Trump's H-1B shock: Offshoring likely to get lift, IT cos may take a hit

New US visa fee piles pressure on Indian IT firms, threatening margins and accelerating shift to GCCs, automation, and local hiring

The past 48 hours have tested the nerves of India’s $282 billion information technology (IT) services industry, after Washington stunned the market with a $100,000 one-time fee on new H-1B visa applications. While a closer look at US immigration data suggests that the number of H-1B applications filed has already fallen by nearly 80 per cent over the past decade, underscoring how the visa’s importance to Indian IT has been steadily waning long before the latest shock, industry experts and analysts point out that this will still impact the sector, especially at a time when growth has been slow due to global uncertainty. 

The immediate consequences could hit onsite revenues, put pressure on margins, and delay deal closures. “We had assumed 5 per cent growth in net IT services exports for FY26E, with a 7 per cent CAGR (compound annual growth rate) for the next five years. This could reduce to sub-4 per cent depending on sustained H-1B visa-led risks and GCC evolution ($65 billion+ gross exports currently via GCCs) and IT companies’ adoption of new growth models,” said a note from Emkay. 

According to Xpheno - a specialist hiring firm — between 2015 and year-to-date (YTD) 2025, total H-1B applications amounted to 414,000, with 382,000 approvals and 32,000 rejections. This data covers a cohort of 18 IT services firms: Six Indian listed Tier-1 majors, 10 midcap Indian players, and two US-headquartered companies with significant India operations.

 

A closer look at the numbers shows that total applications over this decade have fallen by almost 80 per cent. In 2015, 35,287 applications were filed, compared with 7,055 in 2025 (YTD), according to Xpheno.

 

Post this fee, one thing is clear: Companies such as TCS, Infosys, Wipro, and others will need to further reduce their dependence on H-1B visas, though they have consistently done so over the last decade. Paying $100,000 for a single employee is costly enough, considering that the previous cost ranged from $2,000–5,000. Companies will therefore send staff onshore only for mission-critical projects where it is absolutely unavoidable.

 

“The Indian IT companies know that irrespective of whether the $100,000 fee is legally tenable or not, any remaining doubts about the policy direction the US administration is taking are gone. In that way, the smart firms should and will welcome the removal of uncertainty and double down on investment plans for building local capabilities in the US to remain relevant first, with the question of competitiveness coming later,” said Gaurav Parab, principal research analyst at NelsonHall, an industry research firm.

 

Some of the larger providers, including TCS and Infosys, have been investing in US facilities since the first Donald Trump administration, making hiring and investment pledges such as developing corporate universities like Infosys’ facility in Indiana. They are likely to expand these programmes further.

 

Motilal Oswal noted that around 20 per cent of employees at the top five IT services firms are currently based on-site. Of these, 20–30 per cent are on H-1B visas, meaning such visa holders represent just 3-5 per cent of the active workforce.

 

And yet, the challenges posed by the absence of even this small percentage will be felt.

 

“In the near term, the fee would cause major disruption to US delivery models. Firms will pause projects that relied on visa rotations, reprice deals, and shift delivery offshore or to GCCs, Canada and Mexico. In the long term, it accelerates a structural pivot away from labor-based pyramids toward automation, outcome-based services, and platformised delivery. Even if the fee is blocked in court or by Congress, boards and clients will move faster to redesign how work gets done,” said Phil Fersht, founder and CEO of HfS Research.

 

Analysts Business Standard spoke to agree that such unprecedented restrictive policies will only push US companies to offshore more work or retain it in-house, allocating it to their capability centres, which are mostly located in India because of cost and talent availability.

 

However, the problems may be more acute for mid-tier firms such as LTTS, Persistent, Coforge, KPIT, Hexaware, and Mphasis. LTTS, Mphasis, and Hexaware received 352, 663, and 471 visas respectively this year.

 

This is because they lack the scale, brand, and local hiring pipelines of their larger peers. Many depend heavily on rotating H-1Bs for client intimacy and delivery flexibility. To maintain US operations, they will increasingly rely on subcontracting with local partners, expand remote delivery from offshore, and selectively absorb the new fee where client budgets allow. The margin impact could be severe, potentially 200–400 basis points for firms most exposed to H-1B rotations, whereas large providers can spread the shock across a broader portfolio.

 

“If an IT company were to apply for 5,000 H-1Bs in FY27, the annual fee alone would amount to $500 million. Given the magnitude of this fee, it is likely that Indian IT companies will avoid new H-1B filings altogether, opting instead to expand offshore delivery or increase local hiring,” Motilal Oswal wrote.