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US visa move to hit Indian IT firms

Bibhu Ranjan Mishra Shivani Shinde & Praveen Bose  |  Bangalore/ Mumbai 

The companies have started increasing the number of in US

The increase in and would partially affect outsourcing to Indian information firms, said analysts.

The US legislation is expected to impact operating margins of most between 0.5 per cent and 0.75 per cent. According to a recent study by Religare, visa costs account for 0.3-0.5 per cent of revenues of This may force them to recruit more locals as part of their US workforce, taking a hit on their bottom line.

Indian IT services companies use about 12 per cent of H-IB visas in a year, while the rest are used by Microsoft, IBM and Accenture, said industry body Nasscom. At the individual level, Indian IT giants like Infosys, and are the biggest visa users.
 

SHRINKING DEMAND FOR VISAS
Company 2008 2009
Infosys 4,559 440
Wipro 2,678 1,964
Satyam 1,917 219
TCS 1,539 3
Patni 296 609
Microsoft 1,037 1,318
Accenture 731 287
IBM India 381 695
Intel 351 732
Google 207 211
Source: USCIS

Contrary to the popular belief, visas constitute an insignificant number of jobs. According to a March 2010 report by a non-profit public policy group, (NFAP), only 0.06 per cent of the American labour force was H-1B visa holders for the financial year 2009.

The US Senate, while passing the last Thursday, proposed to increase the application fee for H-1B and L-1 visas from $2,300 to $4,300. With this, US lawmakers will be able to part-fund the $600 million needed for tightening border security.

“The economics of outsourcing fundamentally does not change too much, though it may impact operating margins. But, it impacts the stock market sentiments and the (Indian) market has taken the high margins of Indian firms for granted,” said Amneet Singh, VP, global sourcing of analyst firm Everest Group.

During the last couple of years, demand for fresh H-1B visas has dropped with a decline in the number of outsourcing deals. Take the case of The number of H-1B visas for 2009 were just 440 — a drop of almost 90 per cent from 4,559 in 2008. For – though the company topped the list for the number of H-1B visas awarded in 2009 – it was down by almost 26 per cent to 1,964 from 2,678 in 2008.

The drop in H-1B visas is also evident in the number of applications. Every year, from April 1 to October 31, the window is open for H-1B applicants. When the demand was at its peak in 2007, the US Citizenship and Immigration Services (USCIS) closed the window the very first day it opened.

“With falling demand, the window is open longer. In 2009, the limit was absorbed only in December. This year, out of the 85,000 H-1B visas available, only 28,000 applications were received,” said Ameet Nivsarkar, VP, Nasscom.

Analysing the USCIS data, the NFAP report said, “In FY 2009, less than 6 per cent of H-1B visas went to Indian companies. In FY 2009, 25 India-based firms had forwarded only 4,809 new H-1B applications. The number of new H-1B visas used by Indian firms fell 70 per cent between FY 2006 and FY 2009.” have started increasing the number of in their US Though the percentage of local Americans hovers around 5-10 per cent, this number is rising. Infosys, for example, employs around 12,000 people in North America, including about 1,300 US citizens and permanent residents. In one year, the company intends to hire another 1,000. Similarly, about 5 per cent of MindTree’s strength are in the US, of which 30 per cent are locals or green card holders. India’s largest IT services firm, TCS, has grown the headcount of its Cincinnati centre to 350, and the company is hiring locals from campuses. Since 2004, America, the subsidiary of TCS, has invested around $135 million in Ohio, Michigan, California and New York.

Business process outsourcing (BPO) firms have also been hiring locals. “We have grown our US headcount seven-fold in the last two to three years. To increase or reduce the US headcount depends on what the customer wants and what the business requires,” said Aparup Sengupta, MD and CEO, Aegis. The firm has 4,500 employees in the US.

First Published: Thu, August 12 2010. 00:39 IST
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