IT cos to tweak operating model for reducing H1B visa fee impact
IT firms likely to reduce the dependence on subcontractors as they’re also relying on H1B visas
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Bengaluru: Delivery model of Indian IT services companies may see adjustments to reduce the impact of H1B visa fee hike from next year.
According to analysts and brokerage firms, IT companies likely to negotiate with clients for more work to be done from offshore or nearshore locations. Moreover, their dependence on subcontractors is expected to be reduced as subcontractors are also heavily dependent on H1B visas for manning operations.
“Though there is no impact now as the new rules will be applicable from next year, IT firms will get more work done from offshore or nearshore centres. Currently, it is around 80:20 ratio (80 per cent work is being done offshore and 20 per cent onsite). It may happen that IT firms will start negotiating with the clients for 90:10 or 95:5 ratio as it becomes difficult to find talent in the US,” Pareekh Jain, a IT outsourcing advisor and founder of Pareekh Consulting told theBizz Buzz.
“The problem is that as the H1B hiring has been on a decline. IT firms were taking the help of subcontractors for execution of projects. But the fact is that subcontractors are also dependent on H1B visas,” he said adding that half of the people hired by subcontractors usually have studied in the US.
Last week, Trump administration has announced that employers have to pay $100,000 entry fee for bringing in foreign workers under H1B visa programme. This has sent shockwaves across the global technology industry which usually takes the H1B visa route for hiring tech talent in the US. India is a major beneficiary of the H1B visa programme as 70 per cent of the professionals have been selected from here during 2024.
However, the clarification issued later has mitigated much of the impact in the near-term. Sources in the know said that impact is manageable. However, it has created an uncertainty environment owing to the fluidity of the situation.
According to brokerage firm-Nuvama, Indian IT firms have significantly reduced their dependence on H-1B visas over the last eight years. “We believe Indian IT companies shall mitigate this impact by higher nearshoring/offshoring and/or hiring local talent,” the report by the brokerage firm stated.
Industry experts pointed out that the business case of hiring people on H1B visa has reduced significantly. While the average salary of H1B professionals in the US is around $80,000- $120,000, the new visa entry fee will be $100,000, making it difficult for managing the surge in cost, they said.
