IT firms to see a spike in subcon expenses from Q3
During the second quarter of current financial firms, Indian IT companies had already reported an uptick in subcon costs
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Bengaluru: Indian IT services companies are likely to see a jump in their subcontractor expenses in the coming quarters as sending technology professionals to the US is becoming difficult owing to the current policies of the American government.
According to industry experts, reliance of IT firms- especially of mid-tier firms and SaaS companies- has already increased in recent months on third party vendors (called subcontractors) and is going to rise further next year.
“Because of new H1B visa fee, sending Indian talent to the US has already turned expensive. What we are hearing from clients that many are not filing for new H1B visa applications. It means reliance on subcontractors is likely to increase,” Aditya Narayan Mishra, CEO of CIEL HR told the BizzBuzz.
During the second quarter of current financial firms, Indian IT companies had already reported an uptick in subcon costs.
Infosys saw the steepest rise in subcon costs by 11.5 per cent to take its total subcon cost as a percentage of total revenue to 8.7 per cent in Q2FY26. HCLTech’s total subcon cost as percentage of total revenue stood at 8 per cent as it had seen an increase of 7.7 per cent YoY basis. For LTIMindtree, subcon cost was at 7.5 per cent, while it was 10.30 per cent for Tech Mahindra.
According to sources in the know said that two factors are driving the current subcon hiring in the US. Firstly, demand in the US market remains subdued, which is holding back IT firms to apply for new H1B visas after the introduction of restrictive fees by Trump administration. Secondly, IT firms are not sure how to pass on the costs if they send talent on H1B visa paying the new entry fee.
“Ultimately, the cost hike (due to H1B visa) will be passed on to clients in some form or other,” Mishra of CIEL HR said.
The US under Trump administration has put severe restrictions on H1B visa programme with introduction of a restrictive $100,000 entry fee for new H1B visa application. On Wednesday, the US has upped the ante with tougher vetting of H1B applicants. Despite a push back from American technology giants, which are the biggest beneficiaries of H1B visa programme, there is no visible signs of easing so far.
Against this backdrop, Indian IT firms are proposing their clients to shift more work to be done from offshore locations like India and near-shore locations like Canada and Mexico.
