x

Abu Dhabi, UAEFriday 14 December 2018

India IT industry uneasy over Trump’s H1-B visa plans

Regions such as the Arabian Gulf could become an increased area of focus for Indian IT professionals as the United States, their key market, is set to impose tougher work visa regulations.
Above, Infosys employees leave a pyramid shaped building at their company’s headquarters in Bangalore. Aijaz Rahi / AP Photo
Above, Infosys employees leave a pyramid shaped building at their company’s headquarters in Bangalore. Aijaz Rahi / AP Photo

MUMBAI // Paula Mariwala, the director of Hinditron, one of India’s oldest IT companies, is concerned about United States president Donald Trump’s proposed changes to its visa regime that would make it harder for them to send workers to America.

“Of course it will change the dynamics and the economics for sure,” says Ms Mariwala, whose company regularly takes on projects in the United States and sends talent there.

She says that markets such as the Arabian Gulf could become an increased area of focus for the company if the bill is passed and operating in the US becomes more challenging and less profitable.

As part of Mr Trump’s immigration reforms, under the US administration’s proposed plans for its H1-B visas, which allows IT firms to hire foreign skilled workers for three to six years, the minimum salary would be more than doubled to US$130,000 a year from $60,000 a year.

Meanwhile, 20 per cent of the H1-B visas would be set aside for small and start-up companies and firms and companies would have to make more efforts to hire US talent before bringing in foreign talent.

“Depending on the type of work, we do need people to be there on higher-end work and that’s going to impacted,” says Ms Mariwala. “IT companies will have to reinvent I guess.”

Firms including Infosys, Tata Consultancy Services and Wipro are some of the biggest names that will be affected along with much of India’s IT sector, if the legislation is passed.

The US is a key market for India’s $150 billion a year IT industry, which has made significant investments into the country, according to the IT and business outsourcing trade association Nasscom.

“If the proposed regime succeeds in implementing this, it will mean Indians hoping to get offshore jobs in the US will find it extremely difficult,” says Pallavi Jha, the chairwoman and managing director of Dale Carnegie Training India.

As well as a lack of opportunities for Indian workers in the US that would result from the proposed visa regime, Indian firms operating in the US would be forced to hire local employees, which would be more expensive for them.

“The challenge will be in managing this type of transition,” says Ms Jha. “There is also the possibility that they might not find the same skills available domestically in the US. That in itself will pose a threat to the current business model.”

Emmanuel Justus is the chief executive of Employability Bridge, a company that facilitates recruitment of students in India for IT firms including Tech Mahindra for roles including international opportunities.

“This has come at an interesting time because IT has already slowed down,” he says. “We as a business see a challenge because the opportunities could be set to dry up even further.”

He has seen a 40 per cent decline in hiring of freshers by Indian IT firms in the months between August last year and January compared with the same period in the year earlier.

A weak global economy, increased automation of processes and competition from other Asian countries have been taking their toll on India’s IT sector. And Donald Trump’s proposed visa changes would deliver another major blow to the already beleaguered industry.

“What we are seeing and what we are hearing from organisations is that the hiring slowdown is probably going to continue for the next year,” says Mr Justus.

It costs a company about 40 per cent more to hire an American software engineer versus hiring an engineer from India and deploying him or her to the US, he says, adding that there are about one million software engineers qualifying each year in India.

Even if the H1-B bill is not passed, he says that Mr Trump’s leadership is likely to present India’s IT sector with other challenges because of his move towards protectionism.

Mr Trump is also against outsourcing, so this would suggest that even functions being performed in India by IT companies could take a hit, Mr Justus says.

If the visa changes go ahead, there will be a flood of IT workers in India looking for jobs. “If the changes come into effect, the Arabian Gulf along with other offshore destinations would definitely benefit,” says Ajay Kolla, the founder and chief executive of Wisdomjobs.com, a recruitment portal in India.

But the volume of projects that Indian IT companies have in the Arabian Gulf is a fraction of their business in the US.

“A fallout of the possible H1-B legislation might be a recalibration by Indian IT companies of their business strategies in the Arabian Gulf, leading to increase opportunities there in the future,” Mr Kolla says.

Ms Jha at Dale Carnegie agrees. She says that IT companies will need to look beyond the US for business.

“To the extent that this will lead to the IT sector diversifying its market, there will be a shift in focus to places like Europe and India and other international territories, including the Gulf, as potential options.”

Brexit poses some uncertainty to Indian IT firms’ operations and expansion plans for the UK and the rest of Europe.

There could be opportunities for Indian IT in other countries. It was revealed this week that Japan is planning to ease its residency regulations for skilled foreign workers, which is expected to benefit Indian IT professionals because Japan is actively looking to attract investment from India into its IT sector.

Companies in India are starting to think of other potential solutions.

Ms Mariwala says that her firm might have to start looking at partnering with companies in the US to get access to manpower over there.

“On a positive note, a lot of students who after their master’s typically get absorbed in American companies on H1-B visas, maybe some of them will start coming back and maybe we’ll have talent available here now in India,” she says.

Som Dutta Singh, an entrepreneur and angel investor, also says that the proposed policy might not have entirely negative implications. “If you are skilled labour, you are going to get a minimum wage, which is $130,000, and people are getting exploited because they are being sent off-site,” she says.

Sameer Narkar, the founder, director and chief software architect of Konnect Insights, says: “If we look at it from the long-term perspective it could well be a blessing in disguise. We should start building the domestic economy so we are not dependent on other countries. The model employed by Indian software services industry in the past two decades was rightly termed as ‘body shopping’. This was … not going to last long. India is a large country with great talent and we are very much capable of developing our own market.”

Keshav Murugesh, Nasscom’s head of business process management the global chief executive at WNS, is optimistic that India’s IT sector will survive the challenges.

“Be it our choice of shores to deliver from, adapting to digital, robotics, data and automation trends or modelling our partnerships around outcomes or gains, the industry is positive about working around constant changes being seen on the global arena,” he says. “Players in this industry will continue to deliver value away from mere wage arbitrage.”

business@thenational.ae

Follow The National’s Business section on Twitter