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IT outsourcing industry doing little to prepare for H-1B visa reform

Stephanie Overby | June 24, 2013
Though IT outsourcing vendors and clients cite concern over the potential H-1B visa reform currently heading to the senate for a vote, they are, for the most part, taking a wait-and-see approach and are doing very little to prepare for the possible effects of the visa changes.

Specifically, Indian outsourcers would no longer be able to place their foreign-born employees at its client sites.

When asked what steps they might take if such restrictions were put in place, buyers, providers and advisers were similarly murky in their responses. More than half of all respondents indicated that they might consider domestic sourcing, insourcing, or even more offshoring in response to new visa rules.

"No one's entirely sure what they're going to do," says Fersht. "We saw the highest proportion saying their were highly likely or definitely go to move more work offshore if these labor restrictions were placed upon them." Twenty five percent of buyers said they were highly likely to do more offshoring while 9 percent indicated they would definitely do more work offshore.

All survey respondents indicated that greatest impact of any visa reforms would be felt in application development and maintenance work, where local resources play a greater role in outsourcing relationships, followed by IT infrastructure outsourcing.

IT Outsourcing Customers and Vendors Need to Talk
Smerdjian says outsourcing customers should be taking this time to review their outsourcing contracts to see what they say about issues like pricing, service continuity, and compliance should any visa reforms become law.

Clients need to have "an open dialogue with their outsourcing vendors," Smerdjian says. "It's in your vendor's best interest to think about these issues and develop contingency plans."

And vendors don't seem to be interested in starting these conversations on their own. When asked whether their vendors had communicated with them about immigration reform impact, 29 percent of buyers said they had heard from TCS and Dell; less than 20 percent had heard from HP, IBM, Wipro and Deloitte; and less than 10 percent from Cognizant and Infosys. Buyers said that all other vendors named (including Xerox, Mahindra Satyam, HCL, Genpact, Accenture, CSC, Cap Gemini, iGate, and others) had made no communication at all.

It is possible that no temporary visa reform will pass—or those proposed new rules that specifically target offshore outsourcers will remain in the final bill. "When this goes to conference, this will all be about what stays and what goes and I expect that vendors will make their case very clearly," says Jeff Lande, president of the Lande Group and former executive vice president at TechAmerica.

"There's a strong likelihood that the outplacement provision will not be in the final package. There's no one in the House that wants those draconian provisions," Lande says. And if no agreement is reached on what should be in the final bill, it will die this year.

Half of offshore-centric providers said that they had increased their onshore hiring in the past six months, according to the survey. "If there is a positive effect, this could inspire more of the offshore firms to invest more in the U.S. as one of their delivery vehicles."


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