Indian IT Firms Fear Provisions in New U.S. Immigration Law

us india outsourcing
Aijaz Rahi/AP

MUMBAI, India -- Low cost efficiency put India's outsourcing companies at the heart of global business and created a multibillion dollar industry that for years has skated over criticism it was eliminating white collar jobs in rich nations. Now, the industry's long-held fears of a backlash are being realized in its crucial U.S. market.

Provisions in an overhaul of U.S. immigration law will close loopholes that allow outsourcing companies, Indian and American, to pay guest workers in the U.S. at rates often below wages for equivalently skilled Americans. The proposed changes are in line with President Barack Obama's vows to make it tougher for U.S. companies to replace American workers with cheaper labor abroad, either by opening factories overseas or subcontracting their work to outsourcing companies.

The cost to the Indian companies, which do everything from running call centers to managing the massive amounts of transactional data generated by banks, could run to several hundred million dollars in lost profits.

India's $108 billion outsourcing industry has shrugged off bad publicity in the U.S. and other countries since it began blossoming more than a decade ago. It has plenty of supporters among global corporations who prized outsourcing's ability to lower their costs and boost profits. But with the world economy stagnating, and U.S. unemployment at stubbornly high levels since the recession, a day of reckoning appears to be looming.

Imposing Steep Fees

At issue in the U.S. are high-skill worker visas called H-1B that have been dubbed the "outsourcing visa" by critics who say the system allows companies to bring in cheaper tech workers from abroad instead of hiring Americans.

The immigration bill, the larger point of which is to boost border security and provide a path to citizenship for 11 million people living illegally in the U.S., would impose steep fees for companies such as Indian outsourcers that have more than half their U.S. staff on the permits and also require them to pay higher salaries.

The Indian government and the country's outsourcing industry are gearing up for a fight during debate on the bill, which could take weeks or months due to its other contentious issues. The draft law is now in hearings before the Senate Judiciary Committee.

India's ambassador to the United States, Nirupama Rao, argued in USA Today that everyone benefits from a generous guest worker policy, with Indian tech firms also creating 50,000 jobs for American workers and consumers benefiting from cheaper technology.

Yet criticism in India that the proposed changes are protectionist and discriminatory is not eliciting sympathy in the U.S.

"This has to do with a business model that exploits U.S. immigration loopholes for competitive advantage," said Ron Hira, an associate professor of public policy at Rochester Institute of Technology who studies outsourcing. "It has nothing to do with the location of the headquarters of the company."

The rapid rise of India's information technology outsourcing industry has been a success story in a country better known for its stifling bureaucracy and biting poverty. In under a decade, outsourcing companies had created more than 2 million jobs and in 2012 contributed 6.4 percent of India's GDP, according to the National Association of Software and Services Companies, based in New Delhi.

That success has reflected the ability of India's companies to develop cheap software using Indian designers at home, where wages are far lower than in the U.S. But that makes it necessary, the industry says, to bring the Indian designers and experts "on site" to the U.S. where they are putting the systems into place.

Indian outsourcing companies now use more than one-third of the 65,000 high skill visas allowed under U.S. regulations. The U.S. branches of Indian outsourcers rely on bringing in their own tech experts from home, saying they are most familiar with the software and other technology developed in India to streamline American companies' payrolls, record-keeping and other outsourced functions.

While American companies also compete to obtain the foreign guest worker visas, most are not as dependent on the visas as Indian companies, industry representatives said. Still, it was an American company, New Jersey-based Cognizant Technology Solutions, which was the No. 1 user of the guest worker visas, with nearly 9,300 in 2012. Cognizant also has a significant workforce in India.

"Lack of talent in the United States and the abundance of talent in countries such as India" is the reason for high demand for foreign tech worker visas, said Ameet Nisarkar, senior vice president of NASSCOM.

Raising the Cap

He said unemployment in the U.S. tech industry has been at 4 percent or below, even during the worst days of the global recession, and so high tech companies need to bring in foreign talent.

The proposed new visa regulations -- hammered out in negotiations among the eight U.S. senators who drafted the bill -- would raise the H-1B cap from 65,000 to 110,000 initially to satisfy technology companies who argue they need the foreign workers.

However, seeking to prevent undercutting American salaries, the bill would require those foreign workers to be paid more than under current law, impose steep fees of $10,000 per visa on big companies with more than half of their staff under such visas and starting in 2014 completely ban new H-1B visas for large firms with more than 75 percent of staff as guest workers.

Sandeep Muthangi of Indian brokerage IIFL Capital says the draft provisions could increase wage costs for Indian companies by 12-15 percent and bring profit margins down by a full percentage point. Mumbai-based Tata Consultancy Services, India's top outsourcer, earned $2.6 billion in the fiscal year ended March and had a profit margin of 22 percent.

For U.S. labor advocates, those profits are proof that Indian outsourcing companies can afford to pay for what they say is damage done to the U.S. labor market.

"Indian companies can advertise and recruit in the U.S. just the way foreign auto companies do. There is plenty of homegrown talent who would be happy to work at a good salary for a company with a future in the United States," said Ross Eisenbrey, vice president of the Economic Policy Institute, a left-leaning think tank in Washington.

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This myth that they cannot find workers is a load. They do not want to pay the worker what they are worth. There are millions unemployed who can be trained for these jobs. Many jobs that pay well with benefits.

April 24 2013 at 8:43 AM Report abuse rate up rate down Reply

Lack of talent in the U.S., that is a bunch of bull..... Sure Indians write a lot of code for software, but the quality of that code leaves a lot to be desired.

Their call center for tech savvy also comes into question. Most of the time it is hard to understand what they are trying to communicate and it is all scripted. There is no indivicual thought in their solutions for problems. Standard answer is restore your system from scratch thereby losing everything since the problem.
Remember once when I first got my computer (HP) I asked this technician if the D drive data was necessary, he told me I could just reformat the partition and that it was not necessary. Being a novice at that time I did so. Turns out that the D drive was my recovery partition. Don't trust them at all.

April 23 2013 at 12:37 PM Report abuse +1 rate up rate down Reply

Now this law will make sense. It's about time!

April 23 2013 at 12:05 PM Report abuse rate up rate down Reply

This is how high tech firms swamp the talent pool here and drive wages down. IMO, H1Bs should be limited to people who possess a skill that is not available in a US citizen. No special skills? No Visa.

April 23 2013 at 11:53 AM Report abuse +1 rate up rate down Reply

Let's bring in more foreigners to take jobs away from Americans? Senators want to increase the visa program from 65,000 a year to 110,000 ? Are they insane.

April 23 2013 at 11:40 AM Report abuse +2 rate up rate down Reply

We definitely need this law to pass, at this time these foreign workers and any no- goods in their countries have access to our personal data to a alarming degree, due to their work in the mortgage and banking fields, they have access to our social security numbers, our bank account data, and all other personal information. All it takes is for a group of them or (or even one) to decide they want to do so and they could wreck havoc on our personal and financial lives as well as our economy as a whole. there are no safeguards in place whatsoever it's like the govt. is blind to the danger, but then again, when have they been worried about protecting the people for that matter? They only protect their own interests, should these people decide to raid our bank accounts or sell our identities on the black market overseas, they could ruin millions of lives and conceivably our entire economy worse that it already is with no recourse for the victims as they are untouchable by our justice system in their countries. I speak from experience as having been victimized by a Indian group who disguised themselves as a legitimate, well- known company here in the U.S., even the company they imitated was amazed at how through and convincing they were, I was one of many they victimized and when the legitimate company found out who they were they had raided our bank accounts and returned to India where they were "untouchable". STOP THE OUTSOURCING!!! It is a serious danger to our country as a whole. there enough people who could be trained to do what they do here at home, lets start protecting ourselves for a change.

April 23 2013 at 11:02 AM Report abuse +3 rate up rate down Reply
1 reply to jspfarm's comment

I don't agree with jspfarm. Foreign workers are doing a great job in America. They provide cheap labor to American companies. So they can reduce their payroll expense and therefore increase the bottom line. In return companies pay more taxes. When the government has more tax revenue they can spend more money for the benefits of Americans in general. Few Americans will be out of job. But they will still benefit from the government social programs which is possible from the extra tax revenue collected from the companies.

April 23 2013 at 11:38 AM Report abuse -2 rate up rate down Reply
lynn s

Its time Americans get the IT jobs here in the USA - my son wanted to get a computer science degree - I have been discouraging him as I've been in the field for 20 years and jobs are scarce. When I started 20 years ago it was a great field - I have seen the decline in the industry over the last 10 years since outsourcing - its time to close the borders to outsourcing

April 23 2013 at 10:15 AM Report abuse +1 rate up rate down Reply

The real question is who cares what India's opinion might be?
It is high time that we take care of the employment needs of US citizens rather than supporting the growth of economies that exploit their populations.

April 23 2013 at 9:44 AM Report abuse +4 rate up rate down Reply

This leveling of the playing field is a good thing. Several years ago the George W administration wondered in the press why American kids were not pursuing technology degrees. With the rampant off-shoring it doesn't take too much to know why. Legistlation like this will help, and it's about time!

April 23 2013 at 9:36 AM Report abuse +3 rate up rate down Reply