The H1-B visa program needs a revamp

This year the INS received 150,000 H1-B visa applications for the coming year starting in October, on the first day that it started accepting applications – for a total of 65,000 visas! An article in the New York Times takes a look at the issues surrounding this. A table from the same article reproduced below gives you the breakup of the visas requested by company. Indian IT Services companies are the only companies at the top of the list.

H1B visas

I remember seeing this same chart in the 98-99 time-frame when I was at Infosys. Microsoft, Intel and other US tech companies were at the top of the list then. So what has changed since then? Sure there was a tech downturn, but the trough on employment in the tech industry is well behind us.

It turns out that the US tech industry wants the H1-B employees, but the Indian IT Services industry wants those visas more.

For the Indian companies, H1-B visas are their lifeblood. 60 to 70% of their revenues are out of the US. H1-B visas are like “raw material” for them. If they don’t have them they can’t start projects and this impacts revenue immediately. For the US tech companies, the same visas affect R&D, which eventually affects new product innovation and so affects the company, but the effect is felt in the long-term, not next quarter.

Understandably then, the Indian companies are more organized in their efforts to secure the maximum number of visas possible. But the US tech companies also have one major disadvantage. They can’t plan for the visa applications as far in advance as an IT Services company can. The US tech company needs the visa to hire someone who is not yet in the company. The Indian services company already has thousands of employees who need the visas in order for them to go to the US to start projects. Planning for their visas can be done well in advance.

In my opinion, the US tech companies can never win this battle for visas. Yet, there is no doubt in my mind (and theirs) that the H1-B employees are essential for their own competitiveness. In the words of Bill Gates, America should “welcome as many of those people as we can get.” So, what can they do to not get “crowded out”?

One way, is of course to just take the cap on visas off or at least take it up substantially. This seems to be the general thrust of the lobbying by the tech companies. This is a temporary solution. Plus, I doubt that Congress will ever let the cap get too high.

A better solution would be to realize that the offshore IT services industry and the domestic tech industries use the same visas very differently and therefore to create different visas for them. Making the two industries compete for scarce visas is unfair to the domestic tech industry. And in the long-term, a cap on visas will hurt both industries. The only problem with this solution is a practical, political reality – the visa for the services industry can become the lighting rod for the anti-outsourcing zealots.

Ultimately, both industries are important for America’s competitiveness. It is important to find a way out soon.

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19 Responses to The H1-B visa program needs a revamp

  1. Brijesh Joshi says:

    Analyzing the data given in the table what I am not able to understand is that even though TCS is having higher employee strength that Infy,Wipro its demand for H1B visas is one third that of other two.How can this be possible when all the three companies have almost equal number of employees and have almost similar %share of US revenue.

    Point to be noted here is that TCS attrition rate is the lowest among the 3.So either Infy,Wipro is fastly losing its existing resource of H1B holders or they are just hoarding H1B visas using as a tool to retain staff.

    Ifsay TCS,Infy,Wipro were having 70000 employees having H1B visa in 2005 and in 2006 if 20000 of this employees leave this company and join say IBM,Accenture.So in 2007 this companies will apply for 20000 + 30000 (new demand) = 50000 H1B visas.I think this practice should be stopped and some kind of limit should be applied even at company levels,so smaller companies who are in genuine need of H1B dont suffer.


  2. Basab says:

    Brijesh, I noticed the TCS number as well. I can see two reasons for TCS’s visas being lower. One, the percentage of business TCS does in the US is much lower. Two, the coverage of H1B visas (number of visas to number utilized in a year) may be lower at TCS.


  3. Shefaly says:

    Often H1-B visa holders are used in early stages of a relationship to do time-and-material work at the client’s site before the client agrees to ship work offshore.

    So an alternative explanation for the TCS number being low could be that they have more mature client relationships in the US than Wipro or Infosys do. Or TCS is relying more on those mature relationships than on new relationships.

    Disclaimer: I have never worked for or done any consulting for TCS. My ‘academic’ argument is mainly based on my insider view of the industry.


  4. Siddharth says:

    I strongly believe a world is not flat when there are restrictions like caps etc. Countries should work together to standardize their visa procedures, eligibility. Anyone, as long as they obey the law of the land, should be able to travel / work / study anywhere. I dont know what the stats are for L1 but i guess TCS could be balancing their requirements with that visa type. Another interesting stat would be number of Green Card conversions for H1B. Large IT companies may need to revise that strategy too, as they are looking to recruit US grads.


  5. Krishna says:

    How about group Visas as a solution ?

    Instead of Visa being granted to the individual, why not a group visa be granted to a company, and the company furnishing periodic list of *nominees* to the Embassies/local govt. ?

    If the employee leaves the job after getting to US (by consuming another vacant H1-B with the new co.), the visa should enable another hire to fill the vacant slot. This way the companies need not be in a race to max out the Visa grants, except for their actual incremental requirements. Cap per company can also be effectively administered leaving elbow room for smaller companies also to get some benefit.

    Thoughts ?


  6. Hari says:

    Another reason why TCS is low in the numbers is because of thier processing of L1’s.This can be a way TCS control their attrition rate at onsite.I think TCS does much more business than Infosys in US and at present they given an option of shifts to the vendors.


  7. Shefaly says:

    Hari, if that is the case, then that explains a lot.

    The L1 visa is more flexible both in terms of the requirement to demonstrate intent not to immigrate as well as in terms of how the employee is paid. It also allows a person to work for up to 7 years, whereas an H1B restricts one to 6 years at the most. I believe that a person in L1 status has to leave the US for some time on completing this 7 year period, similar to J1/ J2 visas albeit in J1/ J2, the US government has permissible work-arounds available for certain specialists e.g. healthcare workers from developing nations. However I do believe that ‘clever’ solutions only last as long as they are not noticed or are expressly permitted.

    The NYTimes story thus tells an incomplete story. Further, as far as I know, those with a PhD need not apply for or worry about the H1B numbers; special allowances are made for them to work in the US.


  8. Hari says:

    Shefaly , I agree and another point might be the type of recruitment followed by Infosys, Wipro and others. Infosys takes any professional guys who might be even an engg graduate in chemical .I believe processing an L1 might not be possible for these guys and it corners them to go only for H1 B visas since most of the revenue is dependent on the US market .This might not be true for everyone and there are companies who just go for IT guys. I think it is very difficult to find a solution for this because of our growth rate in this sector and I definitely agree with Basab, there should be a solution but it should not harm both the parties.


  9. Sanjay Bhadra says:

    Interesting point about the US tech (not services)companies “needs the visa to hire someone who is not yet in the company”. Not sure this is wholly true; because there would be cases of transfers from India offices/engineering centres. And also their number needs are less. And the situation would be further complicated by the fact that many of the services companies do engineering work for the tech majors.
    Yet Basab’s point is valid, there is an implicit competition for visas. Might we see, bench hiring in India by these companies for the purpose of gaining an advantage in the visa application process?!


  10. Siddharth says:

    Note – Stay limit on L1 is 5 years, and H1 is 6 years.


  11. Anil says:

    I completely agree with Brijech here that Infy, Wipro are trying to retain staff. I just came to know from an insider that Wipro has filed H1 B visas for all thier employees in a particular practice (for which the count runs in hundreds) for a specific project even though the requirement is only for 2 persons. And those 2 persons are already in US under L1.

    In order to check the attrition rate and retain staff these orgs have applied visas left and right. This is nothing but cramping up the space for well deserving candidates and organisations.


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  13. Anshuman says:

    Brijesh’s questions are very pertinent and valid.
    I agree with basab’s reasoning to the question. But there is more to it.
    First Infosys and Wipro will not spend huge H1b fee (amounting to 2-3 million dollars unnecssarily as it would turn out to be revenue drain.Moreover in India’s competitive job environment it would be difficult for companies to dangle the carrot of H1B to employees and not sending them to US.

    Second, TCS has more employees than Infy and Wipro and keeping in mind that there’s hardly any difference between the process maturity as has been pointed out by Shefali. Its difficult to understand that they will have lesser number of employees in US.
    TCS majorly process L1 Visas instead of H1B.This serves two purposes
    1.Employees on L1 can’t switch companies as a H1B holder can do
    2.TCS need not run the mad race of H1B visas.

    So why Infy or wipro dont follow the same route?
    The answer is By definition,L1 visas are for Subject Matter experts which a 6 month or 1 year expereince employee can rarely become.
    Hence If Infy or Wipro needs to send an employee with 1 year experince, the ideal choice is H1B and not L1 while same logic is not being considered by some companies like TCS.

    But important thing is that H1B visas have made American Economy very competetive.
    Why we dont have H1B visas in India? We can also attract jobseekers from South Africa,Srilanka,Indonesia,Iran to satiate IT companies employment needs and create bigger talent pool available at reasonable cost.


  14. Basab says:

    Very interesting Shefaly.

    I think this is in response the the New York times article. The numbers were so lop-sided in favour of the IT Services players that it must have caught the attention of the pols.

    Interestingly, Accenture, Cognizant and Delloitte have not been sent letters. Why? They are all seemingly “American” companies but they aren’t. Accenture is incorporated in Bermuda for tax reasons, though their hq is in the US. Cognizant is incorproated and hqed in the US but runs only the offshore model and so their workforce probably looks like Infosys or Wipro’s.


  15. Anonymous says:

    Wipro and other companies raised the salary of thier US employees by 30% by taking surety that they wont leave for one year. Reality is all these companies use all bad tactics to keep their employees happy, they revolve them on the surety that every year they would get one trip at least to US and they should stay with company instead of jumping to rival in India itself. Hard truth is that this is hurting everyone, to those who are here in US since years and still dont have Green cards as numbers are so high that USCIS is not processing them and those who plan to come under merit cant because of all this mess. Indian companies need to be more realistic and they need to work a solution which works for all.


  16. Vick says:

    One more point about lower H1-B visas applied by TCS – TCS tends to do a lot of L1’s in lieu of H1’s. Not sure how the L1 levels are at Infy or Wipro. Would be interesting to see a L1 graphic. For example, at one of the clients that I went to, there were lot of TCS’ers but all of them were on L1 (have seen this at multiple clients).


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