By Esteban Herrera
We’ve recently seen much debate and discussion about the proposed legislation to change existing policies governing H-1B work visas. While it remains to be seen exactly how this will play out, now is the time for CIOs to assess their resources, both internal and external, to ensure their organization is properly aligned and primed for success.
In a nutshell, the proposed legislation would make it easier for Western IT services providers to gain access to these temporary work visas, and to restrict India providers from using the H-1B vehicle. In the short term, the changes would give Western IT service providers a significant competitive edge. (Here’s a summary analysis of the proposed legislation by Paul Roy, a partner at the law firm Mayer Brown.)
Having passed the Senate, the legislation is currently being debated in the House and a final vote isn’t likely until October or November. Given that the overall immigration package is at the mercy of Washington’s climate of political partisanship, we’re presently in a wait-and-see period. Indeed, the ultimate outcome could range from dramatic changes to existing standards, to partial implementation, to no changes at all.
Despite this uncertainty, CIOs with outsourced operations would be well served to prepare now for a range of potential scenarios and contingency plans. Whatever legislative changes are implemented would likely fall within this spectrum:
· Minor changes with minimal impact on service provider margins, resulting in no service degradation.
· More substantial changes that would negatively affect service provider margins, resulting in some service degradation.
· Major changes that have a dramatic impact on service provider margins and result in severe service degradation.
If significant changes are implemented, and they have an immediate impact on service providers and existing agreements, organizations can take several steps to understand and address their exposure, and to preemptively adjust and mitigate risk.
One response would be to move as much as possible offshore, while paying more for what is left on shore. This would avoid a situation of paying a premium for an existing set of services.
Another approach, if significant changes are implemented, is that an organization should conduct an assessment exercise with its service provider to gain transparency into the number of onsite resources that are H-1B visa holders. If, for example, the number is less than 10 percent, one would think disruption, additional costs and service degradation would be minimal, and the focus could be on succession planning for the affected individuals. If the number is 10 to 30 percent, the provider would likely see a measurable margin hit. In this case, providers could try to recover that hit elsewhere or preemptively move additional work offshore. Here, an organization will need to understand who is moving where and how that could impact operations. Lastly, any number above 30 percent would be a cause for immediate concern and should prompt a company to work with its service provider to explore alternative delivery methods.
Having touched on the short-term implications of the proposed visa changes, I want to share a macro view of the work visa issue from both an economic and workforce management perspective.
My colleague Sid Pai recently examined the financial and operational implications of visa reform on free trade agreements, and has also described a potential scenario in which U.S. visa reforms motivate the India firms to ramp up their investment in U.S. operations—with the unintended consequence of making them more formidable competitors to U.S. service providers.