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Top-tier Indian IT outsourcing majors should brace for an increase in costs as they will have to hire locally for US government projects.
US President Donald Trump has signed an executive order banning technology workers on H-1B visas from replacing American citizens in federal government contracts.
The US federal IT spending is pegged at nearly $88 billion for 2020, according to data from the US Office of Management and Budget. Indian software exporters such as TCS, Infosys and Cyient have large US federal contracts. TCS has set up offices in the US to work with US government certified contractors.
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Covid-led recession has thrown millions of Americans out of workSimilarly, Infosys Public Services, a subsidiary of Infosys, is a prime contractor for US government projects and recently partnered with Rhode Island for a project. TCS and Infosys also work with Boeing, GE and other certified US government contractors. American tech companies will also have to hire locally.
Industry watchers expect that while it is still early to gauge the full impact, in the near term companies will have to brace for a rise in costs and increase in local hiring.
Trump’s executive order directs the heads of each federal department and agency to review the use of offshore services as well as temporary foreign labour (H-1Bs and L-1s) in the execution of contracts awarded in FY18 and FY19.
While companies do not give a detailed breakup of the number of employees working in the US, over the years, locals, on an average, have formed 50 per cent of the international workforce of TCS, Infosys, Cognizant and Wipro.
Now, they will have to hire more locals further reducing the reliance on H-1B visas. Hiring locally could increase the cost of doing business by another 30-50 per cent, say industry watchers. “This increase comes at a tough time and we are weighing our options,” said a senior executive of an IT company.
Nasscom frowns
Deploring the move, industry body Nasscom, in a statement, said: “As the world opens up, post Covid-19 induced lockdowns, it is important for the US to access talent critical to the recovery phase. Measures that restrict access to talent will slow down the recovery phase of US economy, jobs, innovation and R&D.”
According to Poorvi Chothani, Founder of LawQuest, an immigration firm, costs can be kept in check if IT companies can find similar talent at similar salaries.
However, there is a shortage of STEM talent in the US and finding local replacements could be tough. Trump’s order also comes on the back of increase in visa fees and freeze on issuing new H-1B visas announced recently.
Trump’s executive order directs the heads of each federal department and agency to review the use of offshore services as well as temporary foreign labour (H-1Bs, L-1s)
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