The H-1B Visa Lull Is Only Temporary

Tuesday, November 03, 2009

The H-1B Visa Lull Is Only Temporary

"Unless we are heading into a Great Depression, pressure on the H-1B visa program will increase as the economy rebounds," says Peter Bendor-Samuel, Founder of the Everest Group, an outsourcing consulting firm in Dallas. "It's almost impossible for me to believe demand [for H-1Bs] will lessen long term. I find it mildly surprising there are some extras left now."

Outsourcing companies that have been among the top users of the H-1B visa program for highly skilled workers say a dip in demand for the program won't last. As of Oct. 25, employers had filed about 72,800 H-1B visa petitions for 2009, leaving more than 12,000 still available some six months after the U.S. government started accepting applications. That's a marked contrast from recent years, when companies snapped up the 85,000 available visas within days of their Apr. 1 offer date.

But the rush for H-1B visas will return as the economy recovers, especially among outsourcing firms that are now the program's heaviest users, say tech industry experts.

"Unless we are heading into a Great Depression, pressure on the H-1B visa program will increase as the economy rebounds," says Peter Bendor-Samuel, Founder of the Everest Group, an outsourcing consulting firm in Dallas. "It's almost impossible for me to believe demand [for H-1Bs] will lessen long term. I find it mildly surprising there are some extras left now."

Part of the Business Model

Bendor-Samuel points to what he considers secular trends that will keep demand strong for H-1B visas: an increasing proportion of foreign nationals studying math and science in U.S. universities and the impending retirement of many skilled workers. "Also, while it's politically incorrect to say so, people with 10 to 30 years of [tech] experience are having trouble," he adds. "Employers are under financial pressure to hire cheaper workers coming out of college."

H-1B visas have become especially important to the business models of outsourcing firms, especially those based in India, including Tata Consultancy Services (TCS.NS), Infosys Technologies (INFY), and Wipro Technologies (WIT). In fiscal years 2007 and 2008, these firms dominated the list of the program's top users. These firms typically bring workers from overseas to the U.S. for a short period, often 18 months, and then employ them again in their home countries.

Som Mittal, president of the NASSCOM trade group, which represents India's software and services companies, says that H-1B visas remain important for the services industry. "We need for people to travel back and forth between the U.S. and India to consult on and complete projects," he says. "The reduction in [H-1B] applications is completely linked to the economic downturn. I think that as the economy turns around, the [H-1B visa] cap will again be reached quickly."

Lots of Unknowns

For several years the Indian government has encouraged the U.S. government to open up more avenues to rotate workers into and out of the U.S. more easily. On Oct. 26 in Delhi, Anand Sharma, India's commerce and industry minister, met with U.S. Trade Representative Ron Kirk to discuss U.S.-India trade relations. It's unclear what specific requests were made to Kirk, and Sharma's office did not respond to e-mail messages seeking comment. U.S. visa policy was part of the discussion, however. "The issue of H-1B visas was raised, but Ambassador Kirk noted at his press conference in Delhi that the issue falls under immigration policy that lies in the hands of Congress, and not under USTR jurisdiction," Kirk spokeswoman Carol Guthrie said in an e-mail. "He promised to share with the appropriate parties that Indian leaders raised concerns at the Trade Policy Forum."

It is yet unknown how many H-1B petitions employers have submitted for fiscal years 2009 and 2010; that information is expected to become available from the U.S. Citizenship & Immigration Services (USCIS) beginning in the spring. Cognizant (CTSH) and Infosys declined to comment on their use of the H-1B program. Representatives for Tata and Satyam Computer Services (SAY) did not return messages seeking comment.

Experts say outsourcers are increasingly using what are known as L-1 visas—short-term visas for intracompany transfers. These visas involve no annual cap and no requirement to pay employees the prevailing wage. Overall use of the H-1B program has been decreasing slowly while it has increased for L-1s. In 2008 a total of 129,464 H-1B visas were issued (which includes those given to employers exempt from the 85,000 cap, such as colleges and universities and nonprofit research organizations), 7% fewer than the 138,965 in 2004. L-1 use, meanwhile, increased 34% from 2004 (62,700) to 2008 (84,078). Outsourcers find the L-1 program easier to use and less politically sensitive than the H-1B program, says Ron Hira, an assistant professor of public policy at Rochester Institute of Technology.

Opening U.S. Centers

HCL America, part of Delhi-based HCL Technologies (HCLT.NS), is one company increasingly relying on the L-1 visa program. Last year, the company used just 85 H-1B visas but 2,935 L-1s. For fiscal year 2009, the company applied for slightly fewer L-1s and only 16 H-1B visas. Shami Khorana, president of HCL America, says the L-1 visa better suits his company's needs. "The intent is for [L-1 visa holders] to gain knowledge and training, and then to take that knowledge back so that work can be done from India," he says. L-1 visa workers typically stay in the U.S. for about two months, he said.

Khorana says that at the same time HCL America is establishing centers in the U.S. to help service clients who want work to be done locally and in the same time zone. The company opened one center in April in Cary, N.C. About 250 people now work in that space, which has capacity for 500 people.

HCL competitor Wipro has been a heavier user of the H-1B visa program in recent years. It used 2,678 H-1B visas in 2008, up from 2,567 in 2007. But spokesman Sridhar Ramasubbu says the company applied for far fewer this year. He says he's not certain whether the reduction in applications is more a result of the recession or the increasingly global nature of Wipro's workforce. "We're propagating a global delivery model," he says. "We're operating in about 54 countries, and the U.S. is [only] one of them."

Up to the Customers

Ramasubbu says local U.S. hires currently represent 23% of Wipro's U.S. workforce, and he expects that number to increase to more than 40% within a few years. "We are committed to training engineers in the U.S. and generating jobs," he says. At the same time, "we are not saying we'll use more or fewer visas. We leave that up to our customers."

By Moira Herbst Source: BusinessWeek

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