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Hypocrisy and connections help IT outsourcing firms

Patrick Thibodeau | Nov. 14, 2014
The liberal group Center for American Progress (CAP) advocates restricting the use of H-1B visas by offshore outsourcing firms to get offshore firms to hire more U.S. workers and curb their ability to move jobs offshore.

Sen. Grassley's role

The offshore industry's main nemesis in Congress is U.S. Sen. Chuck Grassley (R-Iowa), a proponent of the 50/50 ratio restriction on offshore providers — the same restriction CAP wants. As the ranking member of the Senate Judiciary Committee, and presumably its new chairman when Republicans take over the Senate next year, he's in a position to include visa restrictions in legislation.

If Congress were to adopt those restrictions, the change would have consequences for offshore firms.

Peter Bendor-Samuel, CEOo of Everest Group, an outsourcing research group and consultancy, said the impact of a 50/50 ratio restriction "would be significant," and would raise the cost of the employees by 10% to 15%.

New visa restrictions "would cause a spike in competition for U.S. resident IT talent and a rise in cost," he said, noting that it might push offshore outsourcing firms to buy companies with U.S. workforces.

For now, outsourcing firms appear to avoid hiring U.S. workers. For instance, in 2013, the District of Columbia awarded Infosys a $49.5 million contract to build a healthcare exchange in response to the Affordable Care Act. A later discrimination lawsuit filed by an IT professional claims that of the approximately 100 Infosys employees working on this healthcare project, only three were American.

The lawsuit doesn't have data on how many of those employees were on temporary work visas, but the IT worker who is part of this lawsuit said she was excluded from work conversations by supervisors who spoke Hindi. If Infosys is relying heavily on visa workers for this government contract, it's hard to explain why; the Washington, D.C. area has one of the highest concentrations of IT professionals in the nation.

What would visa restrictions do?

David Rutchik, a partner at Pace Harmon, an outsourcing consulting and advisory firm, agrees a visa restriction bill would raise costs, and prompt some firms to try to move even more work offshore.

Speaking generally and not about any specific offshore firm, Rutchik said he believes that the employees offshore providers bring over — particularly those on L-1 visas — are not paid as well as U.S. workers. Although he cautions that he hasn't seen the pay stubs, "our experience is that they are, in fact, paid as offshore resources, not competitive with onshore permanent resources," he said.

If offshore IT services firms decide to hire more U.S. workers, Rutchik believes the firms, their customers, and the overall U.S. workforce, would accrue benefits.

With more U.S. workers on their payrolls, offshore firms could become more competitive with IT services firms, such as IBM and Accenture, by having a large pool of onshore resources. That's important to customers that want or need a greater onshore presence. They will also be less subject to the vagaries of the visa situation, able to get resources to a customer site more quickly, and gain access to government work that might otherwise be restricted to them. By using U.S. workers, offshore firms will improve their ability to work on strategic and "high-touch," areas, he said.

"In the long term, we think that it would be positive if they (offshore outsourcing firms) invested and built out more U.S capability," said Rutchik.

 

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