The Buzz about Visas for Offshore Service Provider Personnel and the Link to On-Shore Hiring

The press has recently given much attention to the growing difficulty of securing U.S. visas for offshore provider personnel and the impact on U.S. clients. In fact research firm CLSA Asia-Pacific released a report this past week downgrading its outlook for the Indian IT Services Sector citing “the visa issue [as] fundamentally altering the business model for Indian techs.” At the same time, an uptick in onshore hiring by many of the big name Indian providers, including Tata Consultancy Services, Aegis Communications, Genpact, Wipro, and Infosys , is making headlines. The Wall Street Journal India Real Time Blog included an entry in the past week summarizing some of the recent press on these issues .

Why is the current visa process for offshore service providers more troublesome than in the past? According to recent statistics, the rejection rate for applicable U.S. visas has increased from a reported rate of 5% to 40% over the past 18 months. The visa challenge is not limited to the United States: the United Kingdom, Switzerland and Canada also appear to be introducing more stringent caps. Conjecture that the 2012 U.S. election cycle will add greater uncertainty to the U.S. visa process for offshore providers seems to be adding to the unease. Finally, any discussion of the state of U.S. visas for offshore providers would not be complete without mentioning the accusations of visa fraud currently being leveled against Infosys . These accusations cast a further shadow on the current state of visas. All of this news seems to indicate what many clients and sourcing professionals have started to see first hand, the temporary and long term visa process in the United States is impacting offshore providers’ ability to staff their projects.

Despite the CLSA report and glum news about the state of visas for its work force, at least one overseas sourcing provider has refuted the recent publicity. Tata Consultancy has downplayed the impact of overseas visa policies noting the situation is “an irritant” and simply indicates that “staffing of engagements has to be planned better, well in advance…” . Nonetheless, in the wake of the visa issue, many of the Indian sourcing giants seem to be increasing their onshore hiring to bypass visa uncertainty. For example, Tata Consultancy released a statement in mid June noting that it will hire more than 1,200 onshore personnel this fiscal year. Similarly, Infosys has plans to hire 1,500 U.S. citizens and Aegis recently announced plans to hire approximately 10,000 U.S. citizens over the next three years. These announcements are evidence of an increasing trend toward staffing more work locally with U.S. citizens.

But is the increase in onshore hiring a result of the visa issue? Although it is likely a factor, we cannot discount that the expansion of onshore hiring perhaps is better attributable to the state of the U.S. economy. There is an available labor pool in the U.S. that is more accessible than in the past, and, given the current rate of unemployment, wages that can be paid to onshore resources are more competitive with their offshore counterparts. In addition to being able to staff engagements faster, onshore hiring has the added benefit of helping providers align culturally with clients. It remains to be seen whether local hiring will also alleviate some of the problems with high staff attrition that have dogged Indian providers in recent years.

All this buzz around visas and onshore hiring means that as companies examine their relationships with offshore providers, there may be grounds to demand more onshore/local resources at competitive rates…a potential win for clients, offshore providers and the U.S. economy.