pending immigration legislation in the United States, which (in its current form) might
upend the Indian outsourcing business model, has IT companies scrambling for
damage control.

IT services firms are putting contingency plans in place, scouting for
acquisitions that will improve their U.S. workforce numbers, and employing
green cards to send workers overseas. 

Shibulal, CEO of India’s second-largest IT services company Infosys, told
analysts at a recent meeting that it is considering setting up local and same
time-zone development centers and boosting local hiring. Infosys
is running pilots on certain projects to test
the efficacy of a larger offshoring component, Shibulal said.

largest outsourcing firm, Tata Consultancy Services, is increasing hiring of U.S.
residents and green card holders. The company recently hired 174 college graduates in the United

impending legislation, if it goes through the House of Representatives in the
fall, could be the dark cloud for Indian IT companies who are gaining from U.S.
Dollar-Rupee exchange rates after the Indian currency’s recent tumble. The
industry is forecast to grow at 13-14 percent rates this year.

U.S. Senate has already passed the bill that allows more skilled
workers on short term visas (H-1B) at higher visa costs, while imposing a limit
on the number of workers who can be deployed at client locations inside the
United States. The bill awaits the House of Representatives approval to become
an Act. Large Indian IT companies with 15 percent or more such workers could be
banned from placing these workers on customer sites.

ultimate form and the timing of the law are as yet uncertain. In its current
shape, it is likely to hit several Indian IT services companies who get a bulk
of their revenues from U.S.-based customers. Top firms make between half and
two-thirds of their revenues from the U.S. market. Infosys, for instance, earns
over half its revenues from servicing American customers.

JP Morgan Chase estimate suggests that the tighter rules could set the industry
back by $8 billion.

technology outsourcing industry, whose exports totaled $75 billion this year, has thrived on a
‘global services delivery’ model, where a legion of workers in India create
software programs and teams of expert workers are then sent to customers sites
in the United States and elsewhere to support and maintain this software. Until now, H-IB and L-1 visas were employed to place Indian workers on U.S.
client sites.

move will not impact similar IT companies that have huge operations in India
but are headquartered in the United States, as these companies — including IBM
and Accenture — have legacy workforces there. 

legislation arbitrarily singles out India-based IT service providers by making
it difficult to get visas and deliver business contracts, said Ameet Nivsarkar,
vice president of global trade and development at Nasscom, the country’s IT
industry trade body. “The contemplated legislation will make it expensive and
challenging to move people across borders,” said Nivsarkar, who added that 96
percent of Fortune 500 companies are serviced by specialists from Indian IT
companies have developed customer relationships over decades and build up
intrinsic knowledge of customer’s businesses. “There is a lot of value we
provide,” said Ganesh Natarajan, CEO of mid-sized IT firm Zensar
Technologies. The investments made by Indian companies to build these
relationships are at risk.

are four levels of potential impact, said Natarajan. The contemplated
five-fold rise in visa fees will affect all Indian IT companies. The move
towards having at least half the workforce in the United States being American
citizens or permanent residents will also affect several companies. Natarajan concluded, “The
potential clause against outplacing visa holders on client sites could be very
damaging, though companies do not expect to see the overly-restrictive clause in
the final bill.”