As US rejects more visas, IT fears slowdown

It’s something that could spoil the party for the domestic information technology (IT) companies.

US protectionism in the form of stricter visa norms, increased fees, procedural hurdles and impending regulations could partially derail the growth of the local tech companies, which have only recently emerged from a slowdown phase.

Some companies have already started complaining on how difficulty in securing H1-B and L-1 visas for carrying out customers’ onsite work has slowed down their growth.

This was revealed by a chief executive officer  of an Indian tech company to CLSA analysts Nimish Joshi, Bhavtosh Vajpayee and Arati Mishra during his interaction with them.

“A CEO of an Indian tech company indicated that they lost up to 1% quarter-on-quarter growth in the second half of the calendar year 2010 due to visa issues,” they wrote in a note to clients on Thursday.

According to them, visa rejection rates across the industry have doubled from 4% to 8% for larger companies over the last 6-9 months. This figure is even higher for smaller companies.

“Over the last 6-9 months, visa troubles for Indian techs have ranged from increased fees, higher rejection rates, difficulties in getting interview appointments, deportation from port of entry, excessive RFEs (request for evidence) and inconsistencies in the visa interview process,” said Joshi, Vajpayee and Mishra.

The trio is concerned that if the trend continues it could wipe out some of the gains local tech companies have derived from improving demand environment and stabilisation of supply situation.

“While we do not consider protectionism a game changer for services outsourcing yet, incidents of the past few months have us especially worried. Events are silently piling up, and perhaps a keener look is warranted,” they warn in their report.

Ameet Nivsarkar, vice-president at information technology trade lobby Nasscom, is also worried “cumbersome” visa procedures could hamper smooth functioning of Indian software services providers.

“Over the last few months, feedback from member firms indicates tightening of norms around the visa approval process,” he said.

“Although the issue hasn’t reached a stage where it is a deal-breaker, the inconsistencies in visa interviews and random requests for more documentation can make the process more cumbersome than it needs to be.”

He accused the US visa authorities of inconsistency in issuing work permits; “We have seen cases where different applicants with the same profile have been treated differently either in interview or in request for additional documentation.”

“We are in touch with the various embassy authorities on how best to deal with this. The problem, however, is that the law is written in such language that it gives the visa officer a lot of flexibility,” Nivsarkar added.

Laxman Badiga, chief executive, talent transformation, staffing and external relations, Wipro Technologies, also confirmed that post-recession visa norms had become stricter and took longer to be issued.

“I don’t have the exact data on the rejection rate of our company but it has become more difficult to secure H-1B and L-1 visas.”

According to CLSA analysts, the near-term impact for Indian tech companies could be lost revenues and higher sub-contracting costs and medium and long-term impact could be in the form of higher onsite delivery costs and lower competitiveness in select cases.

While the current problem itself may be daunting, CLSA analysts say a more disastrous scenario on protections is yet to be played.

That is, if the US government carries out some of its suggestions to control irregularities and manipulations of visa laws by tech firms.

They say the beginning of all this was the law enacted in the US, where H-1B and L-1 visa fees were increased by over $2,000 per application as part of the Border Security Bill.

“Discussion with industry and immigration experts indicates that a higher fee is just the first step and stricter visa norms are likely in the pipeline. Current discussion in US is centered on strengthening the visa process and upholding the original objective of the H-1B visa program. While some of the measures being discussed are beneficial to Indian techs, many of them will likely hurt the competitiveness of offshore IT companies,” said the CLSA analysts.

These measures include wage floor for L-1 and stricter norms for employers where immigration yield is low. These will have negative impact on local IT service vendors.

Though, Nandita Gurjar, senior vice president and group head, Human Resources, Infosys Technologies, shrugged these concerns.

“These (US protectionism measures) are all speculation. When they (measures) actually happen, we can talk about their impact. Right now, they are just speculative,” she said.