Indian IT companies and their customers are facing a dearth of mid-level talent in the US, caused by stricter interpretations of rules governing the H-1B work visa programme.
The US market has always had a problem with entry-level talent but the middle layer was generally filled with Indians on H-1B visas. But as the US government and the Department of Labour have made it significantly harder to get an H-1B visa or have it extended, previously a routine task.
In November, Compete America, a coalition of big technology companies including Google, Facebook and Microsoft, complained about the sharp increase in requests-for-evidence, intent-to-deny and intent-to-revoke notices related to the H-1B programme.
“There is a crunch at the mid-level but even more crunch at the entry level. So to fix the issue you need to be able recruit from campuses and run it,” Rajesh Gopinathan, chief executive of India’s largest IT services company Tata Consultancy Services, told ET in a recent interview. He added in the US, training freshers and bringing them on board would be faster than in the US because of the flexibility of the education system.
“There is no point in everybody chasing it. The midlevel pool is not going to expand because if the visas have been cut down there is no supply into the mid-level. So the mid-level talent will only contract,” Gopinathan said.
IT companies typically send employees with more than four years of experience onsite and those who received visas could typically stay in the US for six years, creating a five- to 10-year talent base. But that has changed significantly in the past two years. IT experts say that even routine changes such as moving one H-1B employee from one state to another, which used to be approved as a matter of course, is taking significantly more time.
“It takes more time, much more documentation and is more process-driven, and there is a cost to it. Customers will not be ready to absorb that cost because it is increasing suddenly,” Saurabh Govil, chief human resources officer at WiproNSE -0.82 %, told ET.
Indian companies are hiring more local engineers in the US than ever before. Wipro has localised more than 50% of its talent in the US. TCSNSE 0.22 % says it has created over 17,000 jobs in the US between 2011 and 2017, while InfosysNSE 1.85 % has committed to hire over 10,000 locals by 2020.
These companies had also acted as a significant source of mid-level talent for clients, as it was not unusual for an employee to have worked onsite on a client project to receive an offer to join the client directly. That too has changed.
“We see this across the board in mid-level talent, those with five-eight years of experience. This appears to be the hardest level to recruit for both service providers and their customers,” said Ray Wang, principal analyst and founder of Constellation Research.
TCS said the talent shortage was also working in favour of IT companies. For the past three years, IT companies have faced significant challenge as their customers have taken work in-house and reduced their outsourcing spending. A lack of talent is putting a crimp in those in-sourcing plans.
“Increasingly, among clients, there is a greater realisation that (building captives) is not an easy task to execute on. And if they try to execute on it, they are also participating in the same market with a much lesser capability to actually build the talent pool required for it,” Gopinathan had told analysts.
IT consultants said they were seeing a shift to third-party players, even as clients continued to work on the captive plans.
“It is clear that clients are running out of talent in the US market and that this is partly creating more demand for third-party services. It does take time to both expand and start new captives and they may be shifting temporarily some of their plans to third parties while they make the investment to expand/start captives,” said Peter Bendor-Samuel, CEO of IT consultancy Everest Research.