In recent months we’ve seen a great deal of discussion surrounding proposed legislation to change existing policies governing H-1B temporary work visas. In a nutshell, the legislation would make it easier for Western heritage providers to gain access to visas, and restrict India heritage providers from using the H-1B vehicle. In the short term, at least, the changes would therefore give Western providers a significant competitive edge. (Paul Roy, a Partner at the law firm Mayer Brown, recently published an excellent summary analysis of the proposed legislation.)
Having passed the Senate, the legislation is presently being debated in the House and a final vote isn’t likely until October or November. Given that the overall immigration package (of which the H-1B provisions are a relatively small part) is at the mercy of Washington’s climate of political partisanship, we’re very much in a wait-and-see period. Indeed, the ultimate outcome could range from dramatic changes to existing standards, to partial implementation, to no changes at all.
Despite the uncertainty, clients with outsourced operations would be well-served to prepare for a range of potential scenarios and contingency plans. First off, whatever legislative changes are implemented would likely fall within this spectrum:
- Minor changes with minimal impact on service provider margins, resulting in no service degradation
- Changes are more substantial and hurt service provider margins, resulting in some service degradation
- Changes have a dramatic impact on service provider margins and result in severe service degradation
If significant changes are implemented that do have an immediate impact on service providers and existing agreements, there are several steps client organizations can take to understand and address their exposure, and pre-emptively adjust and mitigate risk:
One response would be to move as much as possible offshore, while paying more for what is left on shore. This would avoid a situation of simply paying a premium for an existing set of services
Another approach: if it turns out that significant changes are implemented, a client organization could conduct an assessment exercise with their service provider to gain transparency into the number of onsite resources that are H-1B visa holders. If, for example, the numbers is less than 10 percent, one would think disruption, additional cost and service degradation would be minimal, and the focus could be on succession planning for the affected individuals. If the number is 10 percent to 30 percent, the provider would likely see a measurable margin hit. In this case, provider strategies could try to recover that hit elsewhere, or pre-emptively move additional work offshore. Here, clients will need to understand who is moving where and how that could impact the operation. Anything above 30 percent would be a cause for immediate concern and should prompt clients to work with their service providers to explore alternative delivery methods.
We’ll be exploring the H-1B visa issue at the upcoming ISG Sourcing Industry Conference in Dallas; I’ll be facilitating a panel discussion on the topic, and will be joined by Paul Roy of Mayer Brown, who will provide a legal perspective.