Index Insider: What the New H-1B Changes Mean

Hello. This is Alex Bakker and Steve Hall with a special edition of what's important in the IT and business services industry this week.

If someone forwarded you this briefing, consider subscribing here.

 

H-1B Visa Proclamation: $100,000 Fee Creates Shockwaves Across Tech & Outsourcing

What Happened 

On September 19, the U.S. administration issued a presidential proclamation imposing a $100,000 one-time fee on new H-1B petitions filed abroad. The measure takes effect on September 21, 2025, and runs for 12 months, with the option for extension.   

After initial concern that the order would impact all current H-1B visa holders (especially those travelling outside the U.S.), on Saturday, U.S. Citizenship and Immigration Services clarified that current H-1B holders are not affected. They may continue employment and extensions under existing rules, though it is not clear how transfers will be handled. Travel abroad and re-entry for H-1B visa holders is not restricted, easing the anxiety that spread among workers immediately following the announcement. It appears that the impacts are primarily going to be during the next lottery program, which begins in April 2026.  

The proclamation also directs the Department of Labor to revise prevailing wage levels upward, further increasing the cost base for employers, and the Department of Homeland Security to prioritize high-paid, high-skill petitions. A discretionary “national interest exemption” will allow critical industries to continue sponsoring elite global talent without paying the new fee. As the market evolves, we anticipate increasing clarity on how the exceptions will be evaluated and approved.  

Market Impact 

Markets initially reacted with modest declines in IT services shares, and many companies scrambled to issue travel advisories to staff. These early concerns were quickly tempered by clarifications that existing H-1B holders would not be impacted. For employees already working in the U.S., stability remains, and for enterprises, the focus has shifted from immediate disruption to strategic planning.  

The industry has weathered multiple disruptions over the past several years – pandemic travel bans, work-from-home transitions and geopolitical shocks – and has consistently demonstrated resilience and adaptability. This announcement should be viewed through the same lens, a catalyst for change, not a systemic crisis. 

ISG Analysis 

The new measure reshapes the H-1B system in ways that disproportionately affect IT services providers. Although top U.S. technology companies, such as Amazon, Microsoft, Google, Meta, and Apple, are among the largest H-1B employers, the proclamation explicitly calls out outsourcing firms as system abusers. Big Tech is also more likely to qualify for exemptions under the national interest carve-outs, reinforcing their access to global AI and technical talent.  

IT services providers, by contrast, will be forced to absorb higher costs, lean more heavily on offshore and nearshore delivery, and explore more U.S. hiring. Given the impact that AI is currently having on U.S. computer science graduates, IT services providers might also have an opportunity to hire early-career staff at a moment when development skills and AI are transforming how IT services are delivered in the first place.  

What Clients Should Do 

Enterprises should map their overall risk exposure, identify internal use of H-1Bs and assess existing providers that are reliant on new H-1B petitions abroad. They should evaluate the overall business case to determine the impact of potential higher onsite costs. Contract reviews are essential, given the increased cost to use H-1B staff, to protect both existing price structures in the agreement and delivery quality. Enterprises should also be sure to clearly define AI adoption and pricing in agreements and make them part of future renewals. 

Enterprises should map their overall risk exposure, identifying internal use of H-1-Bs and assess existing providers that are reliant on new H-1B petitions abroad.  They should evaluate the overall business case should also be evaluated to determine the impact of potential higher onsite costs.  Contract reviews are essential, given the increased cost to use H-1-B staff, to ensure protect both existing price structures are protected within the agreement, and delivery quality is not impacted. Enterprises should also AI adoption and pricing should also be sure to clearly defined AI adoption and pricing in agreements and must make them be part of future renewals.