Visa Reform and Unintended Consequences

At the recent ISG Americas Sourcing Industry Conference, I participated in a panel discussion examining implications of proposed legislation to reform existing standards around H-1B, L-1B and other temporary work visas.

During the discussion, one panelist opined that a complicating factor in the legislative process was that the politicians who are writing the bill know nothing about the economics of outsourcing, while the businesses most directly impacted by potential changes know nothing about how politics work.

With that thought in mind, it’s worth considering some of the unintended consequences that may result from significant changes to existing visa standards.

My ISG colleague Sid Pai has expressed the view that if India heritage providers can no longer rely on the temporary visa model, they may respond by investing more aggressively in establishing a domestic presence and acquiring U.S. entities, and thereby becoming more formidable competitors to the Western heritage players. Probably not what the reform champions had in mind.

There’s also been talk that visa reform may spur repatriation, nearshoring and rural sourcing, thereby delivering a boost to domestic employment. Another possibility, however, is that client organizations will take a fresh look at offshoring and offshore captives to avoid visa-related staffing issues.

Another issue to consider is the potential impact of changes in visa quotas on how outsourcing contracts and relationships are managed. Consider: As the sourcing market has matured, we’ve increasingly counseled our clients to focus on outcomes rather than on staff-augmentation labor rates – if a provider can deliver to a defined level of quality at the lowest possible cost, then the client needn’t worry about where the work is done or by whom. This perspective allows providers to leverage global delivery models, economies of scale, process efficiency and automation. If staffing becomes a concern, the model changes and clients are back in the business of micro-managing their providers in terms of how they manage their resources. A step back, in other words.

At this point we’re still very much in a wait-and-see mode regarding the ultimate outcome of the visa legislation. Given that the high-skill visa issue is tied to the broader immigration reform question (which in turn is hostage to Washington gridlock), it’s possible that the end-result will be business as usual. But as we get closer to decision dates, we as an industry need to prepare for a wide range of scenarios, including some we aren’t currently anticipating.

About the author

As a leading expert in globalization, Paul advises clients across industries on information technology and digital strategies, optimization and outsourcing. He has deep experience in global operations and creative approaches to business growth, including captive operations, joint ventures, build-operate-transfers, and mergers and acquisitions. He recently helped a global consumer packaged goods organization save more than 40 percent by realigning its captive, joint venture and offshore operational strategies worldwide. Paul also assisted a major retail company redesign its global customer digital model to improve quality and increase transparency for executive decision-making. Prior to ISG, Paul served as CEO of a number of software and technology start-up companies.