The H1-B visa ban is not what Indian IT firms want⁠— but they are pocketing some savings while it lasts

The H1-B visa ban is not what Indian IT firms want⁠— but they are pocketing some savings while it lasts
H1-B visa suspension is helping Indian IT companies cushion their marginsBCCL/BI India
  • US President Donald Trump’s visa suspension may seem like bad news for Indian IT companies but it's actually helping them keep more money in the bank.
  • Since visa and travel costs have reduced — also in part due to work from home — Indian IT companies are able to expand margins even if revenue takes a dip.
  • Most of them have been focused on localisation efforts ever since the visa rejection rate has been rising, and with travel restricted during the pandemic, IT companies aren’t too worried.
The IT sector’s coveted H-1B visa may have suspended till the end of the year but they aren’t too worried. In fact, it’s one of the reasons they’re saving money since visa costs aren’t a part of the equation anymore.

“We got 230 basis points (bps) of benefit between visa and travel costs,” said Infosys CFO, Nilanjan Roy. Not just Infosys, but Tata Consultancy Services (TCS), Wipro, and HCL Technologies, aren’t troubled either.

The H1-B visa ban is not what Indian IT firms want⁠— but they are pocketing some savings while it lasts
Margins of Indian IT companies compared quarter-on-quarter (QoQ)Company filings

Visa or no visa — limited impact

The coronavirus pandemic has people working from home and international travel isn’t really on the cards. The biggest weapon in the arsenal of Indian IT companies is the fact that they started localisation before the pandemic was even an issue.

The increase in visa application rejection rates already had them on their toes and looking at ways to no longer rely on visas to operate globally. Infosys COO Pravin Rao estimates that over 60% of the company’s employees are visa-independent — completely local.

CompanyStaff in the USStaff on L-1 visaStaff on H-1B visaLocal staff% on visa
HCL Tech22,8558007,19914,85635%
Tech Mahindra14,6871,1026,2427,34350%

If the workforce isn’t completely local, it’s at visa-ready, according to HCL Tech. The question of visa renewal may come up after December, but for now, there are enough people in the US to fulfill demand requirements.

The biggest boom is that it's not just Indian IT companies that are working from home — but nearly every industry that has been forced to rethink its operating model. As players in tech services, they have been quicker to the buck than most to equip their employees to work from home without compromising on productivity. According to TCS, its Secure Borderless Workspace (SBWS) model will be enough to manage the current scarcity of visas.

Long-term fears
In the immediate future, the ban on visas may not be a factor for IT companies. However, it holds the potential to create issues in the long run.

For instance, there may be challenges when it comes to sourcing new recruits for the company since a lot of the students in the STEM discipline are international students. “The treatment of international students and potential changes in regulations in the future will have implications not only on us but on the future of technology development in the US,” said Gopinathan.

Even so, most agree that the visa situation will have a bigger impact on the American economy than it will have on the IT companies. “The H1-B visa obviously doesn’t make any logical sense. Today, various independent studies have clearly demonstrated the value that Indian IT service providers bring to the US economy and they make American companies very competitive,” said Rao during Infosys’ earnings call.

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