June 11, 2013, 2:33 PM — The Senate immigration bill's impact on offshore outsourcing will be disruptive to outsourcers, their customers and potentially to the U.S. IT labor market, according to Gartner.
The legislation today includes a number of provisions that will make it much harder for the offshore outsourcing firms, mostly based in India, to use large numbers of workers holding H-1B or L-1B visas.
The intent of these restrictions on big users of the temporary visas is to create U.S. jobs. Whether that happens is up for debate, Gartner analysts said in a Web presentation Monday.
The analysts have concluded for now that the bill being debated in the Senate will raise costs for U.S. firms that buy offshore services.
Today, offshore providers do 30% of a customer's work onshore, and 70% offshore.
In response to the visa restrictions, offshore firms would have to hire more U.S. workers. But these firms may try to offset the need to hire locally by increasing the percentage of work done offshore to 80% or even 90%, said Frances Karamouzis, a Gartner analyst.
To limit the amount of local hiring, the offshore firms will likely come up with ways to do more work remotely, as well as to increase their use of automation. "We do think that innovative approaches will come around," said Karamouzis.
There are already signs that Gartner's analysis is correct. One large firm, Infosys, recently signed an agreement with IPsoft, a provider of autonomic IT tools and services.
If outsourcing firms can increase their offshore percentage without hurting services, "then the incentive to actually bring it (work) back to the U.S. and do what this bill was designed to do, which is to create more U.S. jobs, would go away," said Karamouzis.
Another scenario would be that local hiring does increase and "the U.S. may be finally forced to address some of the education issues and figure out how to create a large talent pool of strong knowledge workers," said Karamouzis.
Gartner believes there is an IT labor shortage in the U.S., based on relatively low unemployment in IT labor categories.
Gartner analysts Sandra Notardonato warned that the Senate legislation has a long way to go. The Senate has yet to vote on it, and the House preparing a bill of its own.
"We may in fact see a very different bill than what we are talking about today," said Notardonato.
But if the Senate bill is adopted with its present set of conditions, visa dependent firms, those with 15% of more of their workforce on H-1B and L-1 visas, won't be able send visa holding workers to client sites, although they can continue to offer services out of global delivery centers. This could potentially pull workers from a customer site, warned Gartner.
The legislation's so-called 50/50 restriction stipulates that temporary foreign workers are limited to 50% of their U.S. workforce by 2017. The bill replaces the current four level prevail wage tier level with a three level system, which would force wage increases. There are displacement and job advertising provisions in the bill that will increase customer lead-times for using visa workers.
Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is email@example.com.
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