Monday, May 13, 2013

Looking beyond the political debate on immigration and offshoring

Infosys, Wipro, TCS in a headline on offshoring visas is sure to attract attention in a highly charged immigration overhaul debate. Therefore, it is not surprising to see headlines like the recent one in Economic Times titled “TCS, Infosys and Wipro abusing H-1B visa system: Senator” The article like many recent ones starts by saying “Amidst Congressional debate on the comprehensive immigration reform, a top US Senator has accused big Indian IT companies - TCS, Infosys and Wipro - of abusing the H-1B visa system.
"There are some specific abuses of H-1B," Senator Richard Durbin, said during a Congressional hearing on immigration reform by the powerful Senate Judiciary Committee on Monday, during which the lawmakers discussed threadbare the H-1B visa issues.”

The immigration debate and the proposed bill is focused on ensuring that companies that bring in people on H1 visas also hire a good percentage of local Americans (citizen, residents). Rightfully so, one might argue. The argument is that visas should be issued to hi-tech companies that generate value to American economy – Microsoft, google and the like - and also happen to be based in America, with a majority of employees being American.  (ref: NYT blog “New American Bill Threatens Indian Outsourcing Companies”)

Offshoring firms, many of which are headquartered in India (Infosys, Wipro, TCS) or incorporated in Bermuda (Accenture) try to neutralize the argument by trying local hiring and promising future growth with “onsite, proximity development centers.” Offshoring firms have been trying hard to hire and retain the few Americans (native or naturalized) whom they happen to employ. They also try and go the extra length to retain employees who gain permanent residency (green cards). Of course, the business model is skewed towards cost arbitrage that comes from serving clients with an offshore cost base, not being onsite-heavy.  (Personal note, in my past work-life, I joined and enjoyed the offshoring wave for nearly eight years with an offshoring major, despite being a US permanent resident. In a sense, I was an exception to the norm.)

Hiring local is an argument offshoring firms cannot win, leading to a lot of fuzzy math. For instance, NYT blog had to post a correction "An earlier version of this post said that Indian companies have invested $820 million in the United States to set up offices closer to their American clients. The correct figure is $5.9 billion." Rather than trying to argue on the exact investment - 820 million or $5.9 billion - there may be a better argument to be made in the TCO and value of offshoring

Outsourcing has long been a win-win proposition for corporate America. Sourcing non-core functions, including IT development and maintenance activities helps companies free up capital and resources to invest in other core activities that help in revenue generation. Offshoring extends the benefits of sourcing by leveraging a larger pool of resources across the globe, aided by seamless communication and technology. The fact is that much of Corporate America relies on cost benefits of offshoring. And while Microsoft, google and other hi-tech companies benefit from "foreign born" talent imported on H1 visas, rest of the corporate world also benefits by retaining the services of offshoring firms who need to import talent from offshore locations to service clients onsite.  The Microsofts and Googles may certainly be leading the technology innovation curve, but most other companies, large and small also leverage Information Technology to run their business. The "development and maintenance" of such IT systems requires armies of skilled technologists.

Refocusing the visa debate on the basic need from Corporate America is not as tenuous as it sounds.  However most logic is sure to get muffled in the rhetoric of political arguments.