Wednesday, October 30, 2013

$35 million Immigration Fine for Infosys: powered by intellect, driven by values?

There has been a lot of commentary in the media on the announcement that “Indian Outsourcing firm expected to pay about $35 Million for Illegal Use of Visas” (wsj). As is to be expected, the settlement comes with a legalese statement “The Bangalore-based tech giant did not admit wrongdoing in the settlement, and said in a statement that it “denies and disputes any claims of systemic visa fraud, misuse of visas for competitive advantage, or immigration abuse. Those claims are untrue and are assertions that remain unproven.” (Time)
 
As an interested Infosys stakeholder – shareholder, tech observer and former employee – I find the case and settlement with DOJ intriguing, though not very surprising. Intriguing because one would typically not settle if there is no wrongdoing. Surely a case of smoke and mirrors. What is surprising, however, is the settlement amount. The amount in question, about $34 million, “the largest immigration fine ever” from United States Department of Justice, claims “the Indian outsourcing giant illegally placed workers on visitor, rather than work, visas at big corporate clients across the U.S.”
 
$35 million fine is not small change even for a multibillion dollar company with billions in cash reserves. For years, Infosys ran an ostensibly clean business operation with tagline “powered by intellect, driven by values,” a tagline that was replaced a couple of years ago by the more business friendly 'Building Tomorrow's Enterprise'. (ET) One wonders if the tagline change was recognition of reality: a culture shift from values to an attitude of “calculated risk-taking.”
 
In early 2000s, like many of my peers of Indian descent living in the west, I was observing the offshoring phenomena. Rather than be content to observe, I decided partake in the offshoring experience by relocating back to India, to join Infosys. This was back in 2003 when Infosys was a media darling, portrayed as squeaky clean Made-in-India multinational that could do no wrong. It was lead by the co-founder Mr. N. R. Narayana Murthy who was credited with coining the original tagline and driving much of the company's values. The Indian services troika of TCS, Wipro and Infosys continued to be viewed as tech darlings, even after the implosion of another large Indian giant, Satyam (Time)
 
During my stint at Infosys, I had the opportunity to observe, experience and participate in the Global Delivery Model (GDM) and lead offshoring initiatives both from offshore in India and onsite, consulting with clients in Europe (Switzerland), Canada and the US. Based on my observations, I wrote the book “Offshoring IT services” (Amazon) which also lead to a spinoff of a popular Infosys corporate blog Managing Offshore IT that I anchored successfully for years before leaving the company at the end of 2011.
 
At the time of joining Infosys in 2003, I was already a US permanent resident (green card holder) though I also continued to hold an Indian passport. This “legal status” provided me an opportunity to experience the process of applying for travel visas and work permits to several countries including Singapore, UK, Switzerland and Canada. My relocations also came with layers of fuzzy math in offshore and onsite salaries. There were times when I felt the “process” of relocations and onsite/offshore salaries was designed to shortchange India based employees traveling overseas. The fact is employees of offshoring firms operate in an environment where an onsite opportunity is a “privilege.” Visas and offshore-onsite travel and relocations are “costs” that are extremely well “managed” by IT service firms.
 
It was obvious that the visa challenge was a recurring issue that played out over and over when teams had to scramble to meet client requests onsite. Offshoring firms operate in a visa constrained business model that requires movement of people across national boundaries. On one hand clients need IT resources onsite, and there is an abundant supply of eager “resources” ready and willing to travel to meet this demand. On the other hand, the demand has to be tempered by the highly restrictive national immigration policies, especially in western countries that place quotas and restrictions on numbers of visas of certain types that can be issues.
 
To be fair, much of the operation at Infosys, including managing the visa process was done by the book. Planning and application of visas, especially for highly coveted H1 Visas operated like a well-oiled machine. However, there were times when it felt like middle managers were pushing the envelope, especially when it came to unplanned, “urgent” onsite requirements from clients. Managers were continually expected to balance dual pressures: clamor from eager-and-willing employees asking to be “visa enabled”, while also fielding queries from visa processing specialists to adhere to all applicable requirement. The average project managers or onsite engagement managers are neither qualified nor equipped to question the intricacies of ever changing visa regulations. However, they realize that they operate in an environment where bending over backwards for client requests is a prerequisite of hyper competitive services industry. 
 
Hyper competitive industry operating with restrictive immigration laws and changing regulations on guest workers keeps middle managers, employees and visa departments on their toes. Just a couple of examples:
  • Years ago, a guest worker could travel to the US on an H1 visa and move across job locations as dictated by needs of their sponsoring employer. This law changed, requiring employers to file paperwork every time there was a change in location, even when the original H1 visa continued to be valid. Same is not true of a business visa where an employee on an onsite trip can travel to locations across the country for meetings with clients (but not “work” for the client)
  • A green-card petition for permanent residency filed by an employer requires several stages of processing. A few years ago, employees who had a green card petition pending were indentured to their employer till they received their green cards, a process that could take several years or decade. This has changed and employees are free to switch employment while a green card is being processed.
 
Keeping track of changes in immigration laws and following the letter and spirit of law is no trivial task. Consulting firms like Infosys have teams of lawyers and specialists focused on tracking implications of visas for individual scenarios, which in some cases do lead to room for interpretation. Engagement managers, who are generally under the gun, facing clients, are perhaps inclined to push the envelope and explore potentially risky options unless counseled by lawyers.
 
The crux of the issue in DOJ investigation: “Department found that the Indian company used inexpensive, easy-to-obtain B-1 visas meant to cover short business visits—instead of harder-to-get H-1B work visas—to bring an unknown number of its employees for long-term stays, these people say.” (WSJ) Such misuse of business visas for work related travel is a gray area that only legal experts can decipher. For instance, A US passport holder can travel to Switzerland or Canada for temporary business purposes without a visa, but would require one if they intend to work there. Could a business meeting with a client or a billable consulting engagement lasting a couple of weeks be interpreted as “work?” Sure! But then, employees for multinationals routinely travel across Atlantic for such meetings and short consulting engagements, with border and immigration officials hardly raising an eyebrow. Therefore, such cross border short term travel for “work” without visas by those holding western passports may be kosher while such travel by those holding an Indian passport is improper. Law is blind goes the old adage, but is surely not logical.
 
If jumping through the visa hoops is such a big deal, why don’t offshore firms hire more locally in western markets, you may wonder. Two obvious reasons: 
  • Cost: The nature of business being such, sending Indian employees (with a base salary in India) overseas is much cheaper than hiring an equivalent full-time employee onsite, even after accounting for costs of visa and travel. The deputees typically have much lower salary base in Indian rupees, while their counterparts hired in local markets (in US, Europe etc) receive salary, allowances and emoluments which can be substantially greater.  The onsite allowances and “salaries” for deputees are typically based on complex “formula” of city/country and duration of stay determined by the companies. Service firms justify this model to buffer themselves against unpredictable durations and frequent deputation/relocation of the employees. 
  • Flexibility: Years ago, management guru Prof. CK Prahlad astutely observed how eager college graduates from India were more willing than their western born counterparts to relocate oversease. (Ref case study “From Tumkur to Toronto” in my book). It is not just one time relocation but a willingness to live out of a suitcase. For instance, when an offshore deputee is done with a project in Seattle, Washington, she may be more willing to relocate to Bentonville, Arkansas than to travel back to her base in Bangalore. Would a graduate hired in Atlanta be willing to frequently relocate and live in Bentonville or anytown, USA and work on projects for extended periods of time?  It is not just offshore firms that leverage this flexibility of Indian resources: Accenture, IBM and other “western” IT service firms have also been hiring hundreds of thousands in India, and sponsoring thousands of H1 visas.
Offshoring industry experts and government policy makers are sure to spend time analyzing the implications of Infosys DOJ saga
  •  Lesson for Infosys is obvious: get your house in order, which I am sure is already underway. While you are at it, why not bring back the old tagline (at least the part about being driven by values
  • Lesson for other technology service firms: make sure you get your house in order to. This settlement is not just about Infosys
  • Lesson for companies hiring global IS services firms: while you can't ensure your consultants  dot all the I’s and cross the T’s, you should expect a statement from the consulting managers  to this effect. Make sure the formal statement is recorded in your MSA and contracts
  • Lesson for lawmakers and parliaments: Globalization of services is a reality. Don’t fight it by introducing bureaucracy and ambiguity in laws. Streamline it where you can.



 
Links of interest