India’s IT firms hire U.S. workers as they fight for visas

India’s IT firms have been lobbying U.S. officials to improve access to work visas by telling them, in part, that they are hiring more American workers.

India’s effort to gain unfettered access to work visa faces increasing obstacles . Congress recently raised the H-1B filing fees by $2,000 and U.S. immigration authorities routinely delay visas with paperwork requests and deny more L-1 and H-1B visas applications than they have in the past.

Part of the effort to turn around U.S. perspectives on this issue involves selling India as an American job creator.

India’s largest IT trade group, citing figures from a study it commissioned, says it employs 107,000 people in the U.S., almost twice the 56,000 it employed in 2006. Of that latest number, 35,000 are U.S.-based workers. The rest, 72,000, are either on H-1B or L-1 work visas, according to The National Association of Software and Services Companies (Nasscom), India’s largest trade group.

Those numbers are direct jobs. Another figure cited by the Indian trade group involves total jobs created, direct and indirect: 280,000.

India’s IT firms are increasing their U.S. employment because the types of services these firms deliver are changing, said industry representatives and U.S. analysts.

MindTree Limited is an example. It employs about 11,000 employees worldwide, including about 850 employees in the U.S., and plans to increase its local hiring. Most of its U.S. workers aren’t on visas, said Scott Staples, the president of the Americas division for the firm, which is based in Warren, N.J. and Bangalore, India.

MindTree said on Tuesday that it’s opening a development center in Gainesville, Fla. that will eventually employ about 400 over the next five years. The location was picked, in part, because of its proximity to the University of Florida and the strength of the local labor market, said Staples.

He said the expanded U.S. presence is needed because development work is increasingly becoming domain-specific, such as promotion management. “We are doing a lot of analytics work and you need to have folks on site,” said Staples.

Many of India’s outsourcing firms are gigantic, including Infosys, which employs 145,000; Wipro, with 137,000 workers; and Tata Consultancy Services, which employs 227,000.

Stephanie Moore, an analyst at Forrester, agreed that Indian firms have to increase their presence in the U.S., because of “this need for contextual knowledge,” or the ability to understand how the work fits into the business.

But Nasscom’s answer — bringing in more workers to the U.S. “to ease the visa restrictions” — is not the right answer, said Moore. Bringing in L-1 worker who are exempt from prevailing wages “allows them to undercut U.S. citizens,” she said.

Moore believes Indian firms should be investing in training centers in the U.S. “The measly 35,000 jobs that these multi-billion-dollar behemoths have built over the past 10 years are completely negated by the jobs that we have lost,” said Moore, referring to U.S. hires.

Som Mittal, president of Nasscom, sees the need for work visas as a normal part of business, no different than a company like General Electric sending people to India to work on turbines. He also said the IT work that’s done in India today supports U.S. corporations in Asia-Pacific, an increasingly important market for them.

“It is extremely important to say that this is the new business model,” said Mittal, “and if you stop that, it’s actually stopping trade.”

India and U.S. firms have asked President Barack Obama to reduce restrictions on the L-1 visa, which is used for intra-company transfers of employees from foreign offices to U.S. offices.

The rising denial rate of H-1B and L-1 visas, from the single digits a few years ago to 27% today for Indian firms, said Mittal, is hurting business. A company may want to send a team of five people to the U.S. to work on a client project only to have two of the visas denied for reasons that are unclear, he said.

“It just adds to a huge amount of uncertainty,” said Mittal. “We have commitments to our customers and we have to deliver on it,” he said.

Michel Janssen, chief research officer at management consulting firm The Hackett Group, said the Indian firms are creating jobs in the U.S. just like any other globally competitive firm.

When they first started, companies such as Infosys and Wipro delivered most of their services from India. Today, both firms have about 16% of their staffs in the U.S., said Janssen, who arrived at that figure using public financial records. He expects that percentage to rise, even as the number of jobs U.S. IT firms send to India grows.

“We’re working on a converging model, but it’s coming from two different directions,” he said.

The Hackett Group recently reported that outsourcing to low-wage nations has had a substantial impact on finance, human resources, procurement and IT jobs. By 2016, the number of jobs available in these fields in the U.S. and Europe will have declined to about 4.5 million from 8.2 million at the start of 2002.

“At the end of the day, you’ve got to be globally competitive,” said Janssen. He points to EDS as an example of a company that wasn’t.

EDS started the outsourcing industry, said Janssen. Their labor cost advantage was moving jobs from New York City to Dallas some 25 years ago, where wages were lower. But EDS forgot about the importance of the labor cost advantage.

“They kept finding ways not to go offshore with their workforce, and they became less and less competitive and eventually they went away,” said Janssen.

EDS was acquired by Hewlett-Packard.

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