News: US visa suspension likely to boost demand for offshoring, captives-25/06/2020
Updated On: Jun 25, 2020
US visa suspension likely to boost demand for offshoring, captives
The move is expected to benefit the offshore industry with US firms moving more work here.
BENGALURU/MUMBAI: The US government decision to freeze immigration and suspend work visas till the end of this year to protect American jobs is expected to benefit the Indian offshoring industry with US clients and technology companies seen moving more work here, experts said. IT Industry body Nasscom said the new proclamation may force more work to be performed offshore since there is a dearth of highly skilled talent locally in the US. Indian technology majors such as TCS, Wipro NSE 3.32 % , Infosys NSE 6.81 % , Tech Mahindra and HCL Tech are already seeing a steady rise in offshoring business as coronavirus pandemic has renewed trust on the offshore delivery model for critical services. “Investment in technology in the next two years will definitely increase as every country tries to recover from this crisis,” Nasscom chairman and Infosys chief operating officer U B Pravin Rao told ET. “The opportunity for the IT industry continues to be very good.” Analysts foresee a case for more offshoring of work in coming months, given the impact of the Covid-19 pandemic, travel restrictions, and, now, suspension of H-1B visas. “Logically, yes, visa restriction and Covid-19 has shifted focus back on offshoring and nearshoring,” said Amit Chandra, IT analyst at HDFC Securities
Global technology providers, too, are expected to accelerate hiring for their captive centres in India after the US move. “This order means they will hire more,” said Lalit Ahuja, founder and chief executive officer of ANSR Consulting that helps global firms set up captives in India. India has nearly 1,300 captives of American and other multinationals, employing nearly one million workers. These captives were already seeing a spurt in demand for talent, Lalit Ahuja said. “We were expecting 8-12% increase in hiring. Now, with this order, we can expect 10-15% increase in hiring, which essentially means they are adding more than a lakh people 2021 onwards,” he said. Indian technology companies have been reducing their dependence on visas in the last few years by hiring more people locally. Their offshore revenues have been growing, and the pandemic is expected to boost the growth rate in the coming quarters. “We are seeing once again a shift toward greater offshore delivery as compared to ‘onshorisation’ in play through a better part of the 2010-20 decade,” Emkay Global Financial analysts Manik Taneja and Monit Vyas said in a report. “Given a weak macro environment and potential reset in client businesses due to Covid-19, we see a case for greater offshoring in the sector over the medium term.” They noted that Infosys’ offshore revenues and volumes have been outgrowing onshore revenues and volumes despite the company’s “much-touted claims around localisation and hiring over 10,000 local resources in the US since mid-CY17”. Madhu Babu, IT analyst at Centrum Broking, said, “With work from home implemented at such massive scale post Covid-19 by Indian IT vendors, borders might be losing relevance.”
