June 16, 2009

H-1B: Offshoring bites back (or just bites?)

Filed under: For Managers, Hiring, Stuff I worry about, We all need a laugh

So what’s new with offshoring IT work nowadays? Have overseas costs begun to outstrip the value of offshoring? Has the U.S. economy triggered re-thinking the offshore strategy?

I’ve contended for a long time that as technical “stars” start to develop their careers in India and elsewhere, they’re not gonna be very happy staying on the farm… they’re gonna want to go live in the nice American enclaves, with nicer houses, more amenities, more… well, all the great stuff that stars deserve…

Then the whole low-cost-labor strategy flips around… and those stars move to the U.S. and… start their own shops here.

Well, tomorrow seems to be here today. A reader sends along this link from FierceFinanceIT: Time to sell India-based units? Note the controversy about how “Indian firms are up in arms about the Congressional proposal that would prevent companies with more than 50 percent of H-1B or L-1 visas from receiving additional visas.”

Who told you this was gonna blow up in somebody’s face? 4 Indian companies in the U.S. own more H-1B visas than the next 50 American companies have as a group.

Funny the role economics play in upending stupid policies.

7 Comments on “H-1B: Offshoring bites back (or just bites?)”
By VK Xavier-Freyr
June 16, 2009 at 6:48 pm

Honestly, I think that we are beginning to recognize the difference between raw planning and strategy …and the need for attention to decision-making on long-term objectives.

There might have been “a plan” (cost reduction) in the off-shoring frenzy. Yet, the strategy was lacking — over the long haul and a little thing called intrinsic value (something that goes beyond dollars and cents).

Taking into account the economic “brain drain” from offshore locales and the Exodus in the U.S. from Information Technology sector, caused by offshoring …what was the gain? I watched a panel discussion with Boone Pickens, Al Gore, and Clinton (the ex-President) where Boone was talking about how technology had been over-sold. I have to disagree.

I think that Technology is just as **HOT** as it always will be …the problem with it is that Technology is not a legacy environment — it is not the kind of “factory work” that allows people to schmooze (or, fight) their way into the arena and then kick back and relax for 20, 30, 40, 50 years until retirement.

People who work in the Technology sector have to be there because they are trained, enjoy the work and enjoy the commitment to learning …which Boone was noting as a key factor of the move toward alternative energy as well — it will take time.

I think that knee-jerk (or, “shoot from the hip”) decisions which were made 5-10 years ago, have caused and will continue to cause ripples in the global economy. Evolution (of the economy) in concert with technology advancement and convergence has been a dynamic process which has to be accompanied by learning and subtle responses.

The workforce needs long-term thinking on corporate management, governance and career development as well as active participation (of individuals) in career their planning.

I think that Nick is “on the money” about the ebb-and-flow that will occur in India and other offshore locations. The stars, (encouraged by the international careers and increasing availability of venture capital) are going to find more entrepreneurial opportunities, at home and abroad. The large companies are going to have to compete for talent with up-and-coming venture that offer more creative, lucrative positions.

Thanks Nick

By Julian Jenkins
June 16, 2009 at 8:01 pm

I agree that the US H-1B system should be set up to benefit the US economy. It should be used to attract the best and brightest from overseas. This should supplement and strengthen the local workforce.

The current H-1B system is a joke. Not only do these Indian companies grab all the visas but, as I understand it the yearly allocation for H-1B visas is typically oversubscribed on the first day of issue leading to all visas for the year to be allocated in one batch.

Who but a company that relies on this system to supply a major portion of its workforce can plan to apply for all H-1Bs in April every year. A minor user of H-1B visas who discovers that they need a H-1B employee in May is now stuck for 11 months until the next round. Maybe it would be possible to stagger the allocation of visas over the course of a year.

I am a firm believer in the mobility of labour. I held a H-1B while I worked in Silicon Valley for 5 years. I did not meet your stereotype – I was brought in for skills that were not easily available and managed to paid well above average (measured against US engineers) for the experience that I had.

Now I have returned home to Australia and started my own company. I anticipate that at some stage in the not too distant future that I will need to hire in skills that I cannot find locally and will need to come from overseas, probably the US. My plan would then be to hire for specific capabilities that I need and then use the people I have brought across to train locals. This is what I see the H-1B system is trying to achieve.

The fundamental problem with the H-1B system is that it is impossible for anyone to determine the difference between these two cases from anything that can be written on a form. How can anyone in the department of immigration truly asses the relative merits of various cases. This means that the only way to attempt allocate the visas fairly comes back to arbitrary metrics like percentage of workforce.

By Kevin Flanagan
June 16, 2009 at 11:17 pm

IRS to Audit Employers Sponsoring H-1B Visa Holders

http://www.gtlaw.com/NewsEvents/Publications/Alerts?find=117043

The days of the high-tech slave trade are about to end.

The beatings of Indians in Australia was just the beginning. Operation Uganda II is now in full force in American.

THERE WILL BE RETRIBUTION

By debug
June 16, 2009 at 11:20 pm

With Millions of Americans Unemployed.
Equally disturbing is the unwillingness of Indian IT outsourcing companies to give U.S. citizens a chance to compete for jobs on U.S. soil. This massive open discrimination, practiced by WIPRO, TATA, and Satyam where fully 90% of their U.S. based workforce are Indian citizens. These same companies are now complaining that their current growth, is affected by U.S. immigration policies, http://www.hindu.com/thehindu/holnus/006200905241114.htm.How can this be possible at a time when IBM, Microsoft, Oracle… and many others are laying off skilled hi-tech workers? How can their growth within the United States be affected when there are hundreds of thousands of unemployed hi-tech workers? It could only be the case, if these companies never intend to hire U.S. workers for U.S. jobs. It’s about time that these Indian companies gave up their old-world discrimination, and started to hire fairly, without bigotry, in the U.S. labor marker. No indeed these companies are using the H-1b and L-1 visa to remove millions of U.S. jobs, at all levels, to India.

By Nick Corcodilos
June 17, 2009 at 12:32 pm

VK: Interesting big-picture analysis. Unfortunately, too many companies manage in order to satisfy the daily stock trader, the opportunist.

Julian: Nice, well-rounded discussion. H-1B serves a purpose when used properly. The abuses are absurd. Your story says a lot: trading your specialization for new business skills, starting your own biz, and seeking out new specialized skills demonstrates the logic of work-visa programs. Problem is how to get govt to manage this properly. Expediency trumps logic. $$$ trumps planning.

By Edward
June 22, 2009 at 11:22 am

Good piece! I’ve worked at several company, some that had no outsourcing at all and some that had a lot where even the managers outsourced their PowerPoint creating to a team in India. At the last outsourcer, I was told I had to farm all my market research out to an Indian team, it took them 3 times as long to do the research I normally would have had by an American and it took 3 people in India to do what one in the US was doing. At first I gave them the benefit of the doubt but over time I realized, that’s just their level of work. The pay per person was less, but the overall productivity was far better with the American. I would have rather had an American I could talk to at 4pm in the afternoon rather than waiting for India to wake up to get stuff done. In the end I just did most of it myself, it was faster and more productive. Talking to a friend of mine in engineering, he had the very same experience. For me, outsourcing has not paid off, lower per person cost but when the project was done, the actual costs were either equal or sometimes even more for the outsourcing. To me, that’s not a savings but then, I wasn’t senior enough to make those calls.

Except for management, our entire IT department was from India, all contractors, it was a nightmare to get IT to do anything in a timely manner. I can’t tell you how many online promotions had to be delayed because IT was behind, yet those same guys found time to play ping pong in the company cafeteria everyday from 3pm onwards.

By Dan Mendelevitz
June 24, 2009 at 5:35 pm

One of the things that we should look at is how the use of L-1 and H-1B visas and outsourcing is devastating our technical edge as a country. In addition, many young people will avoid these professions if they see no future in it.

I am not against immigration. This has always been a strength for America. However, the H-1B and L1 programs distort and corrupt this system. It leads directly to our losing our technical edge and control of our technology and innovation. This will continue to have present and future national security implications as our critical systems are no longer developed locally or with local talent.

This is a damaging program to all involved. We have created a system of indentured servitude that damages workers here and from abroad. This is a cruel system which is damaging to our country, our workers and our businesses. I look forward to the upcoming legislation to curb the excesses of this system.

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