H-1B Visa Changes – IT Service Providers Hedging Their Bets: Will Their Customers Feel the Impact?

The current administration crackdowns on H-1B and L-1 visas for technology workers in foreign countries has been going on for months now.  President Trump’s ‘Hire American, Buy American’ initiative has the service provider “majors” hedging their bets and changing their service offering model.

With growing uncertainty on access and approvals of H-1B visas required to bring and now keep resources in the United States, service providers are now altering their service offerings to hedge their bets.  What is the administration doing?  How are service providers altering their practices and what effect does this have on your company’s ability to control costs or acquire and retain the talent you need to deliver?

To answer these questions, we first need to understand what is happening on both sides.  Let’s start with the government.

Buy American and hire American – Executive Order summary

On April 18^th, President Trump signed the “Buy American and Hire American Executive Order.”  The Executive Order further states, “It shall be the policy of the executive branch to rigorously enforce and administer the laws governing entry into the United States of workers from abroad.”  It goes on to state that the use of waivers should be minimized consistent with applicable law.

This Executive Order lays the foundation for further scrutiny of visa applications and outlines target dates (within 60 and 150 days) for agencies to complete assessments of the effectiveness of current vetting, monitoring and compliance of current laws, as well as “propose new rules and issue new guidance, to supersede or revise previous rules and guidance if appropriate, to protect the interests of United States workers in the administration of our immigration system, including through the prevention of fraud or abuse.”

USCIS policy guidance update

Just weeks ago, on October 23, 2017, the U.S. Citizenship and Immigration Services (USCIS) issued updated policy guidance instructing its officers to apply the same level of scrutiny to both initial petitions and extension requests for certain nonimmigrant visa categories. The press release announcing this policy update summarizes the change as follows: “The previous policy instructed officers to give deference to the findings of a previously approved petition, as long as the key elements were unchanged and there was no evidence of a material error or fraud related to the prior determination. The updated policy guidance rescinds the previous policy.”

In essence, visa renewals can no longer leverage the rigor, due diligence and initial justifications presented when first requesting a visa.  Workers requesting visa renewals must re-present and re-justify the need for the visa all over again.  What once was a formality when seeking renewal of a H-1B Visa is no longer a virtual certainty.

U.S. bill heading to House of Representatives aims to hike H-1B minimum wages from $60,000 to $90,000

On November 16^th, 2017, the bipartisan bill, “Protect and Grow American Jobs Act,” which raises the minimum wages for H-1B visas and proposes making master’s degrees mandatory to qualify for work with H-1B visas, was approved by the judiciary committee of the U.S. House of Representative and now goes to the full House of Representatives. If approved, it will have to also be approved by the Senate before it can be signed into law by President Trump. This bill will likely have a strong impact on Indian IT companies, though many have reportedly scaled down their dependency on H-1B visas following the election of Donald Trump.

Systems Integrators (SI’s) changing go-to-market strategies

Make no mistake, SI’s are taking notice of these policy changes and watching the administration’s actions very closely.  Many large SI’s are already altering their offerings to hedge their bets on commitments to H-1B “landed resources” and altering their financial offerings as well.  Two major players, Accenture and Deloitte, are visibly changing their practices.

Accenture is now bundling domestic and landed resources into a U.S.A. rate card, providing a single rate for resources and not differentiating rates by which resources are U.S. Citizen and which are H-1B visa resources.  Deloitte is taking a different but equally indistinguishable approach by blending rates for domestic resources and landed resources making rates equal or near equal for like roles.

Will customers pay the price in the end?

The answer to this is still unclear.  What these changes do mean for companies is the days of service provider transparency into the use of H-1B visa resources may be coming to an end.  A few things companies can do to demystify these new pricing and engagement models include:

• Demand transparency. Insist on staff loading charts for all resources proposed and require that your service provider identify which resources are landed H-1B resources and which are U.S. based resources.
• Secure commitments to the mix of landed vs. domestic resources. Protect your investments by securing commitments that your service provider agrees to hold costs constant if they cannot staff to the level of landed resources in their staffing models. Negotiate renegotiation triggers if the domestic to landed ratios shift to a higher landed percentage.
• Leverage market intelligence on rates to decompose service provider blending and get the true cost of services to ensure you are truly being presented market rates.

What’s next?

To be honest, it is unclear what further changes will be made to our H-1B system.  What is certain is that your service providers aren’t taking a wait and see attitude and companies shouldn’t either.

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