US Visa Revamp Poised to Benefit Big US Tech Punish Outsourcers

Will Trump's Stance on H-1Bs in 2018 Help or Hurt the Channel?

The White House's crackdown on H-1B abuse is making some visa holders and channel employers skittish.

It’s been a rocky year for Silicon Valley and Washington, D.C., with tensions between tech giants and the Trump administration steadily rising over hot button issues like data privacy, cyber-espionage, and regulation over emerging technology like artificial intelligence and drone usage. But perhaps nowhere does the strained relationship have a more human face than when it comes to immigration policy.

Donald Trump rode his anti-immigration message straight into the White House, promising to crack down on the number of immigrants allowed both to enter and to stay in the U.S. From the proposed border wall with Mexico to the travel ban on several primarily Muslim countries he’s struggled to implement, Trump has made his stance on immigration very clear. This includes stated intentions to introduce much more restrictive policies when it comes to the issue of H-1B temporary visas to high-skilled workers--a program Silicon Valley and the channel rely heavily upon to supplement U.S. workforces and address the IT skills gap.

Ed Szofer, CEO of SenecaGlobal, says the program is intended to provide skilled staff for positions employers cannot fill with American workers, but that over the years, abuse of the program has become widespread, and H-1B visa holders are increasingly being used to displace Americans who demand higher salaries. Some companies bring workers from countries like India to the States, pay them rock-bottom wages, and provide substandard living conditions where too many workers are housed in too small living quarters, for instance.

“Companies like Microsoft and other big boys, they do a good job. They manage it well. They pay the engineers properly when they bring them over because they need them,” Szofer told Channel Futures. But the business of providing IT talent to U.S. companies is a big one, and just like any other big business, over time people have learned how to game the system.

Szofer says that in India where SenecaGlobal does a lot of business, tiers of companies have emerged in the H-1B visa placement industry, where the outsource company that deals directly with the workers then hands them over to another brokerage, which in turn sources them to another agency, and so forth. That means some workers pass through two or three different layers of outsourcing firms, and by the time all of the various processing fees have been paid by the hiring company to each of the placement companies, the leftover money given to the worker is far less than it otherwise could be.

“[The hiring company] could be paying $45 an hour for the worker, but that worker is only getting $12 or $13 an hour, and everybody is taking a cut along the way. And at the end of the day, [the hiring company] is getting a $13-an-hour guy.”

On top of that, there’s stiff competition here in the U.S. for that workforce, leading to some smaller software development or IT firms being priced out of the market. In the long run, abuse of the system takes its toll on the channel and leads to higher costs and lower-quality work for partners and end users.

But the White House is cracking down on the industry. While it was unable to pass changes to the program prior to its annual lottery this past April, U.S. Citizenship and Immigration Services began challenging significantly higher numbers of H-1B visa applications this year. The number of challenges, called “requests for evidence” or RFEs, are up 44 percent over last year, the highest levels since 2009.

As a result, many applicants and hiring companies are putting the brakes on moving forward with the process amid concerns workers will be deported after arriving in the U.S. Applications to the annual lottery dropped for the first time in five years in 2017, according to USCIS. And the $153 billion Indian IT outsourcing industry is being hit hard, impacting the Indian economy and raising the cost to U.S. companies even further.

But other countries are implementing initiatives to take advantage of the sudden availability of these workers. Canada, for instance, has instituted a new Global Skills Strategy that includes a fast track to a three-year visa and possible permanent residency. Szofer says that OEMs and ISVs are going to have to change their staffing strategies in order to compensate in 2018.

“In particular, companies will be using a blend of on- and off-shore resources with a greater emphasis on making sure each is optimized. That is, instead of a wholesale approach to bring in a lot of H1-Bs, there will be much more scrutiny for when it is properly called for.”

While it’s impossible to predict what changes the current administration will be able to push through next year, the economic push to optimize where everyone is working and stay ahead of possible policy changes may lead to more development teams working virtually with teams in India and other countries. Szofer says this could actually lead to increased efficiencies and better products and services for partners to sell since the cost for higher-skilled engineers, developers, and other workers will be lower.

On the other hand, as VARs and MSPs are increasingly being tasked with moving large workloads off of legacy systems into the cloud, and ISVs grow in importance in a software-defined IT environment, engineers are more valuable than ever. It’s not just a matter of flipping a switch. In many cases, there are years of old code and outdated programs that have to be re-configured for the cloud. Partners have to re-visit existing infrastructure--re-architect it, re-code it, re-test it--and there’s a big need for skillsets that not enough U.S. workers have.

“It’s a simple supply and demand problem, and the cost for these skills are just going up," says Szofer. "Whether you’re an ISV or a VAR, you’re going to feel the pain of that at some point as you move through digital transformation.”


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