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IBM placed favourably to gain from US immigration Bill

Jul 02 2013, 04:38 IST
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SummaryIBM, the world’s largest IT services company, could emerge as a big beneficiary from the proposed US Immigration Bill

IBM, the world’s largest IT services company, could emerge as a big beneficiary from the proposed US Immigration Bill, if passed in the current form, giving the US-headquartered technology giant access to more number of H-1B visas unlike the India-centric players, including TCS, Infosys and Wipro.

The Bill —Border Security, Economic Opportunity and Immigration Modernization — in the amendments has increased the cap on H-1B visas to 110,000 from the earlier 65,000. This gives the opportunity to companies like IBM to apply for more number of H-1B visas unlike the Indian IT players who are likely to be stymied by the outplacement clause.

The outplacement clause in the Bill, which states that firms with over 15% H-1B dependent employees are debarred from deploying their resources at customer locations, is one of the measures that save US jobs. Indian IT companies like TCS, Infosys, Wipro, HCL Technologies are heavily dependent on the H-1B visas to carry out the operations in the US, its largest market.

A senior executive at a large Indian IT services company said, “This will impact offshore companies like us and also shield the likes of IBM and HP from Indian players in a market which is declining or at best stagnant.”

Industry observers and company executives told FE that IBM could easily apply for over 10,000 H-1B visas in the US without breaching the outplacement clause as their US employee headcount is estimated at around 91,000. This gives the technology giant an advantage in a fiercely competitive market as Indian IT players like TCS, Wipro and Infosys will have to devote more of their time in applying for these visas. Top Indian companies have only 8,000-10,000 employees in the US and have to depend more on H1-B employees.

Nomura Equity Research in a recent report said, “For companies which are not H-1B dependent, they are allowed to place H-1B resources on customer sites after paying a fine of $500 per person. So essentially, US-centric companies (such as Accenture and IBM) less dependent on visas and having offshore operations are likely to benefit from this move, in our view.”

The biggest advantage for a company like IBM is the strong presence in both in its home ground — US — and a offshore destination like India. According to market sources, IBM’s India headcount has surpassed that of the US and this gives them flexibility to shift resources between the two countries.

A top official with India-centric IT firm said, “With the quota on H-1B visas being increased, the likes of IBM will have more access to such visas limiting local hiring. This model would be better for IBM as it can move people back and forth between the US and India rather than recruiting locally.”

However, even a company like IBM is not far behind while applying for H-1B visas. According to information available on myvisajob.com, IBM has put in 6,190 Labour Condition Application for H-1B which is just below the number of TCS at 6,732 and Wipro at 7,178.

H1-B-dependent employer firms with more than 15% of workforce on H1-B visas currently pay around $2,500, excluding attorney fees for normal H1-B processing, and an additional $1,225 for premium processing. The Bill proposes an additional $5,000 per visa as fees for firms with 30-50% of their resources on H1-B/L-1 visas and an additional $10,000 per visa as fees for firms with over half of their employees on such visas.

Industry observers say IBM has been facing pressures on revenue growth and it may actually push more work offshore to maintain its profitability. IBM’s global revenue from IT services has stayed almost flat in the past five years and in the latest quarter it declined by 5% while the large India-centric firms are growing on an average 10-15% each year.

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