Tightening visa norms, a blessing in disguise for IT firms: Pai

The present business model of Indian IT companies – offshore-onsite work ratio of 70:30 would now go up to 90:10, the former Chief Financial Officer of Infosys said. “So, what will happen is they (Indian IT firms) will offshore more work and increase their competitiveness. They will do only ten per cent work onsite, and 90 per cent offshore,” says Pai.

“It can be done very easily for 70-80 per cent of the business. It will improve their competitiveness and make them better,” he said.

“The new H1-B regulations are very good for Indian IT, and bad for companies which try to use it for cheap labour. First of all, Indian IT is not cheap because what they bill to clients is USD 125,000 to USD 150,000 per year (for an onsite employee),” he said.

“The average pay is around USD 80,000-85,000 per year. They are unnecessarily getting a bad name, because some fly-by-night operators are trying to do body-shopping and spoil the name of the entire (Indian IT) industry,” he said.

The new regulations would play to the strength Indian IT companies because they have been reducing the number of H1-B visas they collected since 2014, he said. 

“So, they are already getting prepared. It will increase the billing because it will create artificial scarcity in America, and allow Indian companies to bill more for work because there are not enough Americans to fill the positions that are needed”, said Pai, who is Chairman of Manipal Global Education Services and Aarin Capital. “It’s a blessing in disguise, I don’t think they need to be scared or anything,” he said.

As for possible downsides on the visa front, Pai said there would be some uncertainties for the next six months “because nobody knows what they (US Labour department) are going to do and how they are going to behave and all that.”

“Uncertainty is because the US Labour Department is threatening more inspections. They will find out the number of applications (by Indian IT firms for H1-B visas) have come down and they should be happy,” Pai said.

On what Indian IT companies should now do following the tightening of H1-B visa regulations, he said, “Increase offshoring, increase automation and drive up billing rates. It will be to their advantage.”