Indian IT industry to create new biz models: Nasscom

News Posted - 2010-08-13, Last Updated - 2010-08-13

As US President Barack Obama signed the Border Security Bill into a law, Nasscom, the apex body representing the Indian software industry, proposed to create alternative business models in which new jobs can be created in India, than in the US. The leading Indian IT firms also emphasized that they were trying to come out with new models on how to contain the impact of fee increase.

The legislation nearly doubles the H-1B and L-1 visa application fee from the present level of about $2,300 to about $4,300 per application.

Nasscom, which protested against the 'discrimination' through the Indian government and various industry associations in the US, said if working in the US was becoming a pain, then the Indian IT industry would have to create new business models and bring the jobs back to India.

“Even though this will hardly have any impact on our revenues, our costs will certainly go up. To address this, we are looking at new business models, but that will take time,” Nasscom President Som Mittal said on Friday. He also said the US would continue to be the largest market for Indian IT industry. “Its share may go down but the quantum of business we are getting from them will and should remain large,” Mittal added.

Infosys Technologies, India's second largest software exporter, which derives over 66 per cent of its revenue from North America including the US, said the new business models would evolve over a period of time which would reduce the dependency on H-1B visas.

"The model will evolve over time around a model where we can do more works out of India. In this kind of scenario, customers will come to us. We are already seeing this happening in case of large clients who have captives here," said Kris Gopalakrishnan, CEO and MD of Infosys Technologies. He, however, said that the dependency on H-1B visa might not reduce completely, but it will certainly come down and we are already seeing this happening."

According to Nasscom, only 15-20 per cent of the effort (works) in the entire project life-cycle is done onsite. Most Indian IT firms hire people in the US on permanent basis, Indian resources are being sent to the US on a temporary basis. Out of a cap of 85,000 visas available this year, only 28,000 have been used by 26,000 companies across the world. "We are being made a scapegoat. This is trade and not immigration and hence, it needs free movement,” said Mittal.

Ganesh Natarajan, former chairman of Nasscom and Chief Executive Officer of Zensar Technologies, said: “The increase in the visa fee is not too drastic, it will have a few basis point impact on the margins. However, my concern is about the whole direction of the discussion. It is a recognised fact that the Indian IT industry has not been based on low skill sets.”

Meanwhile, expressing disappointment over the 'protectionist move' from the US, the Confederation of Indian Industry (CII) on Friday urged the US administration to reconsider the largely protectionist provisions in the Emergency Border Security Supplemental Appropriations Act. It said the legislation would burden Indian industry with additional costs, while being detrimental to the economic interests of both countries.

“In the absence of a social security agreement with the US, Indian industry already bears the brunt of double taxation while operating in the US economy. The hike in visa fees makes the business climate worse,” said Chandrajit Banerjee, director general, CII.

Incidentally, unlike all other countries including India, the US does not have a specific employment visa. This is the reason why H-1B visa has been used in the last two decades to fill this gap. Nasscom had been demanding before the US authorities to introduce a separate category of service visa, but in vain.

“We need a separate category of service visa because this issue keeps coming up and we have been discussing it with the US authorities for the last two years to introduce this service visa. Employment visas have been used by large number of US citizens to come to India to further their business interest,” said Mittal.

As per the H-1B visa guidelines, the US has stipulated a minimum salary. Besides, there are additional conditions like not displacing local workers and making all efforts to hire locally before petitioning an H-1B employee. The H-1B visa applied by Indian companies is closely related to the US employment scenario. In 2009, the top 10 Indian companies had filed for 4,555 visas, a mere 6 per cent of the total visas issued.

Source: BS 11/8/10