The United States, data shows, has more than 800,000 job vacancy postings for computer occupations and is the largest market for Indian IT vendors.
IT companies are being forced to depend on subcontractors in global client locations as the Covid-19 pandemic-related closures resulted in the delay in processing of visas.
Each year, the US issues 85,000 new H-1B visas, which are used by these tech companies to send workers to client locations.
Over the last few years, several companies and industry bodies have been calling for an increase in the H-1B quota as the current supply of tech workers in the US is not enough to meet the increased demand.
According to staffing firm TeamLease, the current share of subcontracting among the top Indian IT companies is 6-8%, while it is 3% overall in the Indian tech industry. In comparison, the US tech sector subcontracts almost 18% of its requirements.
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Visa delays and the subsequent lack of technologically skilled talent in the United States is impacting subcontracting firms as well, said Prabakaran Murugaiah, chief executive of IT staffing portal techfetch.com.
“The visa issue impacts everyone, including subcontracting firms, as even we use the same visas to bring talent to the US. The immigration challenges are very critical for every IT company,” Murugaiah said. “If this isn’t addressed, it will result in more projects going offshore as there isn’t enough talent available in the US to staff those projects.”
Subcontracting demand also remains high for new technology-related skills, he added.
With more global technology clients insisting on employees returning to office, IT service companies are finding it tough to manage onsite subcontracting costs, while also addressing available demand at the earliest.
The increase in subcontracting cost has been due to two factors, including closed borders, said Tata Consultancy Services (TCS) chief executive Rajesh Gopinathan during an analysts’ call after announcing second quarter results on Monday.
However, these costs have started trending lower, India’s largest software services provider by revenue said.
“…With borders opening up and visa availability in most countries being more and more available, we would expect subcontractor costs to start trending down,” Gopinathan said.
India’s largest software services provider by revenue reported a 40-basis-point sequential dip in subcontracting costs. As a share of revenue, subcontracting costs were down to 9.6% during the September quarter compared to 10% in the June quarter, an analysis by Kotak Institutional Equities showed.
“An extensive backlog in visa processing and the low annual limits for H-1B visas and employment-based green cards are also contributing to inflation by limiting the supply of labour available to increase the production of goods and services,” said Stuart Anderson, executive director, National Foundation for American Policy (NAFP), an immigration focused think-tank.
The lack of workers inhibits economic growth and encourages US-based companies to outsource more work, he added.
ET reported last month that unavailability of appointments for the short-term B1/B2 US visas is also impacting tech companies, hampering their ability to meet with clients and seek new business in their biggest market.
While B1/B2 visa holders cannot work in the United States, these permits are used for personal or business travel for client meetings and attending events and conferences, an important way of signing on new business, especially for small and medium enterprises.
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