Increase in Onshore Hiring by Offshore Providers: Why Now? A Kowtow or Something Very Different? | Article

Business building under construction, outsourcingIn just the past month, two Indian providers announced plans to expand their onshore operations in the United States. MindTree – a Tier 2 IT and product engineering services company – is opening its new IT development center in Gainesville, Florida and plans to bring at least 400 jobs into the city over several years. And Genpact – a Tier 1 business process and technology management firm – is currently adding 25 mortgage positions in its Richardson, Texas delivery center to support processing for a major financial institution and expects to expand the center to 150-200 full-time professionals over the next 12 to 18 months.

MindTree’s March 27, 2012 press release on the new center quoted Scott Staples, its President, Americas, as saying, “The Southeast is an untapped region for MindTree from a talent and client acquisition standpoint. Setting up our first major U.S. Development Center in Florida gives us a foothold into this region.” He continued, “Gainesville, Florida is a great city with many positives: a thriving population of IT and engineering talent, a great place for our MindTree Minds to call home, and a strong partnership with the University of Florida.” Fair enough. Leveraging local talent and bringing much-needed jobs into the community.

In Genpact’s March 8, 2012 news announcement, Scott McConnell, the company’s senior vice president and business leader, Americas, stated, “We are thrilled to continue to grow our U.S. presence with the opening of this center in Richardson, as it reinforces our strategy of providing high-end services onshore close to our clients.”  A bit later in the press release he continued, “We chose to expand operations in the Dallas metropolitan area because of its favorable business climate, a growing and diverse pool of skilled professionals, and central proximity to our clients across the U.S. We are already in discussions with a number of clients who are excited that we’ll be adding significant services capabilities while creating new professional-level jobs.” Again, fair enough…local talent usage and new job creation.

But one has to wonder, are the establishment of these new onshore centers indicative of additional factors most, if not all, Indian offshore providers are facing, which are in turn driving them to hire more U.S. employees? I can think of several possibilities.

H-1B Visa Restrictions

A study conducted a year ago by the Confederate of Indian Industry (CII) found that only one in 10 of the U.S.-based employees of Indian IT providers are U.S. citizens. According to the report, as stated in an excerpt published in Computerworld, “…This may be explained by a skills shortage in the U.S., [and by] the availability of a highly-qualified Indian workforce that dominates the IT and BPO sector not only [in] the U.S. but also globally.”

Whatever the reason, the current cap of 65,000 issued H-1B visas per year is severely constraining Indian providers’ ability to source and employ staff under their predominant model (despite the fact that foreign nationals are subject to U.S. withholding taxes.)


Money Pressures

The U.S. Citizen and Immigration Services website states that fees for H-1B visa petitions for the fiscal year 2013 cap season include:

  • Base filing fee of $325;
  • ACWIA fee of $750 for employers with 1 to 25 FTEs
  • $1,500 for those with 26 or more FTEs (unless exempt in either case);
  • Fraud prevention and detection fee of $500;
  • An additional $2,000 for petitioners that employ 50 or more employees in the U.S. where more than 50 percent of its employees in the U.S. are in H-1B or L-1 non-immigrant status.

Employers seeking Premium Processing Service – i.e., a decision within 15 days – must pay an additional $1,225.

Granted, these fees per FTE do not compare to most of today’s signing bonuses, but collectively for numerous foreign national hires, they do add up. And when you factor declining margins and inflation in key Indian cities such as Bangalore and Mumbai into the equation, the financial pressures on Indian providers are certainly growing.

Election Year Issues

Consider this out-take from President Obama’s impassioned – yet fundamentally flawed – statements on outsourcing during his January 24, 2012 State of the Union Address, “So my message is simple. It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.”

Indeed, it’s clear that creation of new onshore employment opportunities are a component of India providers’ strategies to retool their images among corporations, the labor force and politicians alike as discussed in a recent Reuters article. (And in fact, the article stated that MindTree has actually engaged a global branding consultant to assist with its image.) Only time will tell if this image makeover is political posturing during an election year.

A final possibility: could it be that offshore providers are finally getting the picture and really building out truly global networks?

Personally, I think the increase in onshore centers can be attributed to a combination of all the above, to varying degrees per individual provider. What about you?

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