Small Tech loses to Outsourcing Firms

by admin on January 13, 2017 in Business Trends


When Congress created the H1-B visa program, it was designed with the intention of letting American Tech companies reach all over the world to find the specialized technology skill they were having difficulty finding in the United States. Although successful, this program eventually became dominated by outsourcing companies who were “gaming the system” and locking out small tech firms from global talent.

It has been demonstrated that only thirteen outsourcing companies took nearly one-third of the eight five thousand H1-B visas granted in 2014, the last time data was compiled for presentation. As compiled by the New York Times, of the top 20 companies receiving visas, the 13 being outsourcing companies exclusively are as follows; Tata Consultancy (India) – 5,650; Infosys (India) 3,454; Wipro (India) 3,048; Tech Mahindra Americas (India) – 1,781; Larson and Toubro Infotech (India) – 1,298; HCL America (India) – 855; Mindtree (India) – 487; Accenture (Other) – 2,275; Capgemini Financial Services (other) – 536; Cognizant Tech Solutions (U.S.) – 4,293; Syntel Consulting (U.S.) – 1,080; iGate Tech(U.S.) – 886; Computer Sciences (U.S.) – 873.

With a limit of 85,000 visas annually, and more than 10,000 companies making applications in 2014 only 20 companies received more than 32,000 visas according to Ronil Hira, Howard University professor who studies the visa program and analyzed the H1-B data. Examples of the work some of the outsourcing companies include temporary workers for firms like Disney and Toys ‘R’ Us. Because the visas are approved on a first-come-first-served basis beginning every April 1, companies submit an unlimited number of applications for their employers enabling global giant outsourcing firms to submit multiple requests.

Federal rules require larger employers like TCS, Infosys and Wipro that have large numbers of H-1B workers in the United States to officially declare that they are not displacing American workers with and H1-B recipient. However, companies are exempt from that requirement if the worker is paid less that $60,000 per year. The consequence is that H1-B workers from outsourcing firms make at or slightly above this amount, yet this remains far below what a skilled American technology professional would tend to earn at the same job. The result being outsourcing firms can offer similar technology services to American companies at a far lower cost, undercutting American workers.

But smaller American firms are also feeling the pinch of competition from large outsourcing firms for the H1-B resource. Professor Roni Hira again explains, “The H-1B program is critical as a way for employers to fill skill gaps and for really talented people to come to the United States, … But the outsourcing companies are squeezing out legitimate users of the program,” he said. “The H-1Bs are actually pushing jobs offshore.”

Changes in the H1-B visa system to level the playing field will face challenges going forward. Bruce Morrison, a lawyer representing an association of American engineers acknowledges of the large outsourcing companies “They have spent a lot of time and money creating a business model that fits within the rules so they can use the visas to offer cheaper labor,”