In a September conference call, IT, BPO and consulting services company Hexaware said it is beginning to see potentially a set of challenges around a supply side for talent in the US. “So while demand was actually very strong, we had challenges in being able to execute from a supply of talent perspective in the US.”
That month, Persistent Systems echoed Hexaware’s sentiment. “The biggest challenges, in some sense, have been not so much about the demand but about the ability to fulfil the demands of the right set of people at the right time,” it said.
A Real Threat
The voices of Hexaware and Persistent are not isolated. The focus in India’s IT services industry so far has been on digital demand. But a critical problem that has not got sufficient attention has been the inadequate digital talent to service this demand.
The September quarter happened to be the first occasion when companies made public worries that supply side bottlenecks were impacting them. Hexaware and Persistent reported slower sequential revenue growth. Infosys, India’s second biggest IT services company, missed its margins due to higher subcontracting costs and onsite localisation. Rival Cognizant was hit by increased attrition, another example of the severe talent crunch that has hobbled Indian IT.
The threat to Indian IT from Trump administration's protectionist intent is widely acknowledged. But there was no change in H1B legislation and there was no law to increase the minimum wages as was feared. This had raised hopes for IT stakeholders.
But US authorities tightened curbs via the administrative route. Visa rejection rates have shot up, even for renewals and premium processing has been halted for a long period.
That’s not all. There has been a reduction in the period of H1-B visas from three years to any arbitrary period.
The H1B Cloud
Immigration issues will restrict supply in an already talent-constrained market and potentially lead to higher wages, not just for workers on temporary visas but perhaps also for locals. A direct consequence will be margin pressure and the revenues of companies too will be depleted as they would be unable to fulfil demand.
And as we look ahead, there is increased chatter about a complete overhaul of the H1-B visa regime. The changing visa allotment process is now likely to be based on salary and skill levels rather than the current lottery system, changing the definition of specialty occupation.
In an ever-tightening visa regime, the risk is now real. Talent crunch can slow down growth. That’s the challenge IT companies will have to grapple with in the New Year.
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That month, Persistent Systems echoed Hexaware’s sentiment. “The biggest challenges, in some sense, have been not so much about the demand but about the ability to fulfil the demands of the right set of people at the right time,” it said.A Real Threat
The voices of Hexaware and Persistent are not isolated. The focus in India’s IT services industry so far has been on digital demand. But a critical problem that has not got sufficient attention has been the inadequate digital talent to service this demand.
The September quarter happened to be the first occasion when companies made public worries that supply side bottlenecks were impacting them. Hexaware and Persistent reported slower sequential revenue growth. Infosys, India’s second biggest IT services company, missed its margins due to higher subcontracting costs and onsite localisation. Rival Cognizant was hit by increased attrition, another example of the severe talent crunch that has hobbled Indian IT.
The threat to Indian IT from Trump administration's protectionist intent is widely acknowledged. But there was no change in H1B legislation and there was no law to increase the minimum wages as was feared. This had raised hopes for IT stakeholders.
But US authorities tightened curbs via the administrative route. Visa rejection rates have shot up, even for renewals and premium processing has been halted for a long period.
That’s not all. There has been a reduction in the period of H1-B visas from three years to any arbitrary period.
The H1B Cloud
Immigration issues will restrict supply in an already talent-constrained market and potentially lead to higher wages, not just for workers on temporary visas but perhaps also for locals. A direct consequence will be margin pressure and the revenues of companies too will be depleted as they would be unable to fulfil demand.
And as we look ahead, there is increased chatter about a complete overhaul of the H1-B visa regime. The changing visa allotment process is now likely to be based on salary and skill levels rather than the current lottery system, changing the definition of specialty occupation.
In an ever-tightening visa regime, the risk is now real. Talent crunch can slow down growth. That’s the challenge IT companies will have to grapple with in the New Year.
Have you signed up for Primo, our daily newsletter? It has all the stories and data on the market, business, economy and tech that you need to know.
First Published: Dec 26, 2018 12:25 PM IST
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