India’s Top Outsourcing Firms Under Fire

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People walk through Infosys Technologies Ltd. headquarters in Bangalore, India, on Tuesday, April 13, 2010. (Namas Bhojani / Bloomberg / Getty Images)

Allegations of visa fraud have been a constant complaint by critics of the outsourcing industry, who say that firms misuse complex U.S. immigration laws to get their Indian employees to work in the United States. That’s the subject of the investigation underway now against Infosys. It started with an Alabama lawsuit filed in February by an Infosys project manager, Jack Palmer, who is still employed by the company. Infosys  has denied the charges and says it is reviewing its policies internally. In May, the company disclosed that it has been subpoenaed by a grand jury in Texas for information about its use of business visas, but did not reveal details.

The Alabama case, and the increased scrutiny of the industry, is hurting every major Indian IT company. India’s largest outsourcing firm, TCS, came out publicly on the issue this week, speaking to one of India’s business news channels to say the whole issue was overblown, and that the firm would do well this year despite challenges. TCS CEO N. Chandrasekaran also rejected the findings of a report from the brokerage firm CLSA Asia Pacific, which argued that the combination of tightened visa norms and dampened demand from the U.S. would hurt its results this year, and that of other companies: “We see the visa issue fundamentally altering the business model for Indian techs,” the report said. Firms like TCS have been touting their robust hiring within the U.S. as an answer to their critics, but they can’t do that on a large scale without hurting its profitability. Wage arbitrage is still a driver of profitability for these firms, despite their efforts to move into higher-skill, higher-margin businesses and to look for growth outside of the U.S. and Europe.

Amol Sharma notes in the India Real Time blog the “growing frustration” of Indian workers who ultimately bear the personal costs of the soaring rates of rejected visas:

“Many are complaining that long delays and unfair rejections are becoming common, regardless of how scrupulously they observe laws and requirements. North Carolina immigration lawyer Murali Bashyam recounts an episode in which a U.S. employee for an Indian I.T. firm he represents traveled to India to get married and applied for a new H-1B visa while he was there. After two months of delays and harassment by immigration officials, Mr. Bashyam says, the worker was ultimately denied the visa.  “This employee has never violated his H-1B immigration status, and his employer carefully followed all relevant laws, but the employee is now stuck in India,” Mr. Bashyam writes. “This type of ‘gotcha’ immigration policy should never exist in this country.”

That frustration — in this case by an employee who says he followed all the rules — might be the thing that forces IT companies to stop pushing the boundaries of acceptable visa practice, and forces the U.S. to come up with work visa rules that are simpler and less prone to abuse. Here’s a sign that’s already happening: In this morning’s Mint, an Indian business daily, reporters Malia Politzer and Surabhi Agarwal recount the story of  “X” – a Wipro employee who says he went along with the company’s allegedly questionable visa policies until they landed him in immigration custody and have made it difficult for him to travel to the U.S. even as a tourist. It concludes:

“They (recruiting companies) don’t tell you how it could affect you in the future,” said X. “Unless this happens to you personally or a friend or someone you know, I don’t think anyone is fully aware of the repercussions.”