Durbin-Grassley, Indian Outsourcing, and the H-1B Visa

Filed in archive Americas on June 29, 2009

BusinessWeek had a fascinating examination early this month of what may be the biggest problem faced by the H-1B visa: Indian outsourcing.

A bill currently before Congress, the Durbin-Grassley visa reform bill, would probably bring an end to the Indian outsourcing model by requiring that U.S. company have no more than half of their employees be H-1B visa holders.

The H-1B is a temporary work visa used to allow companies to bring in foreign workers with "rare" talent on a temporary basis. Companies like Google and Microsoft use the visa as a stepping stone town permanent residency and citizenship for those workers.

The Indian outsourcing model takes a different approach.

Outsourcing firms typically post visa workers in the U.S. on a short-term basis, in many cases about 18 months. The workers then return to India, where they continue to work for the outsourcer on behalf of U.S. clients.

The outsourcing firms' business model, developed over the past decade, has worked well for them and their American clients. When they win contracts to manage the technology, accounting, or other operations for U.S. corporations, the Indian firms typically handle the work with about 20% to 30% of the employees in the U.S. and 70% to 80% offshore. The mix allows the companies to benefit from the lower wage rates offshore, while doing the most critical work, such as testing software applications, on-site.

Proponents of the Durbin-Grassley bill see the Indian outsourcing model as displacing a US worker when the visa holder arrives, and then allowing him or her to continue displacing a U.S. work after the visa holder returns to India. Opponents of the bill see the model as good for both U.S. and India business, and they fear a trade war will erupt if the Durbin-Grassley bill is signed into law.


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