This year the INS received 150,000 H1-B visa applications for the coming year starting in October, on the first day that it started accepting applications – for a total of 65,000 visas! An article in the New York Times takes a look at the issues surrounding this. A table from the same article reproduced below gives you the breakup of the visas requested by company. Indian IT Services companies are the only companies at the top of the list.

I remember seeing this same chart in the 98-99 time-frame when I was at Infosys. Microsoft, Intel and other US tech companies were at the top of the list then. So what has changed since then? Sure there was a tech downturn, but the trough on employment in the tech industry is well behind us.

It turns out that the US tech industry wants the H1-B employees, but the Indian IT Services industry wants those visas more.

For the Indian companies, H1-B visas are their lifeblood. 60 to 70% of their revenues are out of the US. H1-B visas are like “raw material” for them. If they don’t have them they can’t start projects and this impacts revenue immediately. For the US tech companies, the same visas affect R&D, which eventually affects new product innovation and so affects the company, but the effect is felt in the long-term, not next quarter.

Understandably then, the Indian companies are more organized in their efforts to secure the maximum number of visas possible. But the US tech companies also have one major disadvantage. They can’t plan for the visa applications as far in advance as an IT Services company can. The US tech company needs the visa to hire someone who is not yet in the company. The Indian services company already has thousands of employees who need the visas in order for them to go to the US to start projects. Planning for their visas can be done well in advance.

In my opinion, the US tech companies can never win this battle for visas. Yet, there is no doubt in my mind (and theirs) that the H1-B employees are essential for their own competitiveness. In the words of Bill Gates, America should “welcome as many of those people as we can get.” So, what can they do to not get “crowded out”?

One way, is of course to just take the cap on visas off or at least take it up substantially. This seems to be the general thrust of the lobbying by the tech companies. This is a temporary solution. Plus, I doubt that Congress will ever let the cap get too high.

A better solution would be to realize that the offshore IT services industry and the domestic tech industries use the same visas very differently and therefore to create different visas for them. Making the two industries compete for scarce visas is unfair to the domestic tech industry. And in the long-term, a cap on visas will hurt both industries. The only problem with this solution is a practical, political reality – the visa for the services industry can become the lighting rod for the anti-outsourcing zealots.

Ultimately, both industries are important for America’s competitiveness. It is important to find a way out soon.

 Cross posted in 6ampacific.com