IT Services Companies And Clients Bear Brunt Of H-1B Crackdown

Donald Trump signing the “Buy American and Hire American” executive order on April 18, 2017, in Kenosha, Wisconsin. The executive order has made it more difficult for companies to hire or extend the status of high-skilled foreign nationals in the United States. (Stacey Wescott/Chicago Tribune/TNS via Getty Images) GETTY

New U.S. Citizenship and Immigration Services (USCIS) data reveal the Trump administration’s crackdown on high-skilled immigration has hit the information technology (IT) services sector the hardest. Such services have been important in making U.S. companies more competitive and increasing U.S. economic growth, which means, according to analysts, administration policies are harming American companies and the U.S. economy.

In FY 2018, USCIS denied 80% of the H-1B petitions for new (initial) employment for Capgemini, a French multinational, 61% for U.S. company Cognizant, and between 34% and 54% for IT services companies Syntel, Infosys, Mindtree and HCL America. To put these figures in perspective, major U.S. tech companies, including Amazon, Facebook and Apple, had 1% or 2% of their new H-1B petitions denied in FY 2018. (See Tables 1 and 2.)

USCIS says 60% of all completed H-1B cases received a Request for Evidence in the first quarter of FY 2019, which companies consider a high level that adds time, cost and uncertainty to the process. FY 2018 data show even H-1B extensions for existing employees were denied about 25% of the time for many IT services and consulting companies, even though such employees had been previously approved for visas.

Table 1: Denial Rates for IT Services Companies for H-1B Petitions for Initial Employment (FY 2018)

Employer Denial Rate (Initial Petitions)
Capgemini 80%
Cognizant 61%
Infosys 54%
Syntel 47%
Mindtree 40%
HCL America 34%

Source: USCIS, National Foundation for American Policy.

A major disconnect exists between those making U.S. immigration policy – now designed to make it very difficult to hire people with sought-after technical skills – and the role digital platforms play in determining the competitiveness of companies. “One of the most significant secular trends today in U.S. business is the move to utilize digital transformation to increase competitiveness,” according to Peter Bendor-Samuel, founder and CEO of Everest Group, one of the world’s top research firms focused on information technology, business process and engineering. “Almost every major U.S. firm is building some form of digital platform so it can enhance its competitive position both domestically and internationally. This is probably the most important thing these firms are doing and success will define both company and global success as we move into the future.”

Bendor-Samuel explains access to talent is crucial for IT services companies to conduct work for U.S. clients attempting to build these digital platforms. “The U.S. faces an acute shortage of digital and IT skills and these digital transformations and digital platforms require a significant amount of these skills to build and maintain,” he said in an interview. “The access to international talent and particularly to the large Indian talent pool is vital to the success of these programs. When the administration restricts the ability to bring these scarce skills into the United States by restricting H-1B and L-1 visas, making the granting of these visas more difficult and less predictable, it directly affects these firms’ ability to build and scale these digital platforms and negatively affects the competitiveness of U.S. companies.”

The administration’s immigration crackdown against IT services is taking place even though economists recognize the key role such services today play in spurring a nation’s economic growth. “The relationship between services growth and overall economic growth has become stronger in the past two decades as services’ average contribution to GDP [gross domestic product] and value added has increased,” explain economists Dr. Patricia Buckley and Dr. Rumki Majumdar in a study for Deloitte. “In 2015, services’ value added accounted for 74% of GDP in high-income countries, up from 69% in 1997. The contribution of services’ value added to GDP was higher in the United States than among its peer high-income nations.

Vic Goel, a managing partner of Goel & Anderson, said in more than 20 years of representing companies he has never seen the tactics currently used to change how U.S. immigration law is applied. “The data reflect the different evidence required and different approach to adjudication USCIS requires of companies whose employees work at third-party work locations versus employers who engage in traditional employment at their own location,” said Goel in an interview. “It is striking that approval rates are so markedly lower for IT services firms.” Immigration law does not indicate a different standard for adjudication based on the type of firm or the location work will be performed, attorneys point out.

Table 2: Denial Rates for H-1B Petitions for Initial Employment for Companies Not in IT Services (FY 2018)

Employer Denial Rate (Initial Petitions)
Amazon 1%
Microsoft 1%
Intel 1%
Google 1%
Facebook 1%
Apple 2%

Source: USCIS, National Foundation for American Policy.

Observers note current restrictive immigration policies have come at a time of record job openings, near-record low unemployment rates and data showing U.S. students make up no more than approximately 20% of the full-time graduate students in computer science and electrical engineering at U.S. universities. “The increase in denials and Requests for Evidence injects delay and unpredictability into the H-1B process, which in turn creates uncertainty for the U.S. clients of IT services companies,” said Goel. “This results in missed opportunities and increased costs, while providing a powerful incentive for companies to base their operations outside the United States, such as in Canada or India.” In several documented instances, even when cases were approved, USCIS limited the duration period of the H-1B visa to days or weeks, rather than years, a practice that attorneys have challenged.

The FY 2018 USCIS data reveal IT services companies, including those based in India, do not, as some believe, use “most” of the new H-1B visas each year. The top 7 Indian-based companies received only 2,200 new H-1B petitions for initial employment in FY 2018, less than 2.6% of the 85,000 annual limit for companies, according to a National Foundation for American Policy (NFAP) analysis of USCIS data. An NFAP report last year found new H-1B petitions for the top 7 Indian-based companies had fallen 43% between FY 2015 and FY 2017. “The decline in H-1B visas for Indian-based companies is due to industry trends toward digital services such as cloud computing and artificial intelligence, which require fewer workers, and a choice by companies to rely less on visas and to build up their domestic workforces in America,” noted the study.

Table 3: Leading Recipients of H-1B Petitions for Initial Employment (FY 2018)

Rank Employer Initial Approvals Initial Denials Denial Rate
1 Amazon 2,552     37  1%
2 Microsoft 1,252     13  1%
3 Intel    873       9  1%
4 Google    724       6  1%
5 Ernst & Young    716     93 12%
6 Apple    698     13   2%
7 Facebook    651       5   1%
8 Deloitte    593   295 33%
9 Tech Mahindra Americas    579   201 26%
10 TCS    528   152 22%
11 Cognizant    500   790 61%
12 Larsen & Toubro    407     93 19%
13 Accenture    363   160 31%
14 Wal-Mart    341     35   9%
15 IBM    330     63 16%
16 Cisco    328     13   4%
17 JPMorgan Chase    321       8   2%
18 Cummins    314      11   3%
19 Wipro    273      82 23%
20 Capgemini    273 1,061 80%
21 HCL America    196    100 34%
22 Mphasis    174      60 26%
23 Mindtree    148      98 40%
24 PricewaterhouseCoopers    112      20 15%
25 Infosys      69      80 54%
26 Syntel      64      57 47%
27 Randstad Technologies      42        4   9%

Source: USCIS, National Foundation for American Policy. Note: Totals for IBM and IBM Private India were combined, as were Amazon and Amazon Corporate, as well as Larsen & Toubro and L&T Technology Services.

In FY 2018, the USCIS data show major U.S. companies were 6 of the 7 top employers with approved H-1B petitions for initial employment, led by Amazon (2,552 petitions), Microsoft (1,252), Intel (873), Google (724), Ernst & Young (716), Apple (698) and Facebook (651). (Ernst & Young is a UK-headquartered multinational.) Slower processing may have affected the total number of approved petitions for companies on the USCIS list. (See table 3 for a list of employers.)

Technology companies with the best H-1B approval rates remain concerned about current U.S. immigration policy, including the Trump administration eliminating work authorization for up to 100,000 spouses of H-1B visa holders and no longer honoring prior approvals when companies try to extend H-1B visas for existing employees. In an August 2018 letter, CEOs of America’s largest corporations, members of Business Roundtable, wrote, “Unfortunately, U.S. Citizenship and Immigration Services has issued several policy memoranda over the past year . . . resulting in arbitrary and inconsistent adjudications. Inconsistent government action and uncertainty undermines economic growth and American competitiveness and creates anxiety for employees who follow the law.”

Restricting access to foreign-born talent, particularly high-skilled foreign nationals who can increase the competitiveness of American companies, makes little sense, according to those who best understand business and technology. “Digital transformations and digital platforms are just starting to take off and, as we look into the near future, the current skill shortages are going to grow as the demand for digital and IT skills explodes,” said Everest Group CEO Peter Bendor-Samuel. “If this administration wanted to harm U.S. competitiveness, then restricting access to this vital labor would be an excellent approach.”

Author: ashmith

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