As the American dream sours for foreign workers, tech companies have their eyes peeled for local talent.
Immigrant workers have long flocked to US tech companies, with nearly two-thirds of the H-1B visas in 2014 allocated to those in computer-related occupations. While IBM, Google, Apple, Amazon, and Microsoft are among the top contenders for the 85,000 new visas each year, the biggest beneficiaries of H-1Bs have traditionally been the Indian IT bigwigs like Infosys and Tata Consultancy Services (TCS) or American multinationals like Cognizant that outsource the majority of their jobs to India.
Even before president Donald Trump signed an executive order to kickstart the much-discussed H-1B revamp on April 18, Indian IT firms were cutting back on visas requests by opening offshore and nearshore centers, automating parts of their business, and working remotely. Bengaluru-based Infosys said it would add 10,000 jobs in the US over the next two to four years. Cognizant, with most of its operations in Chennai, is said to be handing its Indian employees pink slips while it ups its US headcount. Last year, it hired 4,000 US citizens and residents. Azim Premji-led software giant Wipro expects to have half of its workforce comprise of US locals by June. Rival TCS reportedly has hiring programs in place at engineering campuses and the top-10 US business schools.
While these companies may want to trade their Indian employees for those on American soil, a straight swap isn’t easy. They’re competing with Google and Facebook as well as startups like Uber and Airbnb. Moreover, American tech workers are fewer in number, are generally not as highly skilled, and cost more than their Indian counterparts. In 2015, there were nearly 10 times more US computing jobs open than there were students equipped with computer science degrees.
“There’s still a gap out there,” when it comes to skills, said Steve Ostrowski, director of corporate communications at non-profit IT trade association CompTIA. “Hundreds of thousands of jobs–core IT jobs—are advertised for and not filled.” Ostrowski says the problem is exacerbated by how rigid companies are in their hiring practices. Many won’t invest in the training necessary to make a hire viable. “Maybe you’ve found someone fitting the bill 80 to 90%, and can’t quite close the remaining 10%. What would be wrong in hiring such persons and skilling them up?”
In the US, over 60% of the employers offer some form of undergraduate tuition reimbursement, according to a 2016 report by jobs site Indeed. However, subsidizing the education cost is only useful if students graduate with skills that serve the market’s needs. “For generations, high skill professions have relied on years of undergraduate and graduate education to qualify large swaths of their workforce,” the Indeed report says. “That model may not suit the reality of the labor market today and into the future.”
To help close this gap, Infosys, which gets 62% of its revenue from North America, has trained 2,500 teachers and over 135,000 students through its Infosys Foundation. The foundation is also funding the training of over 1,000 public school teachers in computer science this summer.
This may not be enough to provide the Indian IT firms with the talent they need. Many potential hires just don’t want to work for them.
“If you were to sample 15 engineers and give them the option of working at an outsourcing company,” or a product-first tech company like, say, Apple, they will take the latter, says Harj Taggar, founder of tech recruitment portal Triplebyte. “The interest of doing the work is so much higher when you’re working for the product-first company.” At traditional software companies like Wipro and TCS, people are often left “building cookie cutter software for big companies,” he says.
Companies could consider looking for talent outside of the saturated Bay Area and tap into tech hubs like Seattle, Austin, and Boston, or create their own elsewhere in the US. For instance, Snap has single-handedly been able to almost monopolize the top tech talent in its home base of Los Angeles because of its product-driven business model. However, that sort of lure doesn’t exist for Indian IT companies as their business models don’t inspire ingenuity.
Not only is the job role dull, Taggar says, people’s careers can also stagnate at these conveyor belt-like services firms. “If they can offer individuals a chance to see solid career path (where they are) promoted after ‘X’ amount of time and (they) won’t be pigeonholed, they can find workers that fit the bill,” he says.
Money is also an obstacle.
“When firms say they can’t find any workers, what they really mean is they can’t find any workers at the price they are willing to pay,” says John Horton, the assistant professor of information, operations and management sciences at New York University’s Stern School of Business. “Maybe you can get to the point where you can’t get anyone, no matter the price. But people can move. So even in those cases, it’s not really an insurmountable gap, so much as an unwillingness to pay enough to induce people to move.”
Workers participating in the H-1B program have to earn at least $60,000 and most Indian tech firms hire at the rate, but “that’s way, way under market rate, particularly in the Bay Area,” Taggar says. The average tech sector wage in 2016 was $108,900 in 2016, according to the Cyberstates 2017 report (pdf). Consequently, if H-1B dependent employers hire outside the program they should anticipate a spike in costs and a drop on profits. Especially because, unlike H-1B workers whose visa status is tied to their employer, American nationals are free to move as and when they wish.
Considering upwards of 60% of the revenues for India’s $150 billion IT sector come from North America, bringing local talent onboard is likely a strategy for Indian companies. Whether it’s sustainable is another question.
“The political signal it sends is a good one. ‘We’re not here to steal all your jobs, we’re here to help Americans get skills they need’,” says Taggar. “But fundamentally, it is very hard to believe. Companies ultimately have to care about bottom lines.”