How Are Offshore Outsourcing Firms Adjusting to the Backlash?

The H-1 visa (Specialty Occupation Work Visa) was created in the early 1950s to give skilled foreign workers a permit to reside in the United States. The H1-B category was added in 1990 to give foreign workers an opportunity to work temporarily in the United States.

According to USCIS.gov: "The H-1B is a nonimmigrant classification used by an alien who will be employed temporarily in a specialty occupation or as a fashion model of distinguished merit and ability." A specialty occupation requires theoretical and practical application of a body of specialized knowledge along with at least a bachelor's degree or its equivalent. H-1B workers may only work for the petitioning U.S. employer and only in the H-1B activities described in the petition.

In 1999, under pressure from high-tech companies and other manufacturers, Congress expanded the limit from 65,000 to 115,000. It raised the cap again to 215,000 in 2000 and to 195,000 in 2001 and 2002. The cap reverted back to 65,000 on October 1, 2003.

Indian companies have been curtailing the use of H1-B visas for sending employees to the United States. Most companies have shifted to the use of L-1 visas (used for intra-company transfers). As a result, it's unlikely that the offshore outsourcing trend will be affected.

To prevent this loophole, certain bills are calling for a cap of 35,000 on L-1s, which currently have no cap. The bills also adds a prevailing wage requirement and prohibits L-1 use by companies that have laid off U.S. employees within the preceding six months and for six months after the application is filed.

As far as other legislation and the backlash against offshoring, some U.S. companies such as Dell have experienced a temporary negative impact on their stock, but most Wall Street analysts are rewarding companies when they announce their plans to go offshore.

The leading Indian outsourcing firms such as Wipro, Infosys, and Satyam do not seem to be affected by the 2004 opposition legislations such as the Thomas-Voinovich amendment. Some have their stocks trading at near record highs.

The bottom line: The offshoring trend is causing concern among the unions and state and federal politicians. Recently there have been vocal protests by unions, who are organizing themselves to force companies to agree to certain time frames during which they will not resort to outsourcing. That such commitments are neither demanded nor granted for periods no longer than a year shows the inevitability and gravity of the public policy situation.