H-1B, Digital Transformation and ISG’s Vision

Authored by Steve Hall, Stanton Jones and Bruce Guptill

What is Happening?

The U.S. H-1B visa lottery is under way. In 2007, this annual program allowing companies to bring specialized foreign workers into the United States took 39 days to fill an 85,000-person quota. In 2017, it took just five days.

But next year – and the years to follow – may well run a different course. The new U.S. administration made it clear that it would reform the H-1B visa program. Though no legislative changes have been made to date, executive action that may signal what is to come is in progress. This includes the following:

• On March 31, a memo from U.S. Citizenship and Immigration services (USCIS) clarified a 15-year-old definition of a computer programmer, ending its status as a “specialty” role.
• On April 3, USCIS issued new measures to detect and deter H-1B visa fraud and abuse, including site visits for H-1B-dependent employers and a new email address to submit tips about abuse.
• On April 3, the U.S. Justice Department issued a statement to H-1B employers, warning them not to discriminate against U.S. employees.

The result is rapidly escalating uncertainty about the availability and cost of tech resources – especially resources critical to the development and growth of the IT industry – and about the ability of enterprises and IT providers to compete in the emerging digital economy.

Why is it Happening?

Some U.S. workers, politicians, unions and business leaders are concerned that current work visa programs, including H-1B, allow companies to shift jobs from higher-paid U.S. citizens to lower-paid foreign nationals. This theme was echoed in campaign rhetoric during the recent U.S. elections, and immigration reform, including H-1B visa reform, became a centerpiece of the administration’s platform.

Now H-1B employers – the companies hiring and bringing foreign workers into the U.S. – are under scrutiny. Nine of the top ten H-1B employers are large consulting companies, including Indian Heritage firms Infosys, Tata Consultancy Services (TCS), Tech Mahindra and Wipro. Tech providers tend to use the program to fulfill staffing requirements for a variety of projects – projects they say require more resources with specific skills than are available in the U.S. at present.

This raises questions about job definitions, creating further uncertainty for all parties. The program was designed to fill what were labeled as “specialty occupations” in areas such as engineering, medicine and technology. However, today, technology jobs proliferate. Computer systems analysts, software developers and computer programmers account for 87 percent of all Labor Condition Applications (LCAs). Roles categorized as “programmer” roles, though, often are required to help implement a successful outsourced or offshored project. When a company decides to tap into a global talent pool, it needs expertise onsite and offshore. The onsite roles, which are typically H-1B visa holders, usually account for less than 10 percent of the total team. Their role is to assist offshore resources with the broader development effort by collaborating with the client and providing onsite technical expertise. 

Impact

Given the nascent nature of visa reform, uncertainty will prevail at least through 2017. The scope of reform is still unknown as the number and variety of administrative and legislative proposals continue to grow. And the ability of the current administration, government agencies and legislating bodies to agree on and enforce new standards is yet to be determined.

ISG’s view of this complex situation encompasses short- and long-term scenarios.

In the short term, it will be difficult for national political and regulatory entities to reach consensus about how to overhaul the H-1B program. This suggests that piecemeal reform is the most likely path through at least early 2018. Piecemeal approaches tend to create uncertainty for all involved. They also tend to create more complexity in markets because they have either a very narrow focus or a very broad scope. Knowledgeable guidance becomes critical.

In the longer term, we see a dramatic shift in the types of skills and capabilities required in enterprise IT and in the development and delivery of next-generation technologies and provider solutions. We expect the flow of labor in the future to be more challenging to predict, legislate and regulate. Key disruptors shaping this future include the following:

• The impact of automation in IT, Finance, HR and other operating areas of large enterprises will change the skills equation. Automation adoption and adaptation throughout digital business scenarios will drive significant shifts in resource and skill needs for user enterprises and for IT providers alike, along with shifts in the cost and value of existing and next-generation tech resources.
• Agile development technologies and approaches will likewise affect the need for and value of a range of skills, including those replaced or supplemented by agile approaches. 
• AI and machine learning will substantially alter tech and business operational skill requirements by enabling faster and more accurate data analysis and decision making, along with system and solution interconnectivity, management and security.
• Emerging near-shore/rural-shore approaches will shift locations of outsourcing and therefore locations of skills and their associated needs. While traditional, labor-leverage-focused outsourcing models continue to decline in prominence, clients will need more and different skills located in new and different places.
• Digital business-driven visa policies will result from – and help to shape – all of the above. The breadth and depth of business IT transformation currently under way is unprecedented. This is another reason we believe near-term regulatory or legislative efforts will be piecemeal, adding to IT labor market confusion and cost. The most effective rules in any situation are those that are adaptable and based on experience, and the political world has very little experience with digital business transformation to date.  

Given the pace, disruption, innovation and unpredictability of digital transformation and the innovation, skills and experience U.S. enterprises need to adopt new technology, business growth will be unpredictable and variable for years to come. Keeping pace with digital change and keeping a step ahead of new developments will be critical for enterprises and the IT providers that serve them. ISG advisors will continue to add expertise in this area to help guide enterprise and IT provider clients in their decision-making as the situation evolves and matures. ISG Insights subscription research clients can look for a series of Research Notes that analyze key market developments and provide further guidance in support of our advisory programs.

NOTE: this Lens360 blog post was originally published online by ISG at http://insights.isg-one.com. 

About the authors

As a partner and member of the Executive Board, Mr. Hall leads ISG’s Digital Strategy and all ISG Service Lines for the Americas. He also leads ISG’s Alliance group and is ISG’s Executive Sponsor to the TBM Council. During his time with ISG, Mr. Hall has led some of the company’s largest and most complex engagements with clients as diverse as United Airlines, Symantec, BP, World Bank, CEMEX and Motorola. He is a seasoned professional who brings considerable experience in emerging technologies to ISG clients. Prior to his position at ISG, Mr. Hall held senior roles at a number of renowned IT services companies, including Unisys and MCI. He also led large-scale eBusiness initiatives for technology solutions providers C-Bridge and CBSI and gained deep outsourcing and offshore software development experience as a delivery executive with Covansys. Mr. Hall co-authored Managing Global Development Risk: A Guide to Managing Global Software Development. He earned his degree in Computer Science from Regis University.

Stanton helps enterprise IT and sourcing leaders rationalize and capitalize on emerging technology opportunities in the context of the global sourcing industry. He brings extensive knowledge of today’s cloud and automation ecosystems, as well as other disruptive trends that are helping to shape and disrupt the business computing landscape. Stanton has been with ISG for more over a decade. During his tenure he has helped clients develop, negotiate and implement cloud infrastructure sourcing strategies, evaluate and select software-as-a-service platforms, identify and implement best-in-class service brokerage models, and assess how the emerging cloud master architecture can be leveraged for competitive advantage. Stanton has also guided a number of leading service providers in the development of next-generation cloud strategies. Stanton is a recognized industry expert, and has been quoted in CIO, Forbes and The Times of London. You can follow Stanton on Twitter: @stantonmjones.

In his role as leader of ISG Insights’ overall research agenda, Bruce coordinates analysts’ focus on guidance regarding digital disruption, emerging technologies, market shifts and the changing value of enterprise IT for clients’ changing business needs. His own analysis and guidance focus on how disruptive technologies enable business innovation and improvement for enterprise clients, and how these in turn disrupt and reshape software and IT services providers’ business and markets.