Where will the US get its technology graduates from, to support on-shore requirements?

A draft bill currently making its way through the Senate concerning US immigration is bound to cause a stir within the BPO community–both in the US as well as globally–for its implications on services delivery. Over the past year, given the political and economic uncertainty and risk associated with some of the hitherto attractive Asian, Latin American, and East European markets, there's been a slow but steady trickle of BPO services being brought back "onshore". Clients have cited a number of reasons, including the need to get services closer to the business; rising overseas wage inflation; attrition rates; and the challenging state of markets, generally. But perhaps, pure and simple, it’s mainly about perceived loss of control. Whatever the case, buying BPO services onshore is something American companies are increasingly interested in. So it's with some interest that we're all following the developments of the US draft immigration bill that's currently going through the Senate Judiciary committee. In a nutshell, here’s what it's about: Every year, the US issues 65,000 "skilled worker" permits (known as H1-B visas). The criticism leveled by some of the homegrown BPO outfits, is that large, global BPO providers (notably Indian heritage) are unfairly, so they say, importing staff through these H1-B. visas (in some circles, the H1–B visa is referred to as the "outsourcing visa"). The really important part is this: these staff are often paid less, sometimes significantly less (I’ve been quoted 30 to 40%), than their American equivalents would be paid to do the same job. Depending on the outcome of this matter, it may seriously dent the ability of Indian outsourcing firms to grow their business in the US – at least profitably. Given the enormous revenues involved (India's IT industry is worth $110 billion, and makes about half its revenue from the US) we can expect significant pushback from Indian provider companies who, today, account for more than half of all the visas allocated each year. US technology firms, who complain they are at a disadvantage in hiring foreign labor, are lobbying to cap the number of staff a US-based company can employ through H1-B. A recent Wall Street Journal article cites some firms as having 80% of their domestic staff on HB-1 and other visas. The push is to cap this number at 75% and then dropping it to 50%. At the same time, there is significant support for nearly tripling the number of H1-B visas to 180,000 per year [for anyone who's interested, there is a Linkedin group with 7,000+ members discussing H1-B]. The solution, however, is not quite as simple as that. Domestic outsourcers like Monty Hamilton – who runs Rural Sourcing, a company providing application development and support from offices in Augusta, Georgia, and Jonesboro, Arkansas – have been following the issue closely. His clients, half of whom are Fortune 500 companies, are increasingly taking a portfolio approach to sourcing, and they see the US as a natural extension of this strategy. "Having already set up outsourcing arrangements from India, or China, they don’t want to put all their eggs into one basket. They’re taking a risk management approach in choosing the US as an alternate source of services," he says. The problem, he acknowledges, is that there are not enough STEM graduates being produced in the US each year, despite the efforts of the STEM Foundation. Nevertheless, Monty does not think the direction that Congress is taking with the bill is the right solution. "It may provide some temporary relief, but is not addressing the root cause of the problem," he says. Instead, people like Monty believe that companies that are expanding ought to be taking an innovative approach to growth. The real problem, he says, is that companies are overlooking an entire population of people with potential – what he calls the marginalized worker: "The US has an enormous number of Tier 2 and Tier 3 cities, with fully capable, educated, talented workers, and there’s an attractive salary trade-off for moving work to these locations." One change that is being debated concerns doubling the cost of the H1-B visa (to roughly $10,000 instead of the $5,000 per worker it can cost at present), and using the difference to fund STEM education in the US. That may work. Or companies, instead of investing large sums in H1-B visas year after year, could decide to invest in innovative solutions domestically – by building centers in alternate locations and developing a strong services base from there. Companies like GE Capital are taking the lead. It was recently in the news for receiving a robust incentive package for its New Orleans office, where it plans to host 300 IT jobs. Rural Sourcing is also considering a third location for its growing operations. Monty currently has a dozen pins stuck in a map of the US, which he hopes to narrow down to seven locations within a month. He is optimistic. On the other hand, organizations like Microsoft want to be able to hire more of what they need from abroad. (Listen to an interview on NPR about H1-B visas, including Microsoft’s General Counsel Brad Smith, who says: "We need to continue to attract some of the best and brightest people in the world to come and join us in world-leading [research and development] efforts.") Here’s something else to consider: Companies like Accenture and IBM today have more staff working outside the US than inside. Clearly, this is a reflection of labor costs and skills availability. If the US really wants to tackle the problem, it’s going to take a lot more than fixing immigration legislation. There are two main issues here: First, the fact that through some clever transferring, it's possible to offer the kind of wage arbitration normally linked to far-flung destinations from right here in the US; and second, that the US is obviously not providing the numbers of clever IT graduates that its economy requires. Given the messages emanating from Government and academic sources, we may hope to see a turn in this over the next generation [or as soon as my sons graduate from college!]. But in the meantime, it puts the US in an uncomfortable predicament: How to supply the technology workers that are critically required to support growth? Folks like Monty Hamilton believe the solution already exists in the Tier 2 and Tier 3 towns across the country. What do you think? Please send your answers to this thorny issue to me at Barbara.Hodge@ssonetwork.com. [inlinead]

Where will the US get its technology graduates from, to support on-shore requirements?

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