Friday, March 27, 2009

H1B or No H1B?

Looks like the planned reduction of H1B visas will end up increasing US jobs going to South Asia instead of the opposite. According to the WSJ;
"In January, IBM sent layoff notices to about 4,600 people, including workers in its software unit and sales department.

Earlier this year, IBM also told employees that if they wanted to move to an emerging market, they could apply for jobs there with IBM, but they would be paid in local wages. A spokesman Wednesday said "dozens" of people have taken the offer, usually natives of those countries."

That's the story from the US side, while on this side of the world, companies like Infosys seem to be looking for aquisitions as well as future business from other countries, especially in the EU. According to Nanadan Nilekani co-chairman of Infosys;
Rising protectionist sentiment in the U.S. also is affecting customers' decision-making about outsourcing. The economic-stimulus bill, for example, includes a provision preventing participants in the U.S.'s financial bailout program from hiring workers with H-1B visas, which are commonly used by non-U.S. outsourcing companies. "Political issues have become more pre-eminent in our conversations,".
Hence the new trend of Geo-Diversification of the project mix in most companies, in order to reduce their dependency on the US. For instance at Infosys, the US now accounts for about 63% of revenue. But according to Mr. Nilekani, he would ideally like that to be about half. This has been a trend in companies like Virtusa as well. In the past few years, they have expanded rapidly in the UK and EU markets.

The fundamental Economic principle most politicians seem to ignore here is that The Firm is a profit making unit. The goals of maximizing stock prices, in turn maximizing share holder’s wealth, is the objective for firms that are publicly traded. No matter what legislations or sanctions are in place, publicly traded companies will adopt their strategies to maximize profit. When you approve legislation to satisfy the Peanut Gallery, you risk ending up losing your competitive edge and more often than not, shaking the very foundation of your economic dominance as a country.