Indian Information Technology (IT) firms are keenly looking at nearshoring choices to service clients in the US as restrictive visa regulations in the country are making it difficult for them to assign engineers to this major client geography.
Nearshoring is an outsourcing model where IT firms set up delivery presence in countries and locations closer to the client geography and appoint employees working in those centres to service clients at the time of necessity.
According to analysts, the swiftness of nearshoring is set to increase with the newest visa norms floated by the Trump Administration that offers priority to advanced degree holders from the US in technology jobs.
“There has been an uptick in the investments being made in nearshoring, and Mexico, apart from Canada, has seen growing interest from Indian vendors,” said Hansa Iyengar, senior analyst at London-based Ovum Research.
She also told, “Other nearshore activities are centred in Europe where Eastern Europe and Nordics are emerging viable destinations.”
Nearshoring is not a new concept for domestic IT services players, but the execution of stricter immigration policy under the current Trump Administration has prompted many IT firms to look at this opportunity sincerely, apart from localizing their employee base.
As US is the biggest market for Indian IT professionals, with more than 60 percent of revenue coming from the North American continent, IT services usually send engineers on an H1B visa to work on client projects.
Now, 60 percent of H1B visas issued by the US go to Indian firms.
When the Trump Administration is making ‘hire local’ its priority, IT services players are increasing their local base in nearshore centres as it significantly reduces the dependency on H1B visas as the major source for talent. For example, mid-sized IT Company Hexaware has declared that it would employ its Mexico centre to service the US clients.
Similarly, Tech Mahindra has announced to start a centre of excellence in Canada this year by investing around 100 million Canadian dollars. Its main job will be to develop business solutions in digital technologies for clients.
“IT firms are now investing in Canada as getting a visa from Canada is easier than the US. For all practical purposes, you are working in Canada, but can service a client in the US,” said Pareekh Jain, an IT outsourcing advisor.
Jain told, “This has already reflected in the numbers, as in 2017 India has surpassed the Philippines to send the highest number of immigrants to Canada.” Though IT services firms keep eyes at nearshoring to overcome the visa challenges coming from the US, analysts described the solution wouldn’t be sustainable due to the deployment of high-cost resources.
“Nearshoring is not cheap, compared to offshoring, but it provides access to deals that require close proximity between vendor-client teams,” Iyengar said.
Yet flying out resources from nearshore centres like Canada and Mexico for employment in client projects in the US has its own challenges.
“Fly-in and fly-out option has to be used very carefully by IT firms because, when engineers fly in to the US, they can only do so for activities permitted on a business visa,” said Poorvi Chothani, founder and managing partner at LawQuest and president, Indo American Chamber of Commerce (Western Region) which specialises in immigration laws.
She told, “Even though nearshore centres give one proximity to the clients, there are limited advantages as they (engineers who are sent to the US from these centres on business visa) are not allowed to render any profitable work in the US”.