True Global Outsourcing: It’s about Skills, Not Visas

Writing in Forbes, veteran Forrester analyst Stephanie Moore, recently wrote that “every offshore development team requires an onsite component, [and] that [the] onsite component could be provided by American citizens — who naturally have more contextual business understanding, thus satisfying one of clients’ most pressing needs today.” (True Global Outsourcing Should End The Visa Debate). Moore is right that American employees can and should staff more of the onsite roles in global IT outsourcing projects, but the reason they don’t is driven more by the difficulty of finding American employees who have the appropriate skills and interests than it is by costs.

Global outsourcing engagements generally cannot be implemented and managed without significant interaction between buyer and vendor organizations during both project initiation and ongoing operation.  Onsite coordinators and transition teams manage these interactions and are necessarily composed of experienced professionals with strong knowledge of both client businesses and vendor operations.

Moore asserts that these roles can be filled by “a developer from India on an L1 visa in Manhattan [who] can legally be paid $7,000 per year, even if an American developer or an H1B visa developer (who must be paid prevailing US-wage) would be paid closer to $70,000 per year.”  While a tenfold cost difference is provocative, such a scenario meets the requirements of neither USCIS rules nor of the outsourcing services buyer.  A $7,000 salary is approximately the amount paid to IT professionals who are recent college graduates (“freshers” in industry parlance).  The USCIS allows companies to transfer employees from their Indian operations to their U.S. operations using an L visa if, among other things, the employee will be rendering services in either (A) an executive or managerial, or (B) a specialized knowledge capacity.  Virtually no recent college graduate will meet this USCIS standard.  In addition, the global service delivery models deployed by services providers require individuals with the skills and maturity to act as conduits between businesses in the U.S. and technical teams in India.  No “fresher” would have the skills and experience to undertake this role, and few clients would accept such a person if offered.  More typically, employees in these onsite roles will have at least four to ten years of experience and command salaries of $20,000 or more (in India).

However, the cost of a foreign associate in the U.S. does not begin or end with his or her salary.  In our experience, companies that transfer employees to the U.S. on L visas pay their living expenses, just as they would with a U.S. consultant on assignment in another city. Even in a medium-sized city in the U.S., living expenses (lodging, transportation, and food) are at least $200 per day or $72,000 a year.  For longer assignments, companies move L holders to their U.S. payrolls, and pay wages in line with U.S. co-workers with similar skills and experience. The companies with which we’ve worked follow guidelines similar to these, and buyers should require these standards from their vendors.  L visas should allow companies to temporarily import employees to support intra-company work or provide skills that are in short supply, but they should not be particularly attractive economically.

More significantly than visa-holder economics is the difficulty in finding Americans who have the skills and desire to act as onsite coordinators.  As Moore notes, American employees are more likely to have a deep understanding of the American business context, but there are relatively few Americans who have sufficient knowledge and experience with offshore services delivery and management of globally distributed teams.  To gain these skills, Americans need to spend significant time in key offshore locations to learn the intricacies of offshore operations, and, during periodic rotations, to build relations with offshore teams and transfer knowledge related to the business processes.  While rotations to the U.S. are highly desirable career opportunities for many Indian employees, few American employees are willing to make a similar rotation to India or other low-cost country.  As a result, IT services engagements continue to be designed with one-way rotations, and when visas are blocked and Indian employees can’t be landed, projects are delayed or cancelled thereby increasing costs for all the businesses involved.

Addressing the visa risk in a changing political environment requires a multi-pronged strategy.  One element is to work with the U.S. government to improve visa compliance across the industry and insure procedureal fairness so that all industry participants can plan accordingly. However, the industry needs a much more robust approach to developing American employees who can fill these roles – including training in offshore delivery models, cross-cultural team management, and hands-on experience working in different offshore locations.  Providers and buyers also need to work together to design engagements so that a majority of outsourcing employees working onsite at the buyer’s locations are local, domestic citizens, and plan for bidirectional knowledge transfer rotations.

As global IT service centers proliferate in Asia, Latin America and Eastern Europe, being able to field managers from multiple locations who are comfortable operating within and managing multi-shore projects will become a strategic imperative for outsourcing providers. It is also a strategic capability that the U.S. must build in its workforce if it wishes to continue to be a leader in the IT industry.  Growing American workforce capabilities to operate effectively in emerging economies will be increasingly important to our economic growth in the next decade.  Companies that take the lead in developing innovative and responsible strategies for cross-border employee movement, multi-lateral workforce development and economic growth, will emerge from this difficult political environment as industry leaders.

The post was co-authored by Red Bridge Strategy partners Matthew Sullivan and Cindy Carpenter and has been cross posted at Global Sales and Marketing.

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