You may recall the feisty debate on the H1B Visa and outsourcing issue here and here last year. With the 2008 campaigning now in full swing, the "O" issue is noticeably absent from the candidates’ agenda and our old friend Lou Dobbs is waiting in the wings to shoot pot-shots at any of the candidates who say anything that remotely supports offshoring, outsourcing or increasing H1B visas. Step up Hillary Clinton (see video clip below, taken from Lou Dobbs’ CNN show last year).
Yes, she’s supporting Silicon Valley businesses and has them contributing substantially to her campaign, but at least she’s openly discussing the issue and – more importantly – attempting to tie together the realities of outsourcing, offshoring, immigration and the need for the US government to invest in developing technical and engineering talent. I respect Lou Dobbs a great deal – he’s a passionate man who sincerely believes in his vision for American workers, has a great sense of humor, and conjures up some excellent – and entertaining – political discussion. However, this H1B argument just isn’t holding up.
One key reason is the fact that the average salary differential between a "domestic" worker and his/her supplanted job to an H1B worker is….$12,000 per annum. Having advised on several offshoring and outsourcing engagements over the last three years, I can state categorically that I have yet to see companies go through an offshoring or outsourcing process – driven by the goal of cost containment – at such a low cost-saving per FTE. Most companies will not entertain outsourcing business cases if they cannot achieve cost savings in excess of 25% from their original budget – it’s simply not worth the transition cost, complexity and risk to many firms. I would add that some companies have moved into outsourcing engagements at cost-savings lower than 25% from original budget, but their reasons for outsourcing were nearly always driven by motives beyond mere cost-reduction (for example, the need to re-design and standardize processes and drive rapid change to their enterprise that an outsourcing environment could bring). Bottom-line, most companies can’t be hiring H1B workers for the sole purpose of saving a few bucks… they generally need these staff. More key points regrading this issue:
- Clinton’s policy is to increase the current (and already reached) H1B Visa cap from 65,000 to 115,000. Er… is this a big deal – will this type of increase in temporary workers cripple the US economy?
- Clinton wants to increase the H1B Visa fees for sponsoring companies. The current cost of sponsoring an H1B Visa for an organization is about $6,000 – which covers USCIS fees and typical attorney costs. Clinton wants to re-invest these fees into grants for training and education of US graduates in these specialized professions. Why not raise these fees to $10,000? This would have the effect of nullifying any minimal "cost-savings" of bringing in a skilled immigrant worker, and would incent the sponsoring US organization to focus on sponsoring higher caliber staff which are really worth the effort of bringing over (normally US firms will have to cover relocation costs, flights home for their H1B staff and devote HR time to administering the whole process).
- H1B is "legal immigration" and represents a very small fraction of the total number of immigrants in the US.
- The H1B cap is a year-by-year renewable policy. It provides short-term solutions for businesses which need skilled staff.
Dobbs makes the argument that "7 out of 10 H1Bs are going to Indian companies for outsourcing". Let’s not beat around the bush here, but most of the FORTUNE 1000 firms have been outsourcing some elements of their IT services or business processes to firms that have offshore staff in India. As discussed here on this site on many occasions, outsourcing providers – and firms that have their own captive offshore resources, must have strong "bridging" teams that can help manage the work being carried out offshore, particularly for complex tasks such as application development, implementation services, and BPO processes such as accounting, claims processing etc. These bridging teams need native staff from the offshored location who can communicate effectively with the offshore staff, oversee the day-to-day operational issues and manage the knowledge transfer activities, and understand the cultural, management and communication issues that are crucial for ensuring the ongoing success of the offshore work. Without many of these H1B staff, US businesses will suffer as a result of poorly managed outsourcing and offshore captive work. If Lou Dobbs is so desperately unhappy about this high ratio of Indian-centric staff holding H1Bs, then he needs to focus his attacks on the vast majority of today’s FORTUNE 1000 leadership, which made the decisions to use Indian offshore staff in the first place. This high proportion of Indian staff is not the cause of the problem, but merely a symptom of what is happening. The root causes of US firms needing to use offshore resources are set deeply in the culture of corporate America, and the political and educational manifestations of the Unites States over the last three decades. I’m going to tackle the key issues the government needs to address in my forthcoming post "the Outsourcing Equalizer", if it wants to accelerate the development of local IT and business process services centers.
Lou and Hillary going at it again….