skip to main content
Close Icon

In order to deliver a personalized, responsive service and to improve the site, we remember and store information about how you use it. This is done using simple text files called cookies which sit on your computer. By continuing to use this site and access its features, you are consenting to our use of cookies. To find out more about the way Informa uses cookies please go to our Cookie Policy page.

Global Search Configuration

Ovum view

Summary

On April 18, US President Donald Trump signed an executive order that calls for a reform of the existing temporary work visa (H1B and L1) system. The order aims to encourage US enterprises that have become heavily reliant on cheaper foreign labor to staff their technology projects to give preference to domestic US talent. The order also proposes that the current rules and regulations governing the allotment of H1B and L1 visas be overhauled (which would require action from the US Congress) to give importance to highly skilled and highly paid applicants. This proposal intends to curtail the tendency of US businesses of replacing US employees with foreign labor, which has become a contentious issue in the US IT industry. The broader impact of this approach will become clearer over time, but what's clear now is that IT services providers – which rely heavily on global talent with hard-to-find digital skills, as well as on global delivery models, to deliver on projects and remain competitive – are preparing for the potential fallout.

When implemented, proposed regulations will shrink talent pool for IT services in the US

According to the U.S. Citizenship and Immigration Services (USCIS), H1B applications for 2017 fell below 200,000 for the first time in five years. The USCIS received 199,000 applications for 2017 compared with 236,000 in 2016 – about 85,000 visas are granted annually through a lottery system. According to a research by CompTIA, the association for technology companies, the US had 627,000 unfilled technology jobs in 2016 and the gap is widening. The U.S. Bureau of Labor Statistics predicts that this gap will widen to 1.4 million or more by 2020 as more companies across verticals embrace digital technologies. According to a survey of 501 US human resources experts by the Career Advisory Board, a collective think tank of business, academia, and career experts, only 11% believe that the current higher education system is "very effective" in readying graduates to meet skills needed in their organizations. Outsourcers and US enterprises alike bridge this talent shortage by accessing foreign resources (in combination with nearshore and offshore talent centers) to staff certain roles, without which many technology and IT services initiatives would falter, if not grind to a halt together.

The US is the world's largest market for ICT. US businesses are considered leaders in the technology and innovation space, and most of the initiatives are heavily reliant on "imported" workers. The key reasons why most enterprises source foreign talent are the paucity of skilled resources in the US and the failure of the education system to churn out enough STEM (science, technology, engineering, and math) graduates to meet increasing market demand (less than 43,000 STEM graduates passed out in 2016). There is a general consensus that the US visa programs could use some improvement. Many IT services providers and businesses would benefit from a phased approach rather than a sudden drain of the available global talent pool.

Although this is a draft order, and refining the proposed measures into real executed actions will take time, any drastic change to visa administration, regulation, or legislation that aims to restrict free movement of resources to where they are most needed will bring harm to almost all US verticals, especially IT and IT services. Although automation and artificial intelligence/cognitive systems are expected to help fill some of these vacancies, the demand for skills around data science, coding for automation, robotics, and cognitive systems is growing rapidly, and enterprises are depending on IT services providers to deliver these skills in projects and engagements.

The proposed changes in the US visa programs come at a time when many IT services providers, both US-based and otherwise, are already struggling to keep up with enterprise client demand for specialized skills in cloud, automation and artificial intelligence, Internet of Things, and cognitive/analytics. In fact, providers are already concentrating on training and re-skilling their talent base to keep up with demand and provide necessary scale. Restricting access to global talent only gives these training and re-skilling efforts more urgency. Ovum will explore these issues further in its upcoming research.

Appendix

Further reading

"The Internet of Things will drive demand for transformative services,"IT0019-003615 (April 2017)

India IT Services Vendor Quarterly, 4Q16, IT0019-003618 (April 2017)

Author

Hansa Iyengar, Senior Analyst, Large Enterprise Services

hansa.iyengar@ovum.com

John Madden, Practice Leader, Large Enterprise Services

john.madden@ovum.com

Have any questions? Speak to a Specialist

Europe, Middle East & Africa team - +44 (0) 207 017 7700


Asia-Pacific team - +61 (0)3 960 16700

US team - +1 646 957 8878

+44 (0) 207 551 9047 - Operational from 09.00 - 17.00 UK time

You can also contact your named/allocated Client Services Executive using their direct dial.
PR enquiries - Call us at +44 7770704398 or email us at pr@ovum.com

Contact marketing - marketingdepartment@ovum.com

Already an Ovum client? Login to the Knowledge Center now