The recent decision by the U.S. government to impose a $100,000 fee on new H-1B visa applications has sent ripples of concern and strategic recalculation through Global Capability Centers (GCCs) in India. While the move is expected to increase operational costs for tech firms, experts believe it will ultimately boost the already booming GCC landscape in India as companies offshore more critical work.

Understanding the H-1B Visa and the Fee Hike

The H-1B visa is a non-immigrant visa that allows U.S. employers to temporarily employ foreign workers in specialty occupations that require theoretical or technical expertise. It is a crucial pathway for skilled professionals, particularly from India, to work in the U.S.. The U.S. Congress authorizes a maximum number of H-1B visas each year. This "cap" or quota amounts to 65,000 H-1B visas annually, with an additional 20,000 visas reserved for those who have at least a master's degree from a U.S. university.

The newly imposed fee of $100,000 represents a significant increase, potentially a 20-50x jump, compared to the previous fees. While there was initial confusion, the White House has clarified that this is a one-time fee applicable only to new petitions and does not affect existing H-1B visa holders or renewals.

Why the Concern?

The H-1B visa has been a lifeline for India's $245-billion outsourcing industry, allowing firms to station key staff onsite with U.S. clients while the bulk of the team works from India. Indian tech professionals account for a large proportion of H-1B visa holders. The fee hike is expected to have several immediate impacts:

• Increased Costs: The most obvious impact is the increase in expenses for companies that rely on H-1B visas to bring in talent from India. This could lead to added costs and margin pressures, especially for projects requiring on-site personnel.
• Disrupted Onshore Projects: Nasscom has warned that the fee hike could disrupt business continuity for ongoing onshore projects that require adjustments.
• Potential Talent Shortages: Some fear that the high cost of the visa could hinder the entry of skilled foreign workers into the U.S., potentially leading to talent shortages in certain sectors.
• Uncertainty for Indian Workers: The news has created uncertainty for Indian workers aspiring to work in the U.S. Some recent graduates in the U.S. fear that employers may be unwilling to pay the high visa fees, forcing them to return to India.

The Silver Lining: A Boost for GCCs in India

Despite the concerns, many experts believe that the H-1B fee hike will ultimately benefit GCCs in India. GCCs, also known as global in-house centers, are captive units set up by multinational corporations to perform specific business functions, such as IT, research and development, and customer support, from a remote location. India has emerged as a prime destination for GCCs due to its large pool of skilled talent, cost-effectiveness, and favorable business environment.

The H-1B visa changes are expected to accelerate the growth of GCCs in India for several reasons:

• Shifting Work Offshore: With the increased cost of H-1B visas, companies are more likely to shift critical work offshore to India, expanding their GCC operations. As Manoj Marwah, financial services GCC sector leader at EY India, stated, "Either you can get Indians to work in the US or get work to India. With visa costs going up, the latter is more likely".
• Reverse Brain Drain: The fee hike could also lead to a "reverse brain drain," with more Indian professionals returning from the U.S. to take up jobs in the thousands of GCCs spread across India.
• Strategic Advantage: Some experts see the H-1B fee hike as an opportunity for companies to accelerate their GCC strategies and gain a strategic advantage. As Lalit Ahuja, founder of ANSR, noted, a senior software architect can be employed in a GCC to deliver identical output at a fraction of the cost compared to hiring an H-1B worker in the U.S.
• Local Innovation: The move could encourage local innovation in India as companies invest more in their GCCs and tap into the country's vast engineering base.

Moving Up the Value Chain

However, experts caution that GCCs in India need to move beyond traditional delivery roles to create greater value. To fully capitalize on the opportunities presented by the H-1B visa changes, GCCs must focus on:

• Innovation and R&D: Shifting towards higher-value activities such as research and development, product development, and digital transformation.
• Upskilling and Reskilling: Investing in training and development programs to equip their workforce with the latest skills and technologies.
• Collaboration and Partnerships: Collaborating with startups, universities, and other ecosystem players to foster innovation and create new solutions.

In conclusion, while the H-1B fee hike has caused some initial anxiety, it is also viewed as a potential catalyst for growth and transformation in the GCC landscape in India. By embracing innovation, upskilling their workforce, and focusing on higher-value activities, GCCs can solidify India's position as a global hub for technology and innovation.