The H-1B Backfire: How a New Order Will Accelerate Offshoring

India’s IT giants may feel the heat when sending staff to the U.S., but Donald Trump’s sky-high H-1B visa fees could hit America far harder in the long run, industry veterans warn.

“This exorbitant visa fee will only accelerate offshoring by American companies,” warned Mohandas Pai, former CFO of Infosys.

For Indian firms, Pai added, the pain would not be immediate. “For the next 6–12 months, there’s no impact. Visa applications take time. Even if you apply now, approvals won’t come before next year.”

The H-1B visa has long been a flashpoint in India–U.S. relations. India even challenged Washington’s visa restrictions and fee hikes at the World Trade Organization. But as the legal battles stalled and costs soared during Trump’s previous term, Indian IT firms quietly began cutting their reliance on the visa.

“India’s IT companies have already reduced their dependency on H-1B visa,” Pai added, noting that over 65% of their American workforce today is locally hired.

Five years ago, Infosys alone hired nearly 10,000 Americans. Many Indian firms followed suit, sharply increasing their U.S. headcount. This time, however, they are far less likely to seek workers in the U.S.

“By next year, US firms will have accelerated offshoring more jobs to India,” Paid said.

Research supports his argument. A 2020 study by Britta Glennon at the Wharton School found that firms facing H-1B visa restrictions boosted foreign affiliate employment 27% more than other U.S. companies. Her analysis, presented to the National Bureau for Economic Research, was based on a unique dataset linking H-1B visa filings with multinational firm activities, offering a detailed look at how immigration curbs drive offshoring.

Rising costs could even work in India’s favor. “They (India’s IT firms) can ask clients to pay more because costs are rising. Clients haven’t increased billing rates for years. This gives Indian companies a reason to negotiate higher rates while complying with U.S. labor rules,” Pai said.

He also pointed out that AI adoption in the U.S. is still at a very early stage. “To implement AI at scale, they need help. Indian IT companies like Infosys, Wipro, TCS, and HCL are the ones who can deliver this expertise.”

Offshoring is already Rising

Offshoring is already accelerating, even before the visa fee hike takes effect. Pai noted that the COVID-19 pandemic changed CEO mindsets. “After COVID, CEOs realized employees didn’t need to be physically in front of them. Work could be done from anywhere—in the U.S. or India. That’s when GCCs in India really took off,” he said.

Today, there are more than 2,000 GCCs employing over two million people in the country. “If I walk a half a kilometre, I see Google, Qualcomm, Nvidia, Visa, Samsung and Amazon right here,” The Telegraph daily quoted Apul Nehata, a Bangalore executive, as saying. Her remark captured the rapid expansion of GCCs in Indian cities.

Evidence on the ground backs this up. A 2024 survey by Resumebuilder showed that 30% of U.S. companies that laid off employees have replaced at least some roles with offshore workers. According to the report, many jobs Google cut onshore were shifted to India and Mexico.

Revelio Labs also found similar evidence. It said Salesforce cut jobs in the Bay Area and expanded its workforce abroad. Since 2019, offshore headcount at many U.S. firms has grown by 32%, while onshore staff grew only 16.7%.

Major expansions of US firms in India underline this momentum. Earlier this month, Accenture said it is building a massive new campus in Andhra Pradesh, with plans to hire 12,000 people. U.S. commodity giant Cargill has also announced that it will add 500 tech and analytics jobs to its Bangalore GCCs over the next three years.

“America doesn’t have enough homegrown talent. Universities aren’t producing enough people with the required skills, and training them takes time. That’s why companies rely on Indian talent,” Pai explained.

Pai dismissed the idea that Indian IT workers are hired mainly because they are cheap. “It is only a perception,” he said. “They (India Inc) pay employees over $100,000 annually; with travel, insurance, and benefits, the total cost crosses $120,000 per person. Clients pay between $150,000 and $200,000 depending on the work. So clearly, clients aren’t hiring them because they’re cheap.”