Will the Indian IT sector stop relying on H-1B visa holders?

In a significant strategic shift, Indian IT majors Tata Consultancy Services (TCS) and HCL Technologies have announced plans to reduce dependence on H-1B visa holders and instead increase local hiring across the United States. 

 

The move reflects the evolving dynamics of the global technology workforce and the growing emphasis on localisation amid tightening immigration norms and geopolitical sensitivities. It might become a norm in the Indian IT services segment, and an increase in local hiring in the US might become the norm in the future.

 

The recently announced H-1B visa rule imposes a steep hike, requiring companies to pay $100,000 per new application, a significant jump from the previous $4-5K range. 

 

The new fee applies only to new applications (22 per cent of total applications), and existing H-1B renewals remain unaffected, providing some relief for the IT sector. However, increased visa costs are expected to gradually disrupt onsite effort mix, pushing companies to shift delivery to near-shore locations like Canada and Mexico and increase offshoring.

 

“Indian IT service providers were reducing their reliance on H-1B visas for a long period of time. With the new ruling, they will further optimise it and rely on local hiring and contractors. In general, many of these providers stopped backfilling onshore resources in projects to improve margins, and therefore, the need for net new resources was reduced. This will further push the existing resources to deliver more, which is not sustainable, and clients' challenges around delivery excellence may potentially increase,” pointed out Yugal Joshi, Partner, Everest Group.

 

Steady slide in H-1B visa holders

Experts point out that Indian IT firms have steadily reduced their reliance on the H-1B visa over the past decade. What began as a cost and compliance decision has evolved into a strategic workforce shift, building stronger local teams in the U.S. and expanding offshore delivery capabilities. The tightening immigration policies and higher visa costs during the Trump era only accelerated this transition.

 

“What we are seeing now from TCS and HCL Technologies is a continuation of that long-term strategy, not a sudden change. Most large and mid-sized IT players, including firms like Mphasis, Persistent, Hexaware, and Cyient, have already reduced their H-1B filings by more than half in recent years. The focus now is on hybrid models that combine local hiring, offshore delivery, and flexible engagement through gig and remote talent. This trend will continue across the industry,” observed Aditya Narayan Mishra, the MD and CEO of CIEL HR.

 

Market analysts say that for over two decades, the H-1B visa program has been central to India’s $250-billion IT services industry, allowing thousands of skilled professionals to work on client projects in the US. However, with increasing scrutiny over visa renewals, wage requirements, and the political climate in the US leaning towards domestic employment, Indian firms are adapting their models.

 

TCS, which already employs more than 65 per cent of its US workforce locally, has accelerated partnerships with American universities and community colleges to build a sustainable talent pipeline. HCL Technologies, too, has expanded its innovation centres across North Carolina, Texas, and Connecticut to tap into homegrown talent.

 

“This trend from TCS and HCL Technologies is likely to be followed by peers such as Infosys, Wipro, and Tech Mahindra, who are also realigning their global workforce strategy. While this shift may temporarily increase costs due to higher local wages and training investments, it strengthens client confidence and reduces regulatory risks in the long run. Moreover, as IT services move up the value chain, focusing on cloud, AI, cybersecurity, and digital transformation, the need for local talent attuned to customer culture and business practices becomes vital. The localisation push marks a maturing phase for India’s tech industry from cost arbitrage to capability-driven global integration, redefining how Indian IT firms engage with the world’s largest technology market,” observed Manoj Kandoth, Founder and Managing Partner, Urjja Resources.

 

As per a report by HDFC Securities, Indian IT firms, historically the largest user of H-1B, have already shifted towards localisation over the past eight years, hiring about 70-80 per cent of the US workforce locally and the rest through H-1B and L1/L2 visas. The report points out that the impact is higher on US technology companies, which are avid users of H-1B visas, and the new visa rules will boost demand for global capability centres (GCCs). The visa fees hike will not have an immediate impact, but over the medium term, the revenue impact will be 5 or 7 per cent, with a margin impact of 50bps. However, with offshoring and price hike, the impact on revenue will be 4 to 3 per cent and margins will expand by 30bps. The impact is more pronounced for large tier-1 firms like TCS and Infosys, as well as mid-tier companies like LTIM and Persistent.

 

“H-1Bs constitute about 0.5–2.5 per cent of total headcount for major IT firms, and H-1B cost (salary and visa fee) accounts for ~0.3–6.9 per cent of total cost. The new visa fee is applicable to initial applications (fresh applications), and the existing H1B holders are exempt from any fee hike or travel restrictions. 

 

In this scenario, 10 per cent of H-1B positions (critical positions) are retained, and the rest are converted to local hires and near-shore centres gradually. In another scenario, we assume that Indian IT services companies resort to offshoring and pass on some of the cost to customers (price hike) to partly offset the margin impact. However, offshoring is revenue deflationary because of lower billing rates but has a positive impact on margins,” Amit Chandra, Assistant Vice President, HDFC Securities, told THE WEEK.

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