Analysts foresee a case for more offshoring of work in the sector in the next few months, given the impact of the COVID-19 pandemic and continuing travel restrictions.
“With work from home implemented at such massive scale post COVID-19 by Indian IT vendors, borders might be losing relevance,” said IT analyst, Madhu Babu of Centrum Broking.
Offshore revenues of technology service providers have been growing and the pandemic is expected to increase the growth rate in the coming quarters.
Emkay Global Financial analysts Manik Taneja and Monit Vyas said, ““We are seeing once again a shift toward greater offshore delivery as compared to ‘onshorization’ in play through a better part of the CY10-20 decade…Given a weak macro environment and potential reset in client businesses due to Covid-19, we see a case for greater offshoring in the sector over the medium term.”
They noted that Infosys’ offshore revenues/volumes have been outgrowing Onshore revenues/volumes despite the company’s “much-touted claims around localization and hiring over 10,000 local resources in the US since mid-CY17.”
Analysts also said that the unemployment percentage in technology jobs is low.
“We note that though overall unemployment in US is high, unemployment in computer related jobs is low at 2.5%. Also new H1B visas issued this year who were likely to enter USA (from October 2020 onwards) would be very minimal for Tier 1 IT vendors,” he said.
Technology industry body Nasscom has said that the demand for high-tech skills remain strong among employers in the US labour market, even amidst the ongoing Covid-19 crisis. It said that the unemployment rate for computer occupations (most common amongst H-1B visa holders) declined from 3% in January 2020 to 2.5% in May even as the unemployment rate for all other occupations grew from 4.1% in January to 13.5% in May.
However, technology sector employees with H1B visa extensions who are currently stranded in India will be impacted as they would not be allowed to enter the US till the end of the year, analysts said.
Aniket Pande of Prabhudas Lilladher said that TCS, Wipro and HCLT have increased localization efforts in the US and have more than 50% local US workforce.
Technology companies have managed to tweak operations due to the restrictions imposed by the pandemic and will be able to sail through the implications of the current order with minimum friction, according to analysts.
“Companies have managed to conduct project initiation and knowledge transfer via WFH. We believe Tier 1 IT companies are in a good position to manage supply constraints due to further restrictions on H-1B visas provided these restrictions are for a brief period,” said Pande.