How a Contrived H-1B Message Can Backfire on an Indian IT Services Provider

    I had an interesting conversation earlier this week with a senior U.S. executive at an Indian IT services provider, and I came away from it with a deep sense of gratitude that I’m not in his shoes, and in the uncomfortable position of feeling like I have to tap dance around the awkward H-1B visa issue.

    The executive was Scott Staples, president of the Americas operation for Bangalore-based Mindtree. I had interviewed Staples about two years ago, and the thrust of that interview was captured in the headline: “How to Run the U.S. Ops of an Indian IT Firm: Don’t Depend on H-1Bs.” Staples explained at the time that Mindtree’s business model was different from that of the other Indian IT services providers. “H-1Bs,” he said, “are not a core part of our business.”

    Fast-forward a couple of years to April 1. I was invited to interview Staples again, specifically about the U.S. delivery center that Mindtree opened in Gainesville, Fla., in October, and about the trend among Indian companies to tap the IT talent pool in the United States. If H-1Bs weren’t a core part of Mindtree’s business two years ago, they’d be downright rare in Mindtree’s ranks in this new era, right? Well, not so much.

    The first red flag was a March 29 Times of India article about the big rush for H-1B visas, and how the quota for this year was expected to be exhausted within five days. Here’s an excerpt:

    “Most of our customers are optimistic of a faster US recovery, which in turn will lead to higher IT spending in the coming months. And this cautious optimism is reflecting in the higher demand for H-1B visas this year,” said Parthasarathy NS, COO of Bangalore-based IT company Mindtree.

    Wait a minute. The optimism of Mindtree’s U.S. customers is reflected in a higher demand for H-1B visas this year? That certainly didn’t mesh with the picture Staples had painted two years ago, so I asked him to explain the contradiction. Staples said the company is in a process of transformation:

    You can’t just flip a switch and transform a company overnight. So he’s absolutely correct in that we do have increased demand for H-1Bs and L-1s in the U.S., and at the same time we have a greatly increased demand for our local U.S. delivery center offerings. So as we take the company on a transformation path from being seen in today’s market as more of an India-based service provider, we really want to be seen in the future as a global service provider, and that’s going to include a lot of U.S. hiring and creation of what we call “U.S. delivery centers.”

    Well, OK. But what about what Mindtree’s COO said next? Also from the Times of India article:

    The visa quota getting exhausted in 5 days doesn’t bode well for the Indian IT industry. “It will be a constraint to our plans. We will use other approaches to service our customers. Specifically, we will use local talent in our US delivery centre,” said MindTree’s Parthasarathy.

    I told Staples that no matter how you slice it, the message conveyed by the COO in India was that since the H-1B quota problem is constraining Mindtree’s plans, it’s turning to other approaches, specifically using local talent in the U.S. delivery center. I asked him to explain the inconsistency between that and the message he’s been conveying here in the States. Staples said he saw no inconsistency:

    I just think if you look at it on a month-to-month, quarter-by-quarter basis, visas are still a core component of our business—transformation just takes a while. I’m looking at it more on a year-to-year basis, where we go from one point to the next. We’re going to do some significant hiring and opening up of new centers, and transform the company. But it just takes a while. So I guess it’s just a matter of the lens you’re looking through.

    Uh-oh. This wasn’t good. Visas are still a core component of Mindtree’s business? I reminded Staples of that direct quote from the interview two years ago: “H-1Bs are not a core part of our business.” I told Staples he was going to have to clarify that one. The tap dancing began in earnest:

    I guess it’s just a matter of a single word, what’s “core.” Let’s just say visas are a necessary part of our business. We still have people in the States on visas, and we still have the need to bring people over on visas. But we clearly see a transformation model in place. Maybe we would like to have gone a little faster on it, but it’s a lot of work setting up a U.S. delivery center, and setting up all the infrastructure to make that happen—putting in the recruiting and training and all of that kind of stuff. So we’re probably a little behind plan on where we want to be, which is why we still hold to the fact that we do need people on visas to fill our business. But our model clearly is to be a global service provider.

    OK. They still need to bring people over on visas. I get it. But with all that hiring in the United States, the number of people they need to bring over on visas is declining, right? Well, not exactly. According to the website, in 2010 Mindtree applied for a grand total of 24 H-1B visas. But contrary to the message Staples was trying to convey, that number rose to 174 in 2011, and jumped again to 317 in 2012. Didn’t that necessarily mean that Mindtree is, in fact, increasingly dependent on H-1Bs? Confronted with the numbers, Staples explained it the best he could:

    Increasingly dependent, but I think that’s a reaction to the fact that we were not able to beef up our operation capacity in the U.S. fast enough, and open up our delivery centers fast enough. I think we’re about a year behind on where we wanted to be. So I see that increase in visas as us implementing a Plan B when our Plan A was just a little slow in development.

    I asked Staples if he had any sense of what the number of H-1B applications will be for 2013, and he said he didn’t. He did go on to say this:

    One way to help you visualize this is today we’ve got about 1,000 people in the U.S., and we have clear plans from the management team and the board to take that number from 1,000 to 4,000 by the end of 2016. That’s a lot of hiring, that’s a lot of U.S. delivery center creation. Obviously you can see it’s going to become more and more of a significant part of our business model.

    Perhaps I should have let it go at that point, but I couldn’t help myself. I asked Staples what percentage of that 4,000 at the end of 2016 will be U.S. hires.

    “The vast majority,” he said. “I would say somewhere between 80 and 90 percent.”

    Really? Mindtree is going through this big transformation, and after another 42 months it’s still going to need to as much as 20 percent of its U.S. workforce to be brought in from overseas? If the percentage is going to be that high at the end of 2016, what on earth is it now? I asked Staples what percentage of those 1,000 people he has in the United States today are U.S. hires. His response was troubling.

    “I don’t know the exact number there—we’ve been asked this question before,” Staples said. “I don’t even have an educated guess on it right now. I just know the trend is obviously more local hires.”

    Seriously? He’s the president of Mindtree’s Americas operation and he can’t even make an educated guess on the percentage of local hires? I told Staples that would be tough for my readers to swallow.

    “That’s understandable,” he said. “But for me, I’m sorry, I just don’t look historically, I look forward. I know what the model for the future is, and that’s what we’re driving toward.”

    So there you have it. Make of all that what you will. For me, all the contradictory shenanigans speak to the need to just tell the story as it really is rather than focus so blindly on messaging. My advice to Mindtree is to recognize that trying to downplay its H-1B dependency to create a certain identity will backfire for as long as that identity is as contrived as it is now.

    By the way, despite all the H-1B tap-dancing nonsense, Mindtree’s Gainesville delivery center is, in fact, an important step. I’ll cover that center, and Mindtree’s plans for additional U.S. delivery centers, in a forthcoming post. 

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