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What if you suddenly lost a third to two-thirds of your IT staff? Or, what if they were suddenly 50% to 100% more expensive? Can’t/won’t happen? Think H1-B. Ironically, the cloud may save you.

You: CIO; You: VP of Infrastructure; You: VP of Application Maintenance – You know what you did. You know that biggest single expense in running an IT shop is labor. Your legacy IT departments – which constitute the majority of companies – are particularly vulnerable because your older infrastructure and applications require extensive, labor-intensive customized care and feeding. You were under pressure to reduce costs. You are always under pressure to reduce costs. So, you succumbed to the siren song of the outsourcers to lower those costs.

They did it through labor arbitrage. Replace an American working in the homeland with much less expensive Indian labor – some in the US and some in India. To get the Indian staff to the US they relied upon a US government program designed for a very different purpose, the H1-B visa.

Originally, according to federal rules, the visas were intended to bring in foreign workers with college degrees and “highly specialized knowledge,” mainly in science and technology. For years Outsourcers, primarily Indian in origin, have been using the H1-B visa program to import cheap labor – often without “highly specialized knowledge” – to undercut American IT and other jobs. Almost half of these visas go to the big Indian Outsourcers or American Outsourcers with big Indian operations. These accounted for almost 130,000 jobs between 2005 and 2014 (latest data available).

Sadly, American corporations – many household names – have been willing accomplices in this travesty, all in the name of reducing their costs. Examples include: Disney, Toys R’Us, New York Life, Eversource Energy in Connecticut, Cengage Learning in Ohio, and many more. These are only a few who happen to make the press.

These companies know what they are doing and they know the implications if the word were to get out. Why else would they insist upon severance agreements where the displaced American employees cannot disclose training their Indian replacements or the true reason for their termination if they want to maintain any severance benefits and not be sued in court.

Year after year attempts were made to rectify this injustice. But, by making common cause with Silicon Valley and beating the drum that American technological excellence and prosperity required this system, the loss of American jobs continued. Well, the dirty little secret is out. While Silicon Valley pays $150,000+ for workers on an H1-B visa, the Indian outsourcing firms average only $69,500. In 2014, the top Indian outsourcing firms: Tata, Infosys, and Wipro brought in 12,000 people through the visa program. Microsoft, Google, and Apple brought in 2,000 in all. Now, the times are changing. The new administration is wise to the scam and is studying new rules to finally right the wrong.

What are you going to do? H1-B visas only last for three years with a renewal for another three – assuming that rule continues. Take a look at those outsourcing staffers. How many have been with you and for how long? If (when) they go away…well, those systems just won’t stay up by themselves, will they?

Time to bite the bullet, take a page from the leading edge of IT – cloud. Whether for Infrastructure (IaaS) or Applications (SaaS) a key characteristic is that the amount of labor required is phenomenally less than the equivalent in a legacy shop. Your challenge is migrating your portfolio to these new platforms.

The good news is that there are ways to get there. The bad news is that you need to tell senior management that it is going to cost and there will be disruption. Despite the work you have been doing trying to rationalize your portfolio and move to better platforms, you still have some real ugly ones, don’t you? They seem to have been there since the day the earth cooled and are just going to be bears to deal with.

Lastly and ironically, your current outsourcing vendor is not going to want to loose the revenue stream you have been feeding him. A good bet is they want to keep some or all of it. Perhaps you could get them to move you to the cloud. After all, they will be in a bind if (when) they are mandated to ramp down their H1-B’s. And you have them under contract to deliver price and performance. Think about your leverage – your outsourcer is. Already the leader of Infosys recognizes that his business model must change and he is advocating getting rid of H1-B’s and hiring Americans. What a world!

Originally published in CIO.com

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