Indian IT Firms Boost Margins Through Offshoring Amid US Visa Fee Hikes

Indian IT services firms like Infosys, HCL Technologies, Tech Mahindra, Persistent Systems, and L&T Technology Services are boosting their operating margins by shifting work to offshore and nearshore locations. This strategy is a direct response to the US government's significant increase in H-1B visa fees, which rose from $1,000 to $100,000 annually. Offshoring involves moving work to distant countries, while nearshoring shifts it to neighboring ones like Canada or Mexico. These methods reduce labor costs, thereby improving profitability. For example, HCL Technologies saw an 110 basis point margin increase, with similar gains reported by Tech Mahindra, Persistent Systems, Infosys, and LTTS in the September quarter. Companies plan to continue strengthening these offshore/nearshore capabilities. Experts believe this trend will support margins for upcoming quarters. However, long-term growth requires reinvestment in AI and automation, not just cost-saving. Impact: This strategy enhances the profitability of Indian IT companies, positively influencing their stock performance and the broader Indian IT sector. Rating: 8/10 Difficult Terms Explained: Operating Margins: Profitability from core business operations. Offshoring: Moving work to distant countries for lower costs. Nearshoring: Moving work to nearby countries. Basis Points (bps): One hundredth of a percent (0.01%). H-1B Visa: US work visa for specialty occupations. Global Delivery Model: Delivering services from multiple global locations. AI (Artificial Intelligence): Computer systems simulating human intelligence. Automation: Using technology for tasks done by humans.