IT’s not going to be a great year

US tariffs, visa issues, geopolitical tensions, and AI disruption have plunged the IT services industry into an uncertain period. Can it weather the storm?

- SHELLEY SINGH

India’s $283 billion information technology (IT) services industry, which employs 5.8 million people, is used to absorbing shocks — whether it is currency swings, visa issues, even the occasional seesaw in discretionary spending among its client base. But this year feels different.

Data points to stress across the business. Bengaluru-based consultancy UnearthInsight estimates that in the past 18 months, $350-400 billion of global technology procurement — 8-10 per cent of the total — has shifted regionally or has been restructured due to geopolitics. Roughly $100 billion worth of deals have been impacted by the United States/European Union tariff risks. Several clients have delayed or scaled back digital transformation, and deal-conversion rates (making a pitch and bagging the contract/business), which are typically at 75-90 per cent in good times, have slipped to 50-60 percent.

And now a big shocker came last week. US President Donald Trump signed an executive order to increase the fee that companies pay to sponsor H-1B visa applicants to a whopping $100,000. The new H-1B visa fee rule will be applicable for each fresh applicant and not existing visa holders. It’s a onetime fee and not an annual payment, a White House spokesperson has clarified.

“It’s not going to be a great year for the industry,” said R Srikrishna, CEO of Hexaware Technologies, a $1.5 billion IT services company. He is quick to add: “Bad years come, and good years make up for them.” For now, though, the sector is navigating a tighter, more hesitant market shaped by tariffs and caution in boardrooms.

On visas, a spokesperson of an IT services company said, “We are still evaluating, but are unlikely to pay $100,000.”

In the 2023-24 financial year (FY24), Indians accounted for the largest share of H-1B visa holders, making up 71 per cent of all beneficiaries. The astonishing fee hike could increase remote sourcing of work.