Bengaluru / New Delhi, September 22, 2025 — India’s IT-outsourcing juggernaut, long built on sending skilled workers abroad (especially to the U.S.) under the H-1B visa program, is now confronting a storm of regulatory, financial, and geopolitical challenges that threaten to reshape its business model.
🔍 What’s Changing
- Steep Increase in H-1B Visa Costs
The U.S. government has introduced a new $100,000 fee for new H-1B visa petitions, starting in 2026. This move catches many Indian IT firms off guard and will significantly raise the cost of deploying personnel onsite in the U.S. - Heavy U.S. Revenue Dependence
About 57% of India’s $283 billion IT sector revenue comes from the U.S. market. Such dependence makes the sector particularly vulnerable to U.S. immigration policy shifts. - Visa Usage Decline Over Time
Over the past several years, the top Indian IT companies have been reducing how much they rely on H-1B visas. For example, the six biggest firms have cut H-1B issuances by approximately 46% over the last five years. - Potential Outsourcing Tax and Domestic Pressure
There are discussions in the U.S. around legislation such as the “HIRE Act,” which proposes a 25% tax on payments by U.S. firms to overseas service providers. If passed, this could make overseas outsourcing significantly more expensive. - Market Reaction & Industry Anxiety
Indian IT stocks dropped after the announcement of the fee hike. Major companies like TCS, Infosys, Wipro saw losses as investors digested potential cost raises and thinner margins.
⚠️ Implications
- Cost Pressures: Projects that previously counted on deploying staff onsite may become much more expensive. Firms may need to renegotiate contracts, absorb additional costs, or reprice services.
- Delivery Model Shift: Onsite-centric models may give way to more offshore or nearshore delivery. Firms could increase hiring of U.S. locals, use remote collaboration tools more, or push more work to India or other lower-cost centres.
- Margin Erosion: With higher operational costs (visa fees, compliance, etc.) and possibly paying U.S. wages/local employment taxes, margins are likely to come under pressure. Outsourcing contracts might get restructured.
- Strategic Adaptation: Companies are likely to invest more in automation, AI, upskilling, and in diversifying geographic risk (setting up more centres outside U.S.) to mitigate policy uncertainties.
🧭 What’s at Stake
- For employees: Fewer opportunities for onsite/stationed roles in the U.S., uncertain visa future, possibly more reliance on remote work.
- For companies: Need to rethink cost models, manage risk of disruption, and may incur extra compliance, travel or legal costs.
- For clients (U.S. firms outsourcing to India): Project structures, timelines and costs may shift; they may face increased scrutiny or lobbying pressure to source locally.
🔮 Looking Forward
Experts believe the industry will undergo a gradual but profound transformation: less travel, fewer onsite resources, more remote delivery, and a stronger focus on technology and automation to reduce dependency on immigration-based models. Some change is already underway; what remains uncertain is how quickly firms can adapt without eroding profitability or losing competitiveness.
