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He feels the White House will weigh in how important the IT sector is for India before taking a decision.
Concerns surrounding the proposed Immigration Bill and its adverse impact on visas for highly skilled non-immigrant workers have been an overhang for the Indian IT companies for quite some time now. In July, the US Senate had passed an Immigration Bill that changed rules governing H-1B and L-1 employment visas intended for high-skilled workers. The Bill is yet to be approved by the House of Representatives.
Below is the verbatim transcript of Som Mittal's interview on CNBC-TV18
Q: Let me start by asking you about your trip to Washington? Currently the shutdown is in effect but you accompanied the Prime Minister along with another business delegation. The joint communiqué that has been put out by India and Washington seems to suggest that the IT and the ITES industry is important for both countries. Is that a signal that perhaps there could be a better understanding of India's problems with the immigration bill and that the US is actually willing to take some of those apprehensions on board?
A: We are seeing increasingly there is a better understanding in the White House and the administration and also among US corporations because the work that we do is really for them, ensuring that they become competitive. So, we are seeing traction. Right now the house bill is a clean bill, it doesn't put the same restrictions, has all the positives that the immigration bill has. So, we do hope that when the conferencing happens and this could be likely early next year - no longer this year - that people would not insist on those negative clauses.
Q: Did you get any sense that, that is perhaps going to be the route that will be taken? Did you get a sense of assurance that if push comes to shove the White House will weigh-in and look after India's considerations.
A: The indications are that they will weigh-in because when it becomes of strategic nature I think everybody realizes how important this industry is for India.
Q: But it is also about give and take. So, will India need to give as far as the IPR issues are concerned if Washington were to play ball on India's IT concerns?
A: We have solved a lot of other issues. We had issues around transfer pricing, Rangachary Committee recommendations have been accepted, preferential market access (PMA) issue has been resolved. We had this time things on compulsory testing and that got solved and there will be some sticky issues which are around IP which is largely related to pharmaceuticals.
Q: Are they going to hold the IP which is the big bug bear as far as large pharma companies are concerned. You must have seen those hoardings that were put up around the US as well talking about India's IP policy, our IPR regime and the problems that the US has with that. Will the give and take amount to India giving in on the IP issue for the IT industry to benefit?
A: I don't think so. I think those are unrelated issues. We have our own case. We need to resolve any issue that India has to make business easier, removing the friction that we have and similarly US has to do that for us where we see that it is going to harm. So, I don't think this is really a barter. I think the Indian government has moved quite a lot in terms of many changes that have been made in the last six months and I think it is getting noticed.
Q: Are you getting support from large American corporations, IBM, and the Accenture's of the world, are they coming in and lobbying on your behalf as well?
A: They had a different stance because the negative provisions need not impact. There were many positive provisions which they want the bill to go through with. But there is a change in mind. We are seeing companies like IBM they have written a letter to chairman Goodlatte supporting the house bill saying they do not want to see the negative provisions that are in the senate bill, in the house bill. So, there is momentum there under USIBC, I think we are seeing a number of US corporations and customers now weighing-in because the impact on them is as large as it is on us. So, we are on the right track right now.
Q: Realistically when should we be ready whether the best case scenario or the worst case scenario but when should we be ready or when should industry be ready for the transition?
A: I think they should be in the first and second calendar quarter next year. Our estimate is that the house will pass the bill in October-November timeframe but that won't give them enough time to do the conferencing. So, I think it would be taken up again in February-March unless some other issue hijacks this. However, we think there is momentum. For the immigration bill there are many provisions which are positive for the industry as well as very important for the US in terms of undocumented workers. So, this is the first time we are seeing enough traction on that and I think next year is when we would see something happening.
Q: If it is the worst case scenario and that ofcourse is going to be the biggest nightmare facing this industry at this point but incase of the worst case scenario what is going to be the impact, what is going to be the hit?
A; There is always a short-term impact that happens but then I think the business models will change as some people have forecast. There will be work that will move more offshore which will impact US economy even more.
Q: Which pretty much will change the business model for Indian IT companies altogether.
A: Yes but the key point is that this is not an Indian IT company model. Even the large service companies, American, European use the same model. They do work here in India and they have to take people for short term there. We are increasingly hiring people in the United States and not just because of the Immigration Act.
Q: So we transition from the offshore model to the hybrid model which was more the mix of offshore and onshore or offshore and onsite. What can we evolve to now if this bill does go through in the form that we don't want it to go through?
A: The issue is only with some negative provisions. We are already hiring more people across the world for language reasons, for proximity and for being in the same time zone because the kind of work we do is closer to business right now. However, the work that is done on a temporary basis onsite for example installation work we would still need some. So, negative provisions are on Visa dependency, we will probably have to move there but I don't think we have to get our plan B and plan C going. I think our plan A that the negative provisions would be taken off is the plan that we are really working on.
Q: You have to be prepared though for a Plan B and a plan C as well. If plan B and plan C were to come into effect the pricing model of this business is going to change?
A: That is customer, they get an advantage.
Q: What happens then to margins and what happens then to the low cost arbitrage? It is at the very heart of this business and the very heart of this business model?
A: We have a huge sustainable long term advantage. What we offer is just not price, I think it is access to resources. There is a worldwide shortage for technical resources including the United States. So, at the end of it the work has to be done and technology is at the centre of all transformations. There are very little choices that customers would have. So, if the price goes up so be it. I don't think it will have a major impact but what we do today is optimum. So, we will be moving from what is optimum to a non-optimum which does not help United States in any manner.
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