US, Nov 11 : Tightened US visa regulations and higher H-1B application fees are significantly increasing subcontracting costs for India’s top IT firms, as they turn to local hiring in key overseas markets to offset restrictions on foreign workers.
According to data from UnearthInsight, Infosys reported the steepest rise in subcontracting expenses, which climbed 11.5% year on year to 8.7% of revenue in the September quarter. Tech Mahindra’s subcontracting costs grew 10.3% sequentially, although they dropped 9.6% year-on-year, reflecting margin optimization efforts.
Tata Consultancy Services (TCS) maintained the lowest subcontractor dependency among top IT players, with such costs accounting for only around 5% of its revenue. Apart from TCS, all other leading IT majors saw sequential increases in subcontracting costs during Q2 FY25.
“Infosys recorded the sharpest rise, driven by demand for new-age AI skills and location-specific project requirements,” UnearthInsight noted.
Visa Curbs and Cost Pressures
Analysts attribute this trend to stricter US visa norms, rising H-1B fees, and a changing project mix. Companies are increasingly hiring local subcontractors to handle onsite work, especially in the US and Europe.
“Instead of expanding full time hiring, IT majors are leveraging subcontractors to handle short-term, AI-driven transformation projects,” said Gaurav Vasu, founder and CEO of UnearthInsight.
The nature of IT deals has shifted too, with many contracts now lasting just six to nine months, prompting firms to prefer subcontracting over long-term employment.
IT Firms Reduce H-1B Dependence
Despite the impact, Indian IT companies say their exposure to H-1B visa risks has declined sharply. TCS reported only 500 employees on new H-1B visas, while Infosys and HCLTech said they have significantly reduced visa dependency by strengthening their global delivery models.
Wipro confirmed that the recent H-1B visa fee hike will have no business impact, as 80% of its US workforce is already localized. Similarly, Persistent Systems revealed it hasn’t filed any new H-1B applications from India in the past year, even though 80% of its revenue comes from North America.
As the US tightens visa policies and global demand fluctuates, Indian IT companies are likely to continue balancing cost pressures with agile subcontracting strategies.