Infosys' visa row: Forrester says clients turning to plan B

Indian IT services giant Infosys' continuing US visa woes, missed annual sales guidance, and lackluster outlook has clients mulling contingency plans, according to Forrester analyst Stephanie Moore.

Uttara Choudhury May 08, 2012 07:17:59 IST
Infosys' visa row: Forrester says clients turning to plan B

New York: Indian IT services giant Infosys' continuing US visa woes, missed annual sales guidance, and lackluster outlook has clients mulling contingency plans, according to Forrester analyst Stephanie Moore.

Claims that Infosys routinely brought Indian tech workers into the US on B-1 visas to do work that required an H1-B visa will be heard at trial later this year on 20 August. Infosys, accused of visa and tax fraud, will defend itself against a lawsuit brought against it by whistleblower Jay Palmer. If a US jury winds up buying the argument that Infosys flouted immigration laws and then shut up a whistle-blower, it could really damage the company. US commentators are already suggesting that criminal indictments could be on the horizon next.

Moore wrote in a blog post on the US research and advisory firm's website that clients are thinking of "contingency plans" to protect themselves from risk in case Infosys, the company most identified with jobs being "Bangalored" becomes an "election-year scapegoat for American job loss."

Infosys visa row Forrester says clients turning to plan B

Infosys, accused of visa and tax fraud, will defend itself against a lawsuit brought against it by whistleblower Jay Palmer. AFP

"Infosys' continuing visa issues are causing concern for Infosys clients. While at first, the problem sounded isolated and related to a single whistle-blower, the continuing coverage suggests that the problem may be more widespread. Two recent events are increasing client concern," wrote Moore.

"First, there was a CBS Morning News broadcast which seemed to support the original whistle-blower's accusation. Then, Infosys itself disclosed that the US Department of Homeland Security had found errors in a significant percentage of I-9 employment authorisation forms. This, combined with Infosys' somewhat anemic earnings announcement, has clients wondering what the future holds for Infosys," she added.

Moore said Forrester clients worried about Infosys keeping "the lights on every day" and had asked Infosys for documentation about the visa status of all on-site employees and were ensuring that all documentation related to Infosys staff activities is up to date and stored on the clients' network.

In a bad sign for Infosys, Moore said of their clients were talking to "alternate suppliers" should there be a disruption at Infosys "to gauge their ability to accommodate Infosys' workload should the need arise." She said they were also "examining their contractual exit clauses and making sure they are prepared to exit should the need arise."

Moore also said clients were hoping that Infosys would start working with them individually to explore worst-case scenarios. "Infosys has always been considered a reliable and scrupulous industry stalwart, but its response to its recent visa problems (not the accusations, but its response to the accusations) is making clients question their judgment," said Moore.

Infosys had tried to get its employee Palmer to settle the case, to avoid having all of its dirty laundry aired in open court. According to people close to the negotiations, things backfired after Infosys chief marketing officer Paul Gottsegen called Palmer a liar and a fortune hunter. When Palmer demanded a public apology, Infosys baulked. Evidently, Palmer wasn't interested in "getting as big of a payout as he can" from Infosys as Gottsegen had crudely suggested.

Infosys told The Times of India that Moore had made "several unfair assumptions" about marketplace reactions to recent news about Infosys.

"In our conversations with clients in which we share additional background about the events raised in this blog, we remain firm in our conviction that there will not be any disruption or change in the levels of staffing, service or expertise on their business, now or going forward," an Infosys representative told The Times of India.

The civil lawsuit brought 14 months ago by Palmer against Infosys has already spawned a criminal investigation by US authorities into the visa practices of the Indian software giant. Attempts by Infosys to portray Palmer as a lone wolf who's spreading "falsehoods" about the company, also fell flat after two other Infosys managers in the US submitted damning internal whistle-blower reports of visa fraud.

All three whistle-blowers, including Palmer have said Infosys misused short-term B1 visitors' visas to bring in low-cost engineers from India. They have submitted internal reports pointing to Indians on business visitor visas who were working full time at client sites and Infosys was billing for their work. This is illegal as a B-1 visa is only valid for entry into the US for attending meetings and training. They claim Infosys also paid the Indian employees for full-time work in the US withholding federal or state income taxes.

Infosys has about 1,50,000 employees, $7 billion in revenue and a $4 billion war chest for major acquisitions.

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