Key Points:
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H-1B visa curbs and higher US visa fees are increasing subcontracting costs for Indian IT companies.
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Infosys sees the highest rise in expenses, recording an 11.5% year-on-year jump in subcontracting costs.
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Indian IT firms are relying more on short-term contractors abroad instead of full-time visa-based hires.
H-1B visa curbs reshape hiring costs for Indian IT firms
The H-1B visa curbs imposed by the US government are causing major shifts in how Indian IT companies manage their overseas workforce. As the United States tightens visa regulations and increases application fees, top Indian IT giants like Infosys, Tech Mahindra, and Tata Consultancy Services (TCS) are witnessing a surge in subcontracting expenses.
These H-1B visa curbs have made it harder and more expensive for companies to send employees on long-term projects to the US. Instead, Indian firms are now hiring local professionals or short-term subcontractors in foreign markets to meet project deadlines and client needs. While this strategy ensures business continuity, it also raises operational costs significantly.
According to recent data from UnearthInsight, Infosys recorded the sharpest increase in subcontracting costs — rising 11.5% year-on-year, reaching 8.7% of its total revenue in the September 2025 quarter. The data highlights how growing visa restrictions are forcing IT firms to depend more on external contractors, particularly in regions like North America and Europe, where project demand remains high but talent availability is limited.
Infosys leads in subcontracting cost surge
Among Indian IT firms, Infosys has been the most affected by the rising subcontracting trend. The company’s dependence on project-specific contractors increased due to growing demand for new-age AI and cloud computing skills, especially in client locations across the US and Europe. The firm’s subcontracting costs reached 8.7% of total revenue in the latest quarter, the steepest increase among all major IT companies.
Experts attribute this rise to the dual impact of H-1B visa curbs and shifting client preferences. Many global clients now prefer projects to be executed onsite for better communication and faster turnaround times. However, with fewer H-1B visa approvals, Indian IT firms have no choice but to hire subcontractors locally, often at higher hourly rates.
Additionally, Infosys has been investing heavily in expanding its local workforce in key international markets. The company aims to reduce its reliance on visa-based deployments by nurturing regional talent pools, but this transition takes time and initially raises costs. Analysts suggest that these short-term cost hikes may stabilize once companies establish stronger local hiring pipelines and partnerships with local universities.
Tech Mahindra and others face mixed subcontracting trends
While Tech Mahindra also reported a notable rise in subcontracting costs — a 10.3% jump as a share of revenue in Q2 — it simultaneously saw a 9.6% year-on-year decline in overall subcontracting expenses. This contrast indicates that while short-term project expenses went up due to increased reliance on local contractors, the company managed to reduce longer-term subcontracting costs compared to last year.
Industry experts believe Tech Mahindra’s strategy of blending onsite and offshore teams efficiently helped balance its cost structure. The company is also focusing on automation and reskilling existing employees in high-demand areas like AI integration, cybersecurity, and cloud transformation — all of which reduce dependence on external hires over time.
Other major players like Wipro, HCLTech, and L&T Technology Services have also seen subcontracting costs rise sequentially. However, Tata Consultancy Services (TCS) continues to maintain the lowest dependency on subcontractors, with only around 5% of its revenue spent in this category. TCS’s strong offshore delivery model, combined with its emphasis on internal training and upskilling, gives it a distinct cost advantage amid global hiring challenges.
Indian IT firms adapt to visa and demand uncertainty
The ongoing H-1B visa curbs have forced Indian IT firms to rethink their global hiring models. In earlier years, Indian tech companies heavily relied on sending skilled professionals from India to client locations in the US using H-1B visas. However, increasing scrutiny, longer approval times, and higher fees have made this approach less viable.
In addition, the global economy is showing signs of demand uncertainty. Many IT clients in banking, retail, and manufacturing are cutting back on long-term tech spending due to inflation and slower growth forecasts. As a result, Indian IT firms are choosing to hire contractors on short-term projects instead of committing to full-time roles abroad.
This flexible approach helps companies handle unpredictable workloads but increases their overall costs since local subcontractors often demand higher pay. These challenges are compounded by a global shortage of niche digital talent, especially in emerging technologies such as Artificial Intelligence (AI), machine learning, and data analytics.
Infosys’s data shows that project-specific skill demands are now a major factor in rising subcontracting expenses. For example, projects related to AI-driven automation or data migration to the cloud require specialized skill sets that are not easily available in the open market, leading to premium pricing by subcontractors.
How IT companies plan to manage the rising costs
Indian IT companies are developing new strategies to manage subcontracting costs while still meeting client expectations. Infosys and Tech Mahindra are actively investing in local delivery centers across the United States, Canada, and Europe to strengthen onshore capabilities. These centers train and employ local professionals to ensure compliance with regional regulations while gradually reducing reliance on expensive subcontractors.
Companies are also accelerating upskilling programs for existing employees to fill skill gaps internally. Wipro’s “Talent Next” initiative and HCLTech’s “Rise” program are examples of large-scale internal reskilling efforts focused on AI, cloud computing, and cybersecurity. These initiatives not only enhance workforce readiness but also reduce the need for third-party contractors in specialized roles.
In parallel, firms are exploring automation and AI-powered workforce management tools to forecast project demand more accurately. Such predictive models can help them assign resources efficiently, preventing over-dependence on subcontractors during peak workloads.
TCS remains stable with minimal subcontracting dependency
Unlike many of its peers, TCS has successfully kept subcontracting costs under control. The company’s strong global delivery network and steady offshore operations mean that most projects can be executed by its in-house teams in India and low-cost regions.
This approach gives TCS a significant advantage in maintaining profit margins even when other companies face cost pressure due to the H-1B visa curbs. The company’s focus on employee retention, cross-skilling, and long-term project planning has made it one of the most stable IT firms amid global regulatory shifts.
TCS’s low subcontracting dependency also reflects its long-term relationships with global clients, where trust and reliability reduce the need for last-minute hiring or contractor-based project execution.
The road ahead for Indian IT companies
As the H-1B visa curbs continue to shape global hiring practices, Indian IT companies are expected to maintain their focus on local talent development, remote work integration, and digital upskilling. While subcontracting costs may remain high in the short term, these efforts will likely lead to more stable, sustainable global operations in the long run.
Industry analysts predict that subcontracting costs will stabilize by late 2026 as companies adjust to the new visa environment and improve their local hiring ecosystems. For now, however, the pressure remains — forcing firms like Infosys, Wipro, and Tech Mahindra to find the right balance between cost efficiency and client satisfaction.
Ultimately, this transformation marks a new phase in the evolution of India’s IT industry, one where adaptability, skill readiness, and strategic hiring will define success in the global digital economy.
