Rebuild your operating models as the $100K H-1B visa fee ends talent arbitrage

The expense of the new $100k H-1B visa fee slams the labor arbitrage door on employing US-based foreign talent. Enterprises must quickly decide whether to absorb costs, negotiate with vendors, or change operating models.

Visa fees immediately shock thousands of companies

Here’s an overview of the far-reaching impact of the new visa fees:

• Between January 2023 and June 2025, 98,000 companies received permission for 333,656 new hires using an H-1B visa. Of these companies, 77% have only one employee with an H-1B visa.
• In the US, 1,665 (1.6%) companies have more than 25 employees with an H-1B visa, and 320 (.3%) have more than 100.
• The services industry hires the most H-1B employees, followed by the technology, retail, and education industries.
• The companies most directly impacted include services firms like Cognizant, Infosys, and TCS, which have positioned H-1B employees to provide onshore labor arbitrage for application development, application maintenance, and IT infrastructure management contracts. The visa fees will indirectly impact thousands of other enterprises because they directly employ H-1B visa holders and indirectly subcontract for technology services.

This is a human decision as much as it is a business decision

Our coworkers are fellow humans, not “H-1Bs.” They are unsure how to handle careers, real estate, spouses with varying rights to work, and the impacts of mid-term changes on their children’s schooling. Because of the sudden announcement, many people are stranded in a distant place, and there is significant panic while they await decisions. As you make financial decisions that impact your budgets and operations, remember the human consequences—and communicate, communicate, communicate. If there’s someone you want to ensure stays on your team, communicate with urgency and decisively secure the person.

The $100K fees will have an immediate financial shock

Even amortized over years, $100K fees are too significant to dismiss. Despite this being the services industry’s operating model, not yours, assume service providers will immediately attempt to pass these fees onto you as either one-time operating expenses or inflexible multi-year payback schedules. The latter could require you to renew a deal earlier than planned and on less favorable terms.

Many contracts include clauses to address tax and law changes that may affect ownership of these fees. Fully expect the service providers to use contractual language to pass these costs onto clients, even though the business practice of importing talent willing to work for less than Americans will was their decision and choice of business model, not yours.

They can suggest that their cost-cutting clients are at fault by buying services provided by H-1B employees, but don’t let outsourcing providers externalize their now-broken labor issues into your budget. We expect these conversations to begin immediately, drawing you into the emotional turmoil of your well-known staff being expelled from the country, losing their homes, and disrupting their family lives.

Revalidate your need for labor—and where it should sit

The $100K fee forces leaders to challenge two shattered assumptions: first, labor arbitrage is sustainable, and second, local onshore staff are always necessary.

The vast majority of companies are rapidly adopting new technologies to accelerate IT development and drive efficiencies in infrastructure management. Whether it is Claude, vibe coding, no-code platforms, or rapidly evolving built-in management capabilities in applications like ServiceNow and Microsoft Azure, there are tremendous, quickly evolving opportunities to reevaluate the need for headcount, whether internal or external. The best, longest-lasting decision leaders can make is eliminating the need for run-rate costs, like labor and software licensing, in operations delivery. So, in the face of emotional pressure to retain staff, push service providers to innovate and eliminate the need for labor.

The rationale for onshore staff has largely eroded. Fewer workers are in the office on the same days (if at all), and teams have adapted to a virtual workplace, far more adept at videoconferencing and chat. As the underlying assumption of “working together in the same office” is likely invalid, you must revalidate the need for local staff. There is ample business reason not to sponsor H-1B visas if the work could be done elsewhere.

Rebuild strategic talent pipelines and build hybrid talent models

Enterprises will feel the pressure to shift to domestic hiring. However, most IT teams have been reliant on outsourced talent for so long that talent pipelines are constrained and underdeveloped. Decades of ignoring internal IT culture, failing to build a budget and capacity to train staff on the latest software, and not building recruiting linkages with local communities and colleges are significant hurdles to overcome.

However, your company needs to ask whether it will forever remain reliant on external talent or if there could be a better balance between internal and external talent than what you have today. Even if your company continues to feel the need to leverage outsourced talent, the risk currently presented by India is no longer the same. India continues to buy Russian oil, India has actively joined Russia and China in anti-American trade groups, and the US continues to court Pakistan, India’s arch-enemy, through its Middle East alliance with Saudi Arabia. While the future is unpredictable, this additional risk should be calculated in your decision-making. Building alternative talent pipelines or balancing sourcing in other regions is a proactive and smart risk mitigation strategy. Eastern Europe, Mexico, and Canada remain viable, advantageous options, albeit more expensive. This is a good time to reevaluate your location strategy.

Follow this strategic roadmap to manage the end of US-based labor arbitrage

Enterprises have three distinct, strategic plays at this point:

Play 1: Automate first, staff second

Use this trigger to look for every opportunity to use AI, no/low-code, platform-native, and automation options to drive efficiency into your IT organization: Invite your providers to bring innovation to the table and remove those that cling to full-time equivalents (FTEs). Tie vendor contract profitability and their ability to earn your business to their ability to reduce labor dependence.

Play 2: Change your operating model

Commit to building a talent pipeline in your local markets by engaging the local community and universities, building talent development programs, and retraining mid-career staff instead of jettisoning them the moment technology changes. Switch to vendors with more balanced staffing models, nearshore hubs in Mexico and Canada, and onshore staff development centers. If you have sufficient scale, investigate standing up your own GCC.

Play 3: Redesign your contracts’ pricing terms

Replace FTE-driven pricing with fixed fee, deliverable, and output-based pricing terms. Employment issues are your vendors’ problem, and they should remain their problem by renegotiating contracts to insert explicit fee-pass-through limits and clearer responsibilities for changes in law and taxes.

The Bottom Line: Double-down on automation and innovation, not $100K H-1B fees.

Automation and innovation have always unlocked long-term value, but the lure of low-cost labor has been an easy win—one that isn’t so easy when onshore labor costs $100K more. Enterprises must renegotiate contracts to block pass-throughs and shift labor-related issues squarely onto their providers’ laps while investing in new operating models and automation. This is the start of a new, sustainable workforce model and the end of importing cheap labor. US-based companies could follow the same model used by India to create strong talent pipelines while also lighting a fire to make investments that will bring the most effective automation opportunities to their IT teams.