Nearly 4 million. That’s the size of the workforce dedicated to a business that’s thrived for the past three decades on a growth model of labour arbitrage . In the process, it’s matured into a industry worth almost $150 billion. The multi-billion dollar question today is, where does it go from here, as it comes head to head with a series of challenges. Consider:New Bills being introduced by the Trump administration in the US Congress seek to make outsourcing not only tougher but more expensive. This comes at a time when protectionist sentiments that call for onsite hiring of locals are spreading globally.All this, even as traditional IT services are moving towards the digital economy . Only around 10% of the Indian software workforce is ready to take on digital tasks like machine learning software, data analytics and artificial intelligence. And just about 2,50,000 are foreign nationals, nearly half of whom work in India rather than onsite.Rostow Ravanan, CEO of mid-tier IT services firm Mindtree , says, “Immigration pressures come and go while the regulatory stance keeps changing. More worrisome is a shortage of program management skills, architecture and design skills.”While acquiring skills is important to be able to deliver digital work, in the immediate term, local hiring could be a bigger concern, particularly in the US, the largest market for Indian IT. Mindtree employs 16,100 people of 55 nationalities and Infosys has 129 nationalities among its nearly 2 lakh-strong workforce (as of December 2016).Local sourcing rhetoric has come and gone but this time, rising unemployment and a tighter visa regime — that includes a proposal to more than double H-1B visa wages to $130,000 — could play spoilsport.H-1B is a non-immigrant visa that allows American companies to temporarily employ foreign workers in specialty occupations. Sarabjit K Nangra , vice-president, research, IT, Angel Broking , says, “If protectionist policies continue beyond rhetoric and specific curbs are erected, there could be a 30-40% hit on net profit.” For example, a hike in the H-1B minimum wage to $130,000 could add $3.5-4 billion to the tech industry’s wage bill (that’s additional costs calculated for 55,900 H-1B applicants sponsored last year), shaving off a significant part of its annual operating profit.Arup Roy, research director at tech research firm Gartner , sees a potential backlash to US President Donald Trump’s protectionist policies against foreign technology and high-skilled workers.“For tier II companies, the short-term blow could be harder as they don’t have much onsite resources and bank on labour arbitrage to sell services. There could be a backlash in the next 18-24 months as companies will have to tap into globally available skills.” Industry body Nasscom reckons a demandsupply gap of as high as 80 million over the next decade for digital skills. R Chandrashekhar , president, Nasscom, says, “Unfilled jobs in the US will be 2.4 million by 2018. Visa curbs will hurt them more in the long run.” Nasscom says the pool of engineers with digital skills (artificial intelligence, data analytics, machine learning) grew eightfold in the last few years.“Given the shortage of digital skills, India should be in a strong position,” adds Chandrashekhar.So far, companies have been reluctant to outsource digital tasks as they are core to their businesses. However, as business expands, they could look at partners.Ravanan of Mindtree says, “Today, companies like Google work with multiple partners.Businesses like Uber, WhatsApp Airbnb took less than five years to scale to 100 million users, unlike industries before them. Technology has been a big part of the change.” He sees outsourcing by digital companies increasing, leading to demand for such experts.