At the tender age of 31, Praveen Suthrum would already seem to have achieved the American dream. He came to the United States from India in 1999 to work as a software consultant. He got an MBA from the University of Michigan, worked on a book about emerging economies with the star professor C.K. Prahalad, and consulted on technology initiatives for Iraq's new government. Last year, Suthrum started NextServices, a company in Ann Arbor, Mich., that codes doctor's bills and collects insurance payments.

Yes, you could almost hear a Rotarian extolling him in a speech about the enduring virtues of the land of opportunity--except for the inconvenient fact that Suthrum is currently stuck in Mumbai. He went back to India in May to evaluate setting up an operation there. Because of visa delays, he has remained there ever since--unable to visit clients in the U.S., able to talk to his employees only by telephone.

In the post-9/11 world, Suthrum's visa hassles are unsurprising. But his situation reflects a larger debate on America's immigration policies--one that's been getting fiery lately. Along the borders, a vigilante group called the Minuteman is patrolling for illegal aliens who come looking for day-laborer work. But even foreign nationals with advanced degrees and specialized skills who hope to come to America have reason to worry. In Congress, for example, Rep. Tom Tancredo, R-Colo., has proposed getting rid of entire categories of work visas.

Business interests have largely resisted these efforts, arguing that there should be more visas, not fewer, because U.S. employers rely on immigrants to fill gaps in the domestic work force. These gaps are created, they say, by the lack of proficiency in math and science among U.S. students, and by the aging of the population.

It's a valid argument--China, for example, graduated almost nine times as many engineers as the U.S. did last year--but it also misses an important point. Debating whether immigrants take jobs from Americans ignores the fact that well-educated foreigners like Suthrum come to the States to be not employees but employers. Today's visa restrictions could keep out tomorrow's Andy Grove, Sergey Brin, or Jerry Yang.

Anti-immigrant policies are particularly destructive at a time when entrepreneurs have more options than ever as to where to start a company. Open markets and the rule of law are taking root abroad. Technology makes it easier to work with companies overseas. As was made plain by a recent report compiled by the National Academies at the request of Congress, the U.S. is no longer the only game in town. America's position as the destination of choice for foreign-born entrepreneurs is being contested as never before.

"Home's Not So Bad"

To get a sense of the problem, you can start by looking at H-1B visas, the credential that most skilled foreign workers use to enter the U.S. for employment. To qualify for an H-1B, a person must have a college degree and a job waiting for him or her at a company in a specialized field like engineering or computer science.

Five years ago, Congress increased the number of visas by 70% to 195,000. It let the higher cap expire in 2004 and set a new cap of 65,000 visas per year. As a result,

H-1Bs have become so scarce that the government stopped accepting applications for fiscal year 2006 in August--two months before the fiscal year even began (see chart). "It's about as bad as it's ever been with the H-1Bs," says Joel Stewart, an immigration lawyer with Fowler White Burnett in Miami.

For entrepreneurs, a visa snafu can be costly. Hector Saldaña, the CEO of LignUp, a VoIP company in Mountain View, Calif., recently lost an Indian recruit to a Bangalore company when he couldn't get the visa application processed fast enough.

A decade ago, an entrepreneur like Saldaña wouldn't have worried about losing a candidate to India. The U.S. was a necessary stop for ambitious, educated Indians. By 1998, Indians ran almost one in 10 Silicon Valley companies, and they are still coming to America in large numbers to work at fast-growing companies. Last year, India received more H-1B admittances than any other country, accounting for more than 20% of them. This was remarkable given that India ranked only 11th in terms of total foreigners coming into the U.S. on a short-term basis.

But in India today, it is easy to see how tighter immigration policies can hurt the U.S. Successful, well-educated Indians seem to be repatriating in greater numbers. The leading software association in India estimates that 25,000 Indian IT workers returned home between 2001 and 2004. The main draw is a burgeoning economy. India's gross domestic product grew by 14.65% last year, double the U.S.'s 6.57% growth rate.

Offshoring is a key driver of India's economy, and one presumably unintended effect of the U.S.'s stricter immigration policies is to push more work overseas. If companies can't import the technical talent they need, they "absolutely have the ability to hire offshore," says Bryan Stolle, CEO of Agile Software in San Jose, Calif.

He speaks from experience. Four years ago, in part because of visa problems, Stolle opened an office in Bangalore, followed by one in Suzhou, China. Since then, about 100 of his 750 employees have elected to transfer their jobs abroad, where they can live, in some ways, better than they can in the wildly expensive Bay area. "The economies and the opportunities in India and China were getting a lot better," Stolle says. "And a lot of people who used to come here saying that this was the place to be, are starting to say, You know what? Home's not so bad."

Visas, Green Cards, and Other Solutions

If immigrants truly are critical to America's continued prosperity, how can the system be fixed? Some solutions are already at hand. Late last year, Congress set aside 20,000 more H-1Bs for workers who complete graduate school in the U.S. Lawmakers are now contemplating raising the limit again--in October, the Senate Judiciary Committee endorsed a cap of 95,000. Elsewhere in the Senate, where immigration reform will top the agenda in the new year, Sen. John McCain, R-Ariz., and Sen. Edward Kennedy, D-Mass., are working on a bill that would, among other things, create more employment-based green cards.

As for Praveen Suthrum, he'll jump on a plane to the States the moment his visa's approved, but in the meantime, he has decided to make Mumbai his permanent home. He has struck up friendships with some other American-educated entrepreneurs. And in Mumbai, Suthrum can pay college graduates $5,000 a year to code doctor's bills, one-tenth of what he'd pay workers in Ann Arbor. "We'll have part of the work in the U.S. and part in India," he says. "Whatever is right for business, we will just do that."

Stephanie Clifford can be reached at