Nova Sphere blog.com published an article that delves into the reasons why innovation is typically not found in most outsourcing contracts. This is due to the fact that most contracts are based upon the FTE mentality. The author offers the following explanation:
- FTE based contracts encourage all the wrong behaviors for both parties, yet they are by far the most common in the industry
- You cannot put a Service Level on a person anymore than you can measure a light bulb’s output in liters. An individual’s productivity is but one component of delivering a service, yet it’s the only one companies pay for—no wonder they don’t get the process improvement/transformation/efficiency/fill-in-the-blank-with-appropriate-buzzword. Remember “you get what you pay for”? Paying for people and expecting efficiency doesn’t make a whole lot of sense to me.
- FTE-based relationships tend towards “how do we do the same thing for less” through labor arbitrage instead of “how do we do it better” through innovation
Obama's First Move
The Blog at World Press.com discussed President Obama's pending decision on the tax codes for companies that are involved with offshoring. He has proposed a tax revision which will mean that US companies, earning income overseas, will have to pay US corporate tax on that money immediately, rather than deferring payment until the income is returned back to US soil.
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