Kannan Ramanujam, president of a well-known multinational IT company headquartered in the US is in the process of preparing a SWOT analysis for his company’s new operations. The choice is between offshoring its activities and utilising a third-party vendor. The company has offshored most of its service delivery processes, both directly by setting up its own subsidiary in India, as well as through third-party vendors. While he is aware of the company’s strengths and weaknesses, and their numerical impact on the company’s bottom line, his research to identify industry and country-level threats and opportunities, led him to President Barack Obama’s State of the Union address recently. Kannan had the following questions — What is insourcing? What are the exact incentives that Obama proposes to deny transnational companies that offshore jobs? How does it impact services offshoring in terms of cost savings?
INSOURCING
Our analysis today tries to answer these very queries as concretely as possible. We start with insourcing. So what is insourcing? Simply put — bringing jobs into the US rather than shipping them offshore to countries such as Philippines or India. So how does the US government propose to accomplish this? Quite easily, by denying offshoring transnational companies any tax benefits in the US. As an example, the moving expense deduction, which is a deduction allowed for expenses incurred due to a shift in the place of work, might be denied to offshoring MNCs.
via Business Line : Features / Mentor : Insourcing to deter offshoring jobs.
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