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A new tax rule for U.S. businesses that have moved software development, customer service, and research and development work to India was issued by the Finance Ministry of India (GOI) on September 28. The circular, titled "Circular 5/2004," replaces a circular issued by the Finance Ministry's Central Board of Direct Taxes (CBDT) in January ...

Dear Craig, ...

Labor market conditions can change dramatically in a few months. As American firms become increasingly dependent on labor market conditions in other parts of the world, changes in those labor markets can have profound economic consequences in the U.S ...

The best guarantee of success in outsourcing call center programs offshore is to match the work to be outsourced to the appropriate stage of a facility's lifecycle. Herein is a description of management and technical issues involved in running programs at offshore call centers that have gone beyond the awkward first stage of their facility lifecycle...

A fire at a telecommunications hub in Chennai, India, crippled call centers across the country yesterday, and voice and data service interruptions continued this morning ...

Offshoring's toughest moments are often encountered while attempting to manage an IT outsourcing program at a facility that is unprepared for that particular type of work. As described below, chances of offshoring success are improved by matching the type of program with the lifecycle of the offshore IT facility ...

Most U.S. corporate customers of call centers offshore have little or no idea about other voice programs being run at those centers and how those unrelated programs could adversely affect them. Do you? ...

Recent events in Nepal could spill over into India and hurt technology and financial firms in the United States and UK ...

American businesses are usually very price sensitive. Compared to firms elsewhere in the world, American companies tend to pay close attention to performance numbers. Valuing this kind of metric often comes as a surprise to offshore service providers, particularly in cultures where personal connections may be more important than consistently meeting performance goals...

10 percent of the income of the foreign firm as indicated on the tax returns by foreign companies in their home jurisdictions. The CBDT's approach to presumptive tax ignores risk and failure scenarios. At my firm, payments for offshoring work are often made on the basis of performance, particularly at the beginning of a business relationship with an overseas facility when very little is known about an offshore entity's actual capabilities. Pay for performance can be used for inbound order processing as well as outbound telemarketing. For inbound work, payment can be made according to the type of transaction completed, with different pay rates used for different types of transactions. For young facilities, pure pay-for-performance contracts may be the only type of work that they can attract. Many facilities begin with outbound business-to-consumer pay-performance work, and then shift to outbound business-to-consumer pay-for-performance work. Some firms never break out of business-to-consumer work and may fail with some or all of the programs that they undertake. Outsourcing projects may be considered to have failed if performance levels are too low for participants to break even. Under presumptive tax schemes, taxes would still be due on payments made in failed projects, exacerbating financial losses for everyone except the federal government in Delhi, also known as the "Centre." Presumptive tax rates will make it harder for new outsourcing service providers to become established in India because the costs for failure may appear to outweigh the rewards or potential for success. American clients can be expected to withhold the 4 percent presumptive tax amount from payments made to Indian facilities, rather than absorbing the 4 percent tax. The alternative is, in effect, to compensate Indian providers at a 4 percent premium over what is paid to providers in other countries. Anthony Mitchell, an E-Commerce Times columnist, has beeninvolved with the Indian IT industry since 1987, specializing through InternationalStaff.net inoffshore process migration, call center program management, turnkeysoftware development and help desk management. ...

The Indian government has made various proposals recently to tax foreign firms sending outsourcing work to India and firms that import and resell shrinkwrap software in India. Proposals range from setting a simple 4 percent tax on the value of outsourcing contracts to a more complex system of taxing the global income of corporations with standalone operations in India.

Two recent "failures" of offshoring projects have been publicized as if offshoring does not work. The most highlighted instance is Dell's return of some support activities to the U.S. The second is Conseco insurance company's 2001-2002 foray into owning its call center in India. ...