Obama says NO to Outsourcing, Nothing to Panic

“If India were a stock, I would buy it”
- Thomas Friedman.
Pulitzer Prize-winning New York Times columnist.

Meeting one of his key election promises, US President Barack Obama recently said he will end the tax incentives to those US companies which created jobs overseas in places like Bangalore. Instead, the incentives would now go to those creating jobs inside the US.

India Inc. however feels this move will hit American companies more than impact on the Indian outsourcing industry.  As per Som Mittal, president of the National Association of Software and Service Companies (Nasscom)  “It’s a more US-US issue rather than one aimed at stopping outsourcing, or off-shoring, or anything to do with India,”

“If you look at Indian companies operating in the US, or elsewhere, they work there and pay taxes there. Hence, it is not about stopping outsourcing, or off-shoring, but just to collect taxes,”

I too believe this things wont affect much to India Inc. however will put more cost pressure on US companies.

Lets look a simple mathematics, as an hypothetical example if a US company has a work equal to say 100 man days outsourcing would still   benefit them despite Tax has been applied.

If you look at the table below its very easy to understand that despite tax is applied US firms will still gain more than 30% profit over USD 4000.

–All the figures such as per hour rate in US, India is based on my personal experience so far in the industry and should not be taken as benchmark.
–US tax on companies is assumed as 33.9 %
–In order to keep example simple, No other cost/overheads are considered except labor cost.

Section: News On Outsourcing