Posts Tagged Outsource
Tax on Offshore Call Centers-A Bad Idea
Posted by gmtomko in Rants, Uncategorized on June 7th, 2010
Apparently, there is no shortage of ways to generate revenue for cash-strapped government programs. Now we hear of New York Senator Charles Schumer’s idea for a 25 cent tax on calls to offshore call centers.
Sen. Chuck Schumer (D-N.Y.) introduced legislation that calls for taxing companies that transfer domestic customer service calls to foreign call centers. In a prepared statement, Schumer said the $0.25 excise tax is designed to provide incentive for companies to keep call center jobs on American soil.
Of course, this “incentive” is highly unlikely to have its desired effects for the following reasons (and probably many more):
- This will cost everybody 25 cents more for each customer service, help desk or other such call. Either the government will get the 25 cents, or a US-based service provider will be able to charge its US business customer higher rates (up to 25 cents per call) than the offshore provider.
- The cost of doing business will increase as companies will have quarterly disclosure filing requirements, related audits and other bureaucracy-related fees.
- The cost and size of government will increase to administer the program.
- The switching costs to move already-implemented business process solutions from offshore centers to onshore centers would likely exceed the “benefits” of bringing the solution back to the States.
Other than this government’s insatiable appetite for taxing its citizens, what other reason could there be for imposing such a tariff?
With midterm elections less than 5 months away, populist programs that tout job creation/protection will be the rage.
In a blog post at OutsourcingPortfolio.com, it was noted that:
the National Association of Call Centers (NACC) reported that US call center employment has generally grown – even through the current great recession…
So, are we trying to fix something that is not broken? No. We are breaking things further by creating an even uglier climate for businesses trying to succeed in America.
Further, from CIO.com:
According to Schumer’s plan, companies would have to certify annually with the Federal Trade Commission that they are in compliance with the offshore call center rules, or be subject to civil penalties. But the logistics involved in actively policing offshore call center traffic could prove much more costly to the federal government than to companies that outsource overseas.
Bottom line: another government money grab that increases the cost of doing business (thus killing job growth) and adds to the cost and size of government.
©2010 George M. Tomko All Rights Reserved
Cloud Computing – a Capital Idea?
Cloud computing boosters use the selling point that establishing large amounts of storage or computing requires no “up-front capital investment”. Pleading before the gods of capital within corporations has been a bane for IT and business operations functions forever. All those appropriation request forms and cash flow analyses – not much fun when you want the servers installed and the software loaded.
What has always been interesting to me is that more thought, analysis, decision-making and accountability goes in to managing the capital investment portfolio than you often see in managing operating expenses. The irony here is that “op-ex” is very often many multiples larger than the “cap-ex” spend in any given fiscal period. If a $400 million company (in terms of revenue) has an operating profit of 20%, then the company managers spent $320 million with likely much less oversight than the $15 million that they might have spent on projects.
At the end of the day, there is no free lunch. Just like leasing became the way to ensure “technology refresh” every 3 years, let’s make sure that cloud computing and all something-as-a-service offerings don’t wind up costing your company more or that the standards of decision-making are usurped by being able to fly more stuff under the financial controls radar.
The saying “you can pay me now or you can pay me later” became a “tag” line in old oil filter commercials where the idea was that you might pay more now for a premium filter but you would be avoiding the cost of replacing the entire engine later. Of course, the assumption is that you would own the car long enough for this to pay off. This was in the era when the majority of people traded-in and bought new cars in 3 or 4 year cycles. Not long after, 3 year leases perpetuated the cycle.
The reality, then, was that most people wound up paying now and they got to do it over and over because later never came!
Another myth that is related is the 3,000 mile oil change. Again, another marketing bonanza because it got people to pay to replace their oil and filters twice as often as the auto manufacturers recommend in the owner manuals.
So back to op-ex and cap-ex and buying infrastructure/software/platforms as-a-service. If I take the op-ex view, it is almost always an incremental view as in year-over-year budgets and the dearth of zero-base reviews. If I take the cap-ex view, everything is an investment and is evaluated as cash-flows over a defined “economic life”. This takes rigor and commitment and the potential for more eyes to see and more ears to hear.
It is not a bad thing to have the option of paying for something as a service. However, it is a bad thing if the selling point is that you get to relieve yourself of the burden of evaluating and justifying the all-in costs of doing it one way or another.
Remember, you can pay now or pay later. Some times, it is nice to get to pay later.
What do you think. Please leave a comment.
©2009 George M. Tomko All Rights Reserved
Do CIOs have their heads in the clouds?
By George M. Tomko
Without a doubt, conference agendas are brimming with cloud computing boot camps, breakout sessions, keynote addresses, expo booths. On top of this are the podcasts, webinars, whitepapers, e-mails, tweets, mailers, brochures and tee shirts touting the ‘new’ technologies collectively known as the cloud.
Is there a bottom-line here, anywhere? Not yet, maybe never. And, besides, if everyone is looking ‘up’ at the clouds, so to speak, there is no ‘bottom-line’ to look at.
There once was a day when almost all computing solutions were proprietary. If you were running applications and storing data on vendor A’s mainframe, you were also using vendor A’s specific network protocols and devices, software, etc. Occasionally, vendor B would have a compatible terminal or tape drive that you could connect. What an era that was for suppliers. Customer lock-in was a great thing.
Of course, computers and related hardware, software and services cost a mint. You might spend $5 million for the latest model of mainframe back in 1980. Then there were datacenters and round-the clock support staff. Massive.
It didn’t take long for people to see that having 3 terminals on your desk, one for each different suppliers system, was not only costly, but annoying.
Are we headed for the 2010 edition of 1980? Could this be, as Yogi Berra has so aptly put it, “déjà vu all over again”?
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