With the right incentive, the unattainable can be attained
While fighting the Germans during WW II, General Patton's Army ran out of fuel and came to a halt. With no fuel to advance against the enemy, as a joke, Patton told his Army that they could have a pass (time off). The next day, a portion of Patton's Army was several hundred miles away in Paris. Somehow the soldiers had found fuel.

Proper requirements generate proper results
During the 80's a quality and cost study was conducted comparing military, commercial, and civilian avionics. Commercial avionics had the highest reliability, followed by civilian, then military. The military had the highest cost, followed by commercial then civilian. The military systems were the most expensive to produce, and had the highest failure rate.

Under further investigation, it was determined that the problem with the military avionics revolved around the issue of requirements. The military requirements went into how the system should be constructed, by stating specific components in the design. On the other hand, commercial requirements focused on the consequences of failure. If equipment failed during flight, the vendors are required to reimburse airlines for any cost attributable to the failure. For instance, the additional fuel cost as a result of a missed landing opportunity.

In both cases, it was the customer's requirement model that eventually determined the quality and cost of the product.

Service for fee or ASP
In the IT world, I have worked on projects enormously over-staffed, and which abide by every anti pattern process available. Why does this occur? Simple, the firm makes money by charging people. The more people the firm charges, the more the firm makes. If the people are too productive, there is less need for people on the project. Therefore, the firm makes less money.

What happens if someone would to walk into a corporate IT and offer to do the project for free? Everything would be provided including hardware, software, and support. There would also be a guarantee of quality of service. Instead of a 'flat fee' or 'fee for service', the customer would pay based on usage.

In the ASP model everybody wins; the customer pays less up front, the vendor receives a constant revenue stream. Since the ASP focus is on quality, cost and time to market, the manner in which software is developed is drastically different. This is why small commercial companies can run circles around large clunky IT shops. [Little fish eating the big fish].

Personal drive
My father was a big on incentives. While in high school, I was allowed to stay out all night, weekends, what ever, as long as I maintained all A's and B's. Once a C showed up, I was grounded. The rewards were obvious and making the grades was up to me.

Final thoughts
Motivation comes in many forms, and I don't blame managers or contract firms for looking offshore. The problem with corporate IT is an incentive model that breeds bad behavior. If the model is changed, management's behavior will change, and we will all be better off.

I want to thank Terry James for sharing his philosophy on the subject matter. I have spent many years in both the commercial and IT world; Terry helped me understand why the mindsets are so different. Thanks TJ.