May 14, 2004: Headlines: COS - India: Outsourcing: Free Trade: American City Business Journals: Jim Verdonik says "As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial effort."

Peace Corps Online: Directory: India: Peace Corps India: The Peace Corps in India: May 14, 2004: Headlines: COS - India: Outsourcing: Free Trade: American City Business Journals: Jim Verdonik says "As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial effort."

By Admin1 (admin) (pool-151-196-115-42.balt.east.verizon.net - 151.196.115.42) on Thursday, May 27, 2004 - 5:11 pm: Edit Post

Jim Verdonik says "As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial effort."

Jim Verdonik says As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial effort.

Jim Verdonik says "As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial effort."

Outsourcing develops wide range of industries for all

Jim Verdonik

I recently attended a ribbon-cutting ceremony at a client's new building. The structure, more than 30,000 square feet large, was to be used for developing and manufacturing medical devices materials, with options to double in size.

There were nice speeches from chamber of commerce officials and our local congressman. You know, the usual routine.

So where's the story?

Well, my client, an immigrant from India, is employing American workers to the cheers of family members who flew in from India for the occasion.

Unfortunately, all they heard from the U.S. media during their visit is that American companies shouldn't outsource work to Indian workers.

With all the India bashing about outsourcing, it's time to focus on both sides of the mutually beneficial relationships being developed across a wide range of industries, instead of focusing only on one side of a very busy, two-way commercial highway.

Hopefully, politicians will stop talking about things they know so little about.

OK, sanity break. I retract that last sentence. That's too much to expect, but there's no excuse for the rest of us encouraging mindless chatter by the talking classes.

Another politician named John F. Kennedy must be turning over in his grave. How do I know? As a former Peace Corps volunteer, I know that building industries in India and other countries is a goal to which our country has devoted substantial efforts.

Wake up, America. This is positive. Stop trying to lie on the highway blocking traffic. Get a car and get in the race. Of course, it's best to learn how to drive first.

Here's a list of things to remember when outsourcing and conducting other international business deals:

* Intellectual property. Protecting intellectual property is difficult. Other countries often don't protect intellectual property as strongly as U.S. law does. Don't assume you can use the same agreements and procedures you use in the United States. Hire local counsel to coordinate with your U.S. attorney to provide workable protection.

* Limit information circulation. Define the information your international partners need to do their jobs. Limit access to other information. Even the best intellectual property agreements are worthless in countries that lack enforcement mechanisms.

* Perform due diligence. If you send an important part of your business halfway around the world without thoroughly checking it out, you deserve whatever bad things happen.

Conducting due diligence at a distance is difficult, but you have to try. For example, does your outsource supplier have systems in place to deliver the quality promised or does it compete only on low cost?

* Address employees' fears. Many employees panic whenever they hear the word outsourcing. Explain your outsourcing strategy to employees and why their jobs aren't endangered. Outsourcing occurs because it makes companies more competitive. After you allay their fears, explain how the company benefits from it.

* Share the benefits. Your employees will benefit if they are shareholders or option holders. Every dollar you save by outsourcing is a dollar you don't have to raise selling equity that will dilute your employees' ownership.

* Offer incentives. Build into your outsourcing relationships incentives for your outsource suppliers to build value in your business.

* Protect and grow innovation resources. There's an old saying that all the assets of a company walk out the door every night and return in the morning. Having fewer employees means you have fewer assets. Whether your outsourcing company is located 10,000 miles away or right down the block, the people doing the work you outsource are another company's asset.

If you outsource the part of your company that builds value, eventually your company's value will erode. That value will be accumulated by your outsourcing partner. Invest resources in training your employees to build value.

* Remember customers. Outsourcing may look like a fine idea on a cost-savings basis. But if you lose revenue because of customer dissatisfaction with the outsourced part of your operations, you can save yourself right into bankruptcy. Reduce this risk by asking yourself how customer perceptions of your company will change.

Customers will tolerate inconveniences in some areas to achieve lower costs, but not in others. Customers also differ in what they value. Know what is important to each customer and deliver what he or she values most.

* Beware of hidden costs. The more you complicate any business system, the more likely there will be unexpected costs including higher legal, accounting, communications and other expenses associated with outside vendors and internationalizing your business. There is no free lunch, although outsourcing vendors will try to convince you otherwise. Analyze your real costs of running the business.

* Beef up dispute resolution. Your business has problems even though most employees are in one location, speak the same language and share the same culture. Think of the potential for misunderstandings and problems when you internationalize and outsource key parts of your business.

Assume your internationalized system will create new problems and establish in advance procedures for resolving them quickly.

Everyone, start your engines. You're ready to race.

Armed with these principles, go forth and do it right. And don't pay attention to politicians trying to scare little children about their brothers across the sea.

Jim Verdonik is a securities lawyer in Raleigh, N.C., who offers advice to entrepreneurs and small businesses. He can be reached at jverdonik@d2vlaw.com.




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Story Source: American City Business Journals

This story has been posted in the following forums: : Headlines; COS - India; Outsourcing; Free Trade

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