It’s the distance that frightens us. We may even shift uneasily at the sound of the foreign accent. But what really seems dubious is the idea of a company offering services, support, or advice from an office somewhere across the wide Pacific.
Yet, as always, opportunity sweeps away misgivings, and now even startups are asking not who is near, but rather who does it best. To help newer firms sift opportunities from the slurry of offerings, the New Jersey Technology Council presents “Outsourcing: Value vs. Commodity” on Wednesday, June 7, at 4 p.m. at WithumSmith and Brown, 333 Newman Spring Road, Red Bank. Cost: $40. Visit www.njtc.com.
Panelists include moderator James Bourke, a shareholder in WithumSmith and Brown; Danani Shishir, president of Ideavate Solutions in Parlin; and Denny Morris, executive director of a Parsippany-based management consulting firm, Delta Corporate Services.
Born and raised in a small town in central India, Shishir saw early on the potential for linking America’s technological expertise with that of his homeland. He earned a mechanical engineering degree, followed by an MBA from the University of Pune in Bombay. Upon graduation he joined InfoSystem Software, working both in design and management.
Emigrating to the United States, Shishir helped found Ideavate — a linguistic blend of “Ideas” and “Innovation” — in Parlin. This 50-person company specializes in providing small firms and start-ups with product development services (www.ideavate.com).
“Outsourcing used to be only the large company’s option,” says Shishir. “They wanted the most bang for their manufacturing buck and, coincidentally, a foothold into a foreign market.” The large companies opened the door, and now, as delivery and communication speeds have soared, and reliability has risen, companies of all sizes are scouring the globe for services. But as outsourcing services are scooped up in a gold-rush frenzy, there is a question of just how much due diligence companies in search of bargain services are performing.
Advantages abroad. In the last 15 years technology has brought India as close as Pennsylvania, says Shishir. “Start-ups are always strapped for cash,” he says. “They need to take their latest bright idea from prototype to production and find a market niche as cheaply as possible.” By outsourcing the entrepreneur pays only for the work performed and has fewer bodies on his payroll.
Interestingly, Ideavate has seen many of its new entrepreneurial clients come through its virtual door at the prodding of the venture capitalists who fund them. Funders like to see that management has sought to cut costs to the bone by partnering abroad. They know that delivery, cost and quality control, and communication at domestic levels may all be available from the right foreign partner — with the emphasis on “right.”
Homeland caveats. Two years ago a major northeast hospital received an E-mail: “I have all your patients’ medical records. If you do not have that man pay me my money they will go on the Internet by midnight.” It was signed by a woman writing from some remote town in northern India. The hospital had never heard of her, nor of the individual who apparently owed her payment.
As it turned out, the hospital routinely outsourced its patient billing, complete with all the patient identification information, to a nearby company. That company, in turn, brokered the job to a small firm in Texas, which, in turn, shipped it off to the unpaid lady in India.
But the hospital never traced the actual job beyond the local firm. The hospital billing department never oversaw the work, and never sought to know who was handling their confidential files. This example illustrates the need to trace and examine hired production sites as stringently as is the case with domestic suppliers.
For those who are hiring out distribution or manufacturing, the rule of at least one on-site visit annually still applies. Entrepreneurs, particularly, ignore such initial and periodic visits at their peril. Shishir insists that inspection visits must involve more than a lunch with management and a perfunctory plant tour. Walk down the line, talk with individual workers, ask them about shipping or production problems. Become familiar with names, develop contacts.
It is worth the time and investment of a few thousand dollars not to deal blind. An off-site plant or call center is, after all, a vital part of the company and its work, regardless of whose name is on the door.
Backyard feel. “To make itself worthy, the foreign company must educate the first-time outsourcer, and make him feel as if he is partnering in his own backyard,” says Shishir. He suggests that from the outset the two companies work out a business template that realistically covers delivery times, production schedules, and other expectations.
Shishir also places the responsibility on the company being considered as an outsourcer to answer what he terms “the softer questions.” Displaying management qualifications, problem solving times, training, and overall corporate credibility are all elements that will nudge the outsourcer toward a comfort zone. “And above all, both parties must keep accessibility and communication constant at all levels,” says Shishir.
Feeling uncertain about dealing on foreign soil, with foreign laws and strange business customs, is natural. Do you really want to leave your product development in the hands of strangers thousands of miles across an ocean? This fear is healthy, yet a surprising number of companies and venture capitalists leap into negotiations following only a few Internet checks.
The one-woman company in northern India gets a hasty glance, while the hometown firm makes elaborate presentations and is grilled like a homicide suspect. “The solution is simple,” says Shishir, “if you are going to go global — go diligently global.”