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New Person Comes Knocking At My Door On Offshoring 2.0

In my professional career in and about software companies, I’ve primarily run into offshoring of things like call center & customer care, documentation, quality assurance and testing, and R&D. In software, such stuff may be so commonplace that it can be considered Offshoring 1.0 and behind us – a done deal. And from a macroeconomic perspective the US may even be all fine after Offshoring 1.0. Dr. Daniel Drezner blogs that the World Trade Organization’s recent annual trade report release indicates:

The
strength in the rebound in [IT] employment in 2004, and the resilience
of wages of computer occupations, do not support the view that
offshoring services of high-skilled IT specialists had a marked impact
on overall US employment in these occupations up to the end of 2004 …

So what’s in Offshoring 2.0?

If InformationWeek’s July 18th issue and article, "Behind The Numbers: Customer Satisfaction Not A BPO Priority" is a hint of what is to come next on the offshoring front (note that in BPO the "O" stands for outsourcing, which should be differentiated from offshoring), more than 30% of respondents in a June 2005 study said that they outsource sales & marketing to some extent. This is the second item in a list behind call center or customer care (which is close to 45%). Note: my intent by pointing out this article is simply to cites the stats, not reflect my personal opinion on either customer satisfaction or outsourcing in business.

Well just last week (and for the first time), I was approached by an MBA friend involved with business development for an offshoring company in India that provides services related to product lifecycle management, customer lifecycle management, and strategic brand management. This is my first, personal introduction to Offshoring 2.0.

Steve Shu

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Update (7/21/05): Uptick in IT wages in tight labor market …

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The Death of Organizational Structures In Three Internet Stops

As a U of Chicago business guy, I have a tendency to lean toward things that breathe free market theory. Markets are (mostly) efficient. Market are (mostly) right. Stems from Chicago’s strong grounding in economics.

So it’s interesting to think about why organizations of today just aren’t freely forming efforts. Why isn’t there a free market in organizational structures? Why can’t organizations just freely form and dissolve? I haven’t really analyzed this very closely at all, but here’s three interesting Internet stops for you that could spell the death of business organizations as we know them:

  1. Internet Stop 1 (BusinessPundit) – Outsource the CEO
  2. Internet Stop 2 (Business Plan Archive) – Comb the business plan document archive of failed dot coms (compliments of the Library of Congress et. al.) and learn what not to do in business
  3. Internet Stop 3 (The Business Experiment) – Participate in an actual experiment on an open source business model (where the business model and governance structure is all open source) … "The goal is to have the registered
    users of this site collectively start and run a real business.    "

Update (7/20/05): As for Internet Stop 2, I should probably not characterize the business plan document archive as "things not to do in business". These are mostly the planning documents of businesses that are no longer around or in a reduced state of operations (e.g., Blue Meteor, marchFirst). The companies may have very well taken the correct steps in points in time or done the best thy could given the circumstances. That’s one issue with analyzing cases. It is frequently not possible to see from static documents how management teams reasoned, whether they used consistent reasoning, if it was inconsistent with a best practice, etc.

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When Rules Of Thumb And Keeping It Simple Stupid (KISS) Make Me Nervous

As a general rule, I favor the Keep It Simple Stupid (KISS) principle. In some cases, I also like to follow rules of thumb when working on a day-to-day basis. That said, in business I always believe that one should try to ground KISS and rules of thumb within the context of core business theories. If one is going to diverge from theory, then be cognizant of where those boundaries are and what the risks are.

Some example KISS and rules of thumb that I try to use on a day-to-day basis within business operations:

  1. Talking to the press (PR) – While educating press contacts may be great, KISS and speaking quotably are musts.
  2. Storyboarding out the ideal sales pitch and process (Sales) – Push potential objections and roadblocks as far back into a presentation as possible. The objective is not to hide things by any means, but the average person is looking for a reason to say "no" before they will even try to understand the merits of what you have to offer.
  3. Keeping the marketing message simple (Marketing) – People can’t spread your ideas for you if they can’t remember what your ideas are. Although there is a constant struggle with doing disservice to a product by simplifying the marketing message, it takes experimentation to get the balance right.
  4. Minimizing accounting and finance perfection except for specified periods or for external customers (Accounting and Finance) – Administration costs and internal communications costs go up dramatically if one tries to implement GAAP accounting at all times other than agreed upon intervals and fixed times (e.g., beyond end of month, end of quarter, end of year).

In light of probably a long list of rules of thumb for me, a conversation my daughter and I had this past week gave me extra pause about how I apply the KISS principle and rules of thumb. When driving through a somewhat "seedy" area of town, my daughter asked me if we could go eat at one of the restaurants there. I told her "no" that I didn’t think the area was safe and that it might have "bad people" around.

Then she asked me a seemingly simple question, "how do you know if someone is bad?"

Methinks the KISS principle doesn’t work too well in cases like this.

I started off by talking about the bars on the windows of some of the houses and the fire-gutted properties all-around. I stated that there is a tendency for bad people to be around. My daughter then countered me by saying that these properties weren’t that close to the proposed eating place.

I then tried to point to some of the people begging for money, but then this degenerated into a poor people are bad type conversation that wasn’t right either.

We had a whole bunch of mini-conversations, and I couldn’t find very good footing for quite awhile. I finally tried to reason that bad is what bad does. When you see bad things, e.g., illegal graffiti on the walls of building, this is the wake of what bad people have done. In my mind flashed the wake of Worldcom and Bernie Ebbers. I was getting more satisfied with how my answer was playing out as it made intuitive sense and was snappy.

Then I got the question, "but what if the bad person doesn’t do anything bad?" … oh well. It’s back to the drawing board …

To bring things back, where I end up getting nervous about the face value of KISS and rules of thumb are scenarios where I’m in some sense taking custody for someone’s well being. The circumstances might be as I’m getting closer to closing a sales prospect – I want to make certain that the person understands everything presented, that we are making an informed choice together, and that we have addressed the business needs of the prospect. If I’m talking about career advice for someone, let’s be clear whether I’m providing some quick advice or deeply thought out counsel. If we’re talking about me helping an entrepreneur to decide which direction to take his/her business, I know there may only be one shot and that the endeavor is a treasure.

So treat rules of thumb and KISS with care.

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Either Lost All My Feeds Or Lost My Mind

I use Bloglines to read my blogroll of feeds. I think Bloglines knows who I am and what feeds I subscrbe to, but I’ve lost the capability to see which feeds have new posts (and automatically bring them up). Anyone?

Update (7/15/05 – 7:45am): OK – got it back. May be a transient issue or a maintenance thing with Bloglines. Good thing. Last time this sort of thing happened I switched newsreaders. Coincidentally, yesterday a Newsgator (another newsreader vendor) PR person contacted me … maybe a sign for me to switch. Also coincidentally, influential Web 2.0 venture people like Fred Wilson are even looking to drop feedreaders …

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PDF Conversion Arbitrage Opportunity?

Via the techno-mavens at del.icio.us, I’ve found an arbitrage opportunity for converting PDFs online. Those using Adobe online for PDF conversion can PayPal me $99.98 each year, save themselves $0.01/year and instead use PDF Online for free. OK – maybe you should PayPal 50% of the money to del.icio.us, and I will have figured out the del.icio.us biz model that Fred Wilson claims not to have had when he invested money in del.icio.us.

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Using RSS To Plagiarise Or Participate?

Zoli Erdos has two good posts (here and here) that aggregate pointers to and comment on some of the recent happenings in the space regarding the RSS (Really Simple Syndication protocol – feels kind of weird to do the acronym first then the longhand). Suffice it to say that Jason Calacanis has called plagiarism through RSS, "Really Simple Stealing".

For those playing at home, RSS is a mechanism for distributing information like blog posts. It is a machine-to-machine protocol that’s been around for awhile but is gaining a lot of interest as of recent. A venture capital firm recently announced raising $100 millionish for RSS investments.

I suspect there’s an inherent problem with the "really simple" aspect of RSS. If one wants to prevent full text information from being blatantly copied, then one probably has to atomize the blog posts and/or add an authenticated signature that cannot be separated. RSS will no longer be really simple then. To prevent plagiarism, units of data would have to be "really signed" (Really Signed Syndication?). RSS became more widely used in the blogging and news community because of the simplicity.

As for using the RSS protocol to increase multi-network participation of bloggers, I could see this being done, and the use will likely get richer over time. 21Publish uses RSS in its authoring interface to integrate external blogs into a blogging community at various levels.

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Perspectives On Legal Differences When Doing Business Internationally

Carlos Velez has had a series of posts (e.g., here, here, here) that has provoked some thought on doing business internationally and virtually in an early-stage company or as solo practitioner. One of the questions I think he asked me at one time was whether I noticed any differences or had any problems when doing business internationally. I mentioned that I don’t think I have (with respect to recent business) on a day-to-day basis given new collaborative technologies.

That said, when I reflect upon one area that seems to have a common thread across all of the business I’ve done internationally, I forgot this one:

Legal business contracts in the United States seem more complicated than in other countries I’ve worked with. The disparity seems to go up as one moves from the spectrum of simple agreement (e.g., sales documents) up towards corporate infrastructure (e.g., equity and organizational documents).

There is a lot more trust involved with international contracts from my perspective.

And tools like babblefish (for online language translation) will only get you so far. It’s a one thing to translate blog posts written in other languages related to oneself (e.g., here, here), but when it comes to legal you have to get resourceful and/or find specialized help. Heck, we can barely define some of the legal terms and mechanics crisply in English let alone trying to pose the question to babblefish.

I’ve worked contracts in Japan, Latin America, Germany, the Netherlands, Australia, Canada, the UK, and India. Perhaps legal complexity has to do with the fact that the number of venture capital firms and software manufacturers is much larger in the United States. This leads to higher legal intensity and more complex terms and conditions. When tied with the litigious culture of the US, this just feeds the fire. In any case, when I look for tight protections in international contracts, and they are not there as a matter of general culture, I feel more naked.

Some specific differences I’ve seen (at a lower-level than the general American call option versus European call option academic training one gets in b-school):

  • Par value of equity in the US is set $0.01. Par value in other countries may be 100+ times higher. This can be, in some circumstances, a less friendly stock-option environment.
  • Stock option vesting and acceleration clauses may not be there, whereas they are more typical in the US and protect the employee.
  • Equity survivorship (i.e., if one dies) clauses may not be present to the same extent as in the US.
  • Stock option expiration may be much shorter as compared to the United States.
  • Whereas stock options can be printed for free in the US in many cases of start-up, some of the countries require nominal cash transaction for the stock options issued at the money (i.e., strike price at market).

Simpler international legal documents can be a breath of fresh air for smaller companies looking to do business internationally. There’s just less paperwork and formalities to cut through. But the question is, are you protected?

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