www.RMIUG.org
January 12th, 2004
"Starting an Internet/Software Company Today"

Minutes of the 05-09-04 Meeting of the Rocky Mountain Internet Users Group
(RMIUG):"Electing With Clicks"

The meeting started at 7:00 with about 3/4 full house in attendance.
Josh ran the meeting again tonight, and thanked the RMIUG sponsors for their support:

MicroStaff (http://www.microstaff.com) generously provides food and
beverages at the meetings. The company provides Creative and Technical
Talent for Web, Interactive Media, Marketing Communications and Software
Development projects.

ONEWARE (http://www.ONEWARE.com) -- a Colorado-based software company that
provides semi-custom web-based applications, is the sponsor of the RMIUG
meeting minutes.

NCAR -- for the use of their wonderful facility.

Copy Diva (http://www.copydiva.com) - for the audio visual equipment.

___________________

Announcements:

Colorado Mobile Developers group, an in house software developer group First meeting this week.

www.rescueamericanjobs.org, literature and table in front of the meeting

Colorado Alliance for Immigration Reform

Microstaff job announcements

Doug Hirs, Titanium Ware. Start up company. www.titaniummirror.com

______________

Offshoring , The Truth Behind the Headlines

Josh asked warm up questions and introduced the topic and the speakers:

John Leonard, an attorney at Fairfield & Woods, PC.
Johns practice is concerned primarily with commercial transactions.
He assists businesses engaged in all aspects of software development, and represents technology companies in property, business and overseas outsourcing.

Jeff Finkelstein, the President of Customer Paradigm, an email marketing and privacy consultant in Boulder. Jeffs company uses offshore resources, and he will share his experience in what types of projects and talent companies should and shouldn't outsource, and how cultural issues can affect project management and communication.

Richard Armstrong, who founded HireAmericanCitizens.org in May 2000. His organization has over 6500 members nationwide and takes actions designed to eliminate American worker replacement programs.

Many people work for organizations who outsource. A few have had their jobs replaced. In 1999, people in tech couldn't find enough people to work at tech jobs. Now, the "solution" has created a problem for American workers.

____________

John Leonard

Legal pitfalls, and how outsourcing may not be for every or even most companies.

What's being off-shored?

-Software coding and maintenance
-IT Consulting
-System Integration
-Infrastructure Management
-Product Development

Key Areas of Concern

Johns a fiend about contract management. One also needs to protect intellectual property:

1) Proper Subject Matter:

-Export regulations on encryption software -Need to be careful about what you are sharing and with whom.

Privacy concerns: Health, government

-Due diligence
-Fast dispute resolution

This is what he will cover.

Contract Management: what to do--

-HAVE an RFP. Please.
-Have a contract
-If it is not in the contract, expect to pay more -Scope/work orders -Change orders, extension of time, adjustments of money.
-Milestone schedule
-Clear acceptance criteria
-Payments only upon deliverables
-Point persons, client and vendor -- Specific people, specific reporting duties -Requirements regarding vendors employees -- Language (spoken and computer), no subcontractors, only employees

Confidentiality agreements should be attached as an exhibit. If companies are using individual contractors, that is a third source.

For example, say a company will hire an individual contractor, and that company has not transferred rights, then the owner of the rights is the individual contractor.

-Choice of law
-Venue
-Choice of language
-Process by which work is communicated

2) Intellectual property management & protection

-Patents - business method patents.
-Copyrights - register them. Even though we don't have to, it is a good idea. You don't have to send them to Washington now.
Within 3 months
of creation of code, for example, you need to register it with the copyright office. Its $35.00.
-Trademarks -- $350.00
-Trade Secrets -

Software company's intellectual property

Copyright -- advertising materials, web site, source, object code Trademarks -- name of a division or software company

United States protections end at waters edge Each country has its own intellectual property protection machine

Is Software Protected? It depends on the country

3) Proper Subject matter -- ask if this, whatever this is, is something we should be sending oversees. Everything needs an export license.
There are civil and criminal penalties that have changed since 9-11-01.

-privacy
-type of work
-new
-labor intensive
-Contract restrictions
-Funding issues

Due Diligence = get references. Get references. GET REFERENCES. And ask the right questions.

-is it just a store front? (is there an actual company in India?) -who will do the work?
-who are the project managers?

4) Practice fast dispute resolution:

-control money and do not get into trouble
-litigate intellectual property issues rather than arbitrate

-Have arbitration for all else
-What language?
-Where is arbitration?
-Who are the arbitrators?
-What discovery?
-Ad hoc vs. administered arbitration

Sources

www.transparency.org
www.softwareprotection.com

___________

Jeff Finkelstein

He is sharing his companies successes and failures in outsourcing. And how HE decides whether/when to outsource.

Why do businesses want to outsource? Its not just money.

How many people have purchased a drill bit? But do they really want holes? (i.e., focus on the end result)

Customers are in control.

Globalization has impacted outsourcing tremendously in the last 5 years.

So has deregulation, for example in package delivery, airline prices, and utilities. The focus of the US government has been on deregulation.

Digitalization has changed things, too.

Open standards have decreased unit transaction costs.
For example, WellsFargo.com uses HTTPS, EFT protocols to exponentially decrease the cost per banking transaction.

Reasons to outsource:

-lower cost
-better pricing for your customers
-reliable technical skills
-24 hour coverage for customer service
-Ability to work on projects two shifts per day

Hidden costs of outsourcing:

-cultural nuances
-project management -- time lag, detailed requirements -trusting time sheets -it can degrade domestic morale -project size issues (too small, too big?)

-India's economy is booming

Tips for doing it:

-have a trusted relationship
-have detailed technical requirements
-don't ask somebody to read your mind (i.e., have it all spelled out) -avoid using offshore talent for design jobs it [the end product] might not work consistently -be sure to measure the true cost of the outsourcing effort what it costs for/to morale, what it costs in other [non financial] ways

To protect your job:

-Measure and track the ROI [return on investment] of the revenue stream

-Focus on the needs of the customer, and the needs of your employer (not on what's in it for you)

-make all of your interactions relevant - make sure the interactions add value every time - personalized, and anticipated they should not be a surprise.

__________________________

Richard Armstrong

This organization has over 6500 members nationwide.
Started in 2000. Was written up in Denver Post this weekend. Perhaps we saw it. He has been replaced by cheaper foreign labor three times.

It is a national non-profit organization based in Colorado, with members in 50 states.

American Worker Replacement Programs:
-off-shoring
-non immigrant visas

(Richard showed clips of protest and CNN piece, etc., and told the story of a guy from Bank of America killing himself after training his replacement. He was at the No Cal protest)

They are not a union, not anti India, or anti foreigner. Just pro America. Practicing what they call economic patriotism.

Their goals
-Eliminate American worker replacement programs.
-Pass legislative protections for American workers

Why is this important?

-These [American worker replacement] programs are not accidental, they are "pre-meditated policy errors that were masterfully lobbied and orchestrated to obtain the cheapest labor on Earth at the expense of the American worker. "

All Americans are negatively affected somehow.

Economic patriotism:

Doing what is right for American workers, consumers, and for America.
Each are dependent upon the other. Its not possible for one entity to abandon another without harm resulting to all entities.

Why is this important?

-Reliance upon these programs will result in us losing the ability to provide for ourselves.

-15 million Americans can't find a full time job
-2.7 million jobs have been slashed since March 2001 -Unemployment rate over 6% (in IT), there are 1 million IT workers on the street
-9 million Americans unemployed
-Almost 50% of our black American males are unemployed


Taxes that really sting

Taxpayer dollars should never be used to displace American workers.
Did we know that the State of Colorado is a "lowest bid wins the contract" entity?

What state projects are going offshore?

-food stamps
-welfare
-IT work

How do we change this?

His organization is working to get a measure on the Colorado statewide ballot this year. Because we (Colorado) have ballot initiative, which, unlike many states, allows us to put the issue in front of the voter's)

Colorado Ballot Initiative #139 = Colorado constitutional amendment, if it passes. Its not a statute, so it can't be reversed the next day by legislature.

(1) "the people of the State of Colorado hereby find and declare that state funds should be used to employ people permanently residing in the US and to prevent the loss of jobs to foreign countries and temporary foreign workers with non-immigrant visas. "

(2) [see the web site, www.hireamericancitizens.org]

How can you help?

Sign petitions (there are some here at the meeting) Join teams of signature gathering teams and get signatures. It needs 68,000 signatures to get it on the ballot.

Colorado will be/would be the first state where the voter will decide/participate in the off-shoring decision.

Myths of Off-shoring =

-If its more profitable, it's got to be good--

Not all costs are counted. Economic "externalities"
run rampant.

-Eliminating off-shoring would hurt innovation--

Wrong. It increases the Governmental budget crisis.

Security Risks =

-critical information leaks
-can identify in a second where a VISA card holder is spending

Solutions =

-raise awareness
-change our tax codes
-help fix the problem by supporting Colorado Ballot Initiative #139

________________________

Questions for the panel:

Q [statement] Colorado is sending personal information offshore.
Prisons. Did not pass an identity theft bill?

A [Jeff] His company does privacy consulting. They counsel businesses and organizations to watch what happens with databases. Especially before the Do Not Call list. In other countries, these same kinds of databases are used for things like ethnic cleansing.
Jeffs most
concerned with the US Patriot Act.

Q Josh - Is there any sense if we're in a blip or a longer term thing?
A Richard - They believe it's urgent and needs to be taken care of right away. Our own government is sending our info overseas constantly.

Comment Jeff if a company is pocketing the difference .

Comment - Richards partner if a company sends money offshore, there is a law that allows them to keep that money offshore indefinitely so the US doesn't benefit from it. A law before congress is being negotiated to stop that, because its [the amount kept in offshore accounts for these purposes] in the trillions.

Comment John - on same if a business can make more money offshore, via protectionism, they will.

Comment - Richard the only time he sees it as okay is if you are trying to open or enter a new market in another country.

Q as an employee, what particular areas should you move into? Or do you see?
A John he is seeing more due diligence on VC deals.
He sees a pick
up in our local economy. A guy was talking about a fuel plant in Commerce City

Q (to all) He thought the impact of NAFTA on him in CA at the time was pretty nil. He thinks this has really happened rapidly so if it isn't a blip, what is going to continue to fuel that?
Keeping overhead
down?
A Jeff - I think it is really challenging to move an auto plant to a foreign country. But not so, software or information.


Q [Richards partner to Jeff] if you could abandon America for India, would you?
A I think that is a politically unbalanced question.

Q [Richard] - so if competitive business forced you to move your business, would you do it?
A [Jeff] - probably not.

Q (to Jeff) second part level of profitability?
A web development, web marketing, permission based email marketing -- Had email marketing developed overseas when his staff
was swamped. Can
be 1/2 to 1/4 cheaper to send it overseas.

Q [statement] - He is concerned that it is being presenting as a one way street. We export 18% of the world services. So the US also benefits more from off-shoring, much more than any country in the world. And US workers -- is it wise for us to be raising the call when in fact Americans benefit more from this?

A - Richard India does not export anything to us.
There are commerce
figure departments on jobs

Comment [Richard partner] H-1 Vs, fill those jobs. Visas. Not American workers. And each one of those manages 5 more people offshore.

Comment - Richard the trade agreements are working, in the countries in which we have them. But we have no trade agreement with India.

Q - Comment Chairman of Masterlock  Masterlock chairman said we are shopping ourselves out of jobs. The 9$ lock is Masters, the $6 lock is India. He thinks it is a social problem, and that is feeding the cheaper offshore product (the 6$ lock)

Comment - John he would like to see retraining of American workers, absolutely. But our country is extremely productive.
His clients, if
they can get a machine to do what a man would have, yes, they will do it.
But we have always shown that productivity is one way we get ourselves out of it.

Q assuming that this trend accelerates, what are the IT functions/jobs that are resistant to offshoring?
A (Richard) none, in IT.
A - (Jeff) Design maybe, but no jobs being safe is just a product of the information-based society we're in. But certain things become commodities.

Comment one way to keep the off-shoring down is to deal with smaller businesses to medium sized businesses, because off-shore management is just too expensive for the little guys.

More comments on microeconomics. But is anyone looking at this from a macroeconomic standpoint? (Yeah, Richard is!)

Richards partner gave example of externality.
Cancer victims downstream are the ones that bear the brunt.

Q Comment outsourcing is benefiting American corps/stockowners, and foreign everything else.

=======================

RMIUG (http://www.rmiug.org/) appreciates the sponsorship of
MicroStaff (www.microstaff.com), ONEWARE (http://www.ONEWARE.com), and Copy Diva (http://www.copydiva.com).

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