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February 23, 2005 


 Q&A: CECís David Weinstein, Kapil Chaudhary on Internationalization 2/22/2005
The mission of Going Global is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO Ė Overseeing all operations of the organization, David Weinstein is president of the Chicagoland Entrepreneurial Center. His role includes developing and implementing creative programs to serve entrepreneurs in the Chicagoland area as well as identifying new partners and corporate sponsors to grow the base of entrepreneurs in Chicagoland.

He is also responsible for the organizationís marketing to entrepreneurs, government officials and corporate leaders. In 2004, CEC advisory clients secured contracts in excess of $30 million and 26 entrepreneurs secured financing valued at $7.5 million.

Weinstein was previously president of David Weinstein & Associates (DW&A), a Chicago-based consulting and advisory firm that assisted businesses in extending their technology services and products to the public sector. From 2000 to 2001, he was president and CEO of BlueMeteor and was responsible for the companyís growth to $5 million in annual revenues with 110 employees. He led the technology firm in raising $30 million in venture capital.

From 1998 to 2000, Weinstein was the senior technology advisor to the mayor of the City of Chicago. He earned his M.B.A. from the Kellogg Graduate School of Management at Northwestern University.

Kapil Chaudhary is a director with the Chicagoland Entrepreneurial Center. He is responsible for identifying and evaluating high-potential emerging companies in the Chicagoland area, helping them with business development and raising venture and debt financing.

Chaudhary most recently served as venture development manager at The Illinois Coalition where he managed client relationships in the software and communication sectors and organizational relationships with capital providers.

He previously was as a consultant with a venture incubator on the west coast where he worked with entrepreneurs in the formulation and growth of new technology ventures. He also has prior work experience as an analyst in Credit Suisse First Bostonís investment banking group. Chaudhary is a graduate from the University of Chicago.

In part one of a two-part Q&A, ePrairie international expert Michael Muth sat down with Weinstein and Chaudhary to discuss what the CEC has done and will be doing to help local entrepreneurs internationally.

Michael Muth: What have you done or do you plan to do to help local entrepreneurs internationally?
Chicagoland Entrepreneurial Center: We provide one-on-one services that are focused on client development and financing. We have also seen a need to look at globalization and take advantage of global trends in the marketplace.

The majority of the Fortune 500 use some type of offshore outsourcing to reduce costs. We saw a presentation on outsourcing at the Mayorís Council of Technology Advisors. Instead of looking at offshoring as a negative, we tried to look at it as an opportunity.

You mention outsourcing and everyone starts getting nervous. We looked at how to prepare emerging entrepreneurs in town for this new environment. It has gotten to the point that tech companies doing development locally are going to be in trouble if they donít change their cost structure.

Many VCs wonít provide funding to entrepreneurs if they donít have an offshore strategy. There are going to be competitive threats like Tata, Infosys and Wipro (large Indian outsourcing companies), which are selling into huge companies. When they start moving downstream, the pressure will be intensified on Chicagoís emerging tech firms to reduce their internal cost structure.

On one bid, we saw 80 percent to 150 percent cost-saving potential with offshoring as compared to local sourcing for the same product and service. Thereís a lot of pricing pressure. Theyíre getting outbid by other companies.

MM commentary: So long as quality is maintained, there are great cost advantages to sending software development offshore. However, itís difficult, it takes a lot of time and itís expensive to develop those relationships, which are often out of the reach of emerging companies. To centralize this effort for the benefit of many could be a boon to Chicago entrepreneurs.

MM: How have you worked with or will you work with client firms in this regard?
CEC: Weíve been studying this. We drafted a report and have put together a program with a service and support network for emerging companies to go through the outsourcing strategy. We spoke with suppliers of outsourcing and emerging firms.

We found there are a lot of risks involved and there is fear of uncertainty. The established companies wonít work with emerging companies. Emerging companies only feel comfortable doing certain things offshore. They would much rather do it on a project basis rather than setting up operations offshore.

Our goal is to get established players to validate that they will take part projects on a limited basis with emerging companies. Weíve found with the suppliers weíve talked to that they are very receptive. They would work with them.

If there are five technology companies that would be interested in outsourcing (i.e. additional development needs they have), that could be meaningful and we could do it. We need to build up a track record. Weíre looking for meaningful and discrete projects where we can make the connections. Itís not hypothetical.

Our goal is to work on a project-by-project basis. We have two companies that have done that. We will never own the process. We help entrepreneurs navigate and connect the right resources. Itís very inefficient for entrepreneurs to navigate this type of thing. Thatís why we help them. Thatís what we do.

We will go directly to offshore services. We are not going to be the experts. Our entrepreneurs will still need to do a lot of work and do their own due diligence. However, just making the connection is half the battle. We have yet to define the market demand. Thatís one of our challenges. We need to evangelize the market to make people aware.

MM commentary: Though itís great that the CEC is taking the initiative to offer this service, its success or failure will still fall on the shoulders of entrepreneurs. Like many business issues, itís all about how you manage and communicate them. Each task is complicated when theyíre done internationally. Taking baby steps (i.e. by starting on a project-by-project basis as opposed to making much larger commitments) is a good way to get started.

MM: Who benefits and how?
CEC: Emerging technology companies should have the opportunity to reduce their costs by outsourcing development. This should result in better access to financing. This should not result in any local job reductions.

MM commentary: Though the CEC is accelerating the process, it will still take significant amounts of time, thought and money to make this work.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muthís full biography.

Previous Columns:
Q&A: Brian Briggs of Acclaro on Whether to Outsource Localization (2/8/2005)
Q&A: Brian Briggs of Acclaro on the Complexities of Localization (2/1/2005)
Q&A: Brian Briggs of Acclaro on International Localization Services (1/25/2005)
Q&A: RPXís Robert Okabe, IECís John Janowiak on Global Events (1/11/2005)
Q&As: FastRootís Terry Howerton, Doug Cogswell of ADVIZOR Solutions (1/4/2005)
Q&A: Opportunity Internationalís John Kamperschroer on Partnerships (12/21/2004)
Q&A: Opportunity Internationalís John Kamperschroer on Technology (12/14/2004)
Q&A: Opportunity Internationalís John Kamperschroer on Innovative Financing (12/7/2004)
Q&A: IEC Senior Director John Janowiak on Trade Show Realities (11/16/2004)
Q&A: International Engineering Consortium Senior Director John Janowiak (11/9/2004)
Q&A: Founder John Lee of Chicagoís Hostway on Web Site Localization (11/2/2004)
Q&A: Founder John Lee of Chicagoís Hostway on Growing Globally (10/26/2004)
International M.B.A. Guide to Moore School of Business, Thunderbird (10/12/2004)
Your International M.B.A. Guide to Northwestern, Loyola University (10/5/2004)
Entrepreneurís Guide to International M.B.A. Programs in Chicago (9/28/2004)
Q&A: Prairie Angels Founder Bob Okabe on Diction, International Cities (9/7/2004)
Q&A: Prairie Angels Founder Bob Okabe on International Adaptation (9/1/2004)
Q&A: Prairie Angels Founder Bob Okabe on Managing U.S. Subsidiaries (8/24/2004)
Q&A: Origin Ventures Founder Steven Miller on Investments, Angels (8/17/2004)
Q&A: Origin Ventures Founder Steven Miller on the Canadian Way (8/9/2004)
Q&A: CPCP Founder David Baeckelandt on Multilingual Importance, Mentoring (8/3/2004)
Q&A: CPCP Founder David Baeckelandt on Japanese Disclosure, Due Diligence (7/27/2004)
Q&A: Chicago Pacific Capital Founder David Baeckelandt on Overseas Funding (7/20/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on the Art of Partnering (7/13/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on BP, AstraZeneca Wins (7/6/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on Global Software (6/29/2004)
Q&A: CEO Terry Howerton on Why Chicago, Ukraine Made FastRoot (6/22/2004)
Q&A: FastRoot CEO Terry Howerton on Blended Chicago Approach (6/15/2004)

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