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 – 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 organization’s 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 company’s 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 Boston’s 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 Mayor’s 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 don’t change their cost structure.
Many VCs won’t provide funding to entrepreneurs if they don’t 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 Chicago’s 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. There’s a lot of pricing pressure. They’re getting outbid by other companies.
MM commentary: So long as quality is maintained, there are great cost advantages to sending software development offshore. However, it’s difficult, it takes a lot of time and it’s 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: We’ve 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 won’t 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. We’ve found with the suppliers we’ve 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. We’re looking for meaningful and discrete projects where we can make the connections. It’s 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. It’s very inefficient for entrepreneurs to navigate this type of thing. That’s why we help them. That’s 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. That’s one of our challenges. We need to evangelize the market to make people aware.
MM commentary: Though it’s 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, it’s all about how you manage and communicate them. Each task is complicated when they’re 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 Muth’s 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: RPX’s Robert Okabe, IEC’s John Janowiak on Global Events (1/11/2005)
Q&As: FastRoot’s Terry Howerton, Doug Cogswell of ADVIZOR Solutions (1/4/2005)
Q&A: Opportunity International’s John Kamperschroer on Partnerships (12/21/2004)
Q&A: Opportunity International’s John Kamperschroer on Technology (12/14/2004)
Q&A: Opportunity International’s 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 Chicago’s Hostway on Web Site Localization (11/2/2004)
Q&A: Founder John Lee of Chicago’s Hostway on Growing Globally (10/26/2004)
International M.B.A. Guide to Moore School of Business, Thunderbird (10/12/2004)
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Entrepreneur’s Guide to International M.B.A. Programs in Chicago (9/28/2004)
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