Outsourcing Law & Business Journal – February 2011
February 11, 2011 by Bierce & Kenerson, P.C.
OUTSOURCING LAW & BUSINESS JOURNAL (™) : Strategies and rules for adding value and improving legal and regulation compliance through business process management techniques in strategic alliances, joint ventures, shared services and cost-effective, durable and flexible sourcing of services. www.outsourcing-law.com. Visit our blog at http://blog.outsourcing-law.com.
Insights by Bierce & Kenerson, P.C., Editors. www.biercekenerson.com
Vol. 11, No. 1 (February, 2011)
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Editor’s Note: This newsletter dissects the new government “Startup America” plan to promote entrepreneurship. We welcome you thoughts on this controversial topic of law, public policy and international trade in managed services by contacting us at publisher@outsourcing-law.com.
There is also still time to register for the upcoming Webinar (full disclosure, this newsletter Editor is a speaker)
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Webinar Announcement
“Global Entrepreneurship and the Evolution of the New Global Enterprise”
February 17, 2011, 11am – 12:20pm, EST US
Speakers:
William B. Bierce, Esq., Bierce & Kenerson, P.C.
Ed Nair, Editor of Global Services Magazine
Description:
The struggles of the entrepreneur and owner-managed businesses are well known. The real struggle arises when they try to achieve scale and breadth through globalization. They face many challenges in developing and managing an overseas sales presence, brand management, technical presence, business organization, intellectual property and operations. However, the miracles of modern technology, educational diversification, social media and long-distance collaboration now enable some innovative uses of established legal, tax, organizational and operational structures. In short, it’s time to rethink and extend the classic business models for entrepreneurship.
This webinar delves into the idea of global entrepreneurship in the “new normal” economy. Global excellence is not a concept reserved for large companies like Accenture, Genpact and WNS, but can be implemented across the spectrum of both Fortune 500 companies and owner-managed businesses. For more information, click here.
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1. “Startup America”: A Vision for American Entrepreneurs: What Role for Global American Entrepreneurship?
2. Humor.
3. Conferences.
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1. “Startup America”: A Vision for American Entrepreneurs: What Role for Global American Entrepreneurship? On January 31, 2011, President Barack Obama’s office released a “Startup America” plan to promote entrepreneurship. The “Startup America” initiative proposes to “celebrate, inspire, and accelerate high-growth entrepreneurship” throughout the nation by coordinating public and private effort to create “innovation ecosystems” that bring together innovative entrepreneurs, corporations, universities, foundations, and other leaders, working in concert with a wide range of federal agenciesinitiative seeks to promote entrepreneurship as the core of an innovation strategy for achieving sustainable growth and quality jobs It builds on the Job Creation Act of 2010, but does not address many legal issues in the global economy. For more, click here.
2. Humor.
Entrepreneur, n. (1) one willing to give up his life’s savings and home equity in the hope of avoiding having to ask friends and family give up their life’s savings and home equity once he has spent the startup capital; (2) a Ponzi in training.
Innovation ecosystem, n. (1) traditionally, a Darwinian commercial environment characterized by an influx of agile adaptive and mobile participants and new global business models and the decline or exit of the stagnant old participants and outmoded existing business models; (2) a weather system that gently rains and beneficently shines on the land of venture capital, strategic sale and IPO’s and inundates and smashes the innovator in the land of vulture capital and bankruptcy; (3) a public-private partnership where the taxpayer provides subsidies and the private enterprise provides risk capital and subsistence level wages with stock options.
3. Conferences.
February 14-16, 2011, IQPC presents its 4th E-Discovery Finance Conference, New York, New York, focusing exclusively on the financial services industry. The Dodd-Frank bill is the most comprehensive legislative overhaul of the financial services industry since the Great Depression, and financial corporations must respond and adapt immediately. Changing technology creates quickly moving targets for corporations to reach. The burden falls on legal, information security, record retention, and IT departments to ensure the best review, retention, and destruction policies and procedures. A successful e-discovery team can mitigate the costs of e-discovery, reduce the volume of extraneous data, and avoid sanctions and other judicially imposed penalties. Highlights include strategies to:
- Keep costs down while maximizing efficiency.
- Comply with stricter, more expansive regulations.
- Implement and adapt to new technologies in order to “future-proof.”
- Stay out of the headlines for non-compliance or sanctions.
To obtain more information, click here.
February 14-16, 2011, Legal Process Outsourcing Conference, New York, New York. With advanced technology and tight budgets in a downturn economy, companies are exploring more cost-efficient alternatives for high quality legal work. CEOs and CFOs are putting tremendous pressure on their employees to cut spending and given the exorbitant cost of legal spend, in-house counsel are feeling the pressure more than most. Although legal outsourcing is not a fit for every law firm and in-house legal department, the legal community simply cannot ignore the expansion of the LPO market. This event will take an honest look at all sides of LPO and address the challenges, ethics, implications, and strategies of legal outsourcing. Attending this Summit will help decide where your company fits into this new outsourcing dynamic. For more information visit their website.
February 21-23, 2011, International Association of Outsourcing Professionals (IAOP) presents its 14th edition of The Outsourcing World Summit, Indian Wells (Palm Springs), California. This conference, through case studies, educational sessions and presentations, provides participants with news of the latest developments affecting the outsourcing industry and their profession. Its theme is Embracing Change – How Outsourcing Professionals Can Lead Their Companies to Success in This New Outsourcing Landscape. For more information, visit: http://www.iaop.org/Content/23/154/1099/Default.aspx
March 1-3, 2011, SSON presents the 15th Annual North American Shared Services & Outsourcing Week, Orlando Florida. As SSON celebrates 15 years of serving the needs of the shared services and outsourcing community, this conference will bring added value to our participants through inspired structured networking, innovation and meaningful, leading edge content. Featured presenters will include numerous buy-side executives from a wide range of industries. You will meet and network with the very best thought leaders, practitioners, providers and advisors in the shared services and outsourcing space, connecting with over 1,000 senior level attendees from various sectors all over the region.
If you want to seek fresh initiatives and reach new thresholds of productivity or revenue growth, are looking for game changing, innovative content and ideas to leverage technologies, and desperate to leave behind old legacies and shape the future of the sourcing world, then this event is for you. For more information, click here.
May 4-5, 2011, Aitec Africa presents 5th Annual African Outsourcing Summit, Nairobi, Kenya. This conference will gather an unprecedented level of international expertise for emerging BPO enterprises to tap into. This East African Outsourcing & Contact Centre Conference aims to provide a stimulating and informative platform for the region’s emerging BPO enterprises to gain the knowledge, inspiration and business contacts they need to become world-class service providers, learning from international best practice in outsourcing – as well as from competitors and potential business partners closer to home. For more information, visit their website.
May 23-25, 2011, SSON’s 11th Annual Shared Services for Finance & Accounting, Dallas, TX. This event brings together industry leaders to provide the fundamentals of efficiency, quality and service and show innovative ways to grow your shared service center:
- Drive efficiency: Build a value proposition outside of just productivity to further improve quality and decrease costs
- Current trends: Debate in-house vs outsourcing strategies and make sure you choose the right model and technologies for your business
- Process ownership: Continually improve your shared service center to enable growth
- Accelerate improvement: Re-engineer processes to move beyond labor arbitrage
Create a clear strategy for your business with case studies presented by ING, Goodyear Tire & Rubber Company, PepsiCo, Walmart, Wendy’s/Arby’s Group, Kraft and many more! To register, visit www.SharedServicesFA.com , call 1-800-882-8684 or email iqpc@iqpc.com . Mention code SSFAOL20 for an exclusive 20% discount available to Outsourcing-Law.com subscribers.
May 23-25, SSON presents its 9th Annual HR Shared Services and Outsourcing Summit, Chicago, Illinois, focuses on Trends in HR Transformation and HR Shared Services for the Next Decade. This conference will look back at what’s worked and provide you with a look forward to new trends in operations models, globalization, virtualization, enabling technologies, staffing and much, much more. Whether you are in the beginning, middle or mature stages of your HR transformation – or creation of HR Shared Services – the trends of this next decade will have an enormous impact on your success.
For more information, please visit their website.
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FEEDBACK: This newsletter addresses legal issues in sourcing of IT, HR, finance and accounting, procurement, logistics, manufacturing, customer relationship management including outsourcing, shared services, BOT and strategic acquisitions for sourcing. Send us your suggestions for article topics, or report a broken link at: wbierce@biercekenerson.com. The information provided herein does not necessarily constitute the opinion of Bierce & Kenerson, P.C. or any author or its clients. This newsletter is not legal advice and does not create an attorney-client relationship. Reproductions must include our copyright notice. For reprint permission, please contact: wbierce@biercekenerson.com . Edited by Bierce & Kenerson, P.C. Copyright (c) 2010, Outsourcing Law Global LLC. All rights reserved. Editor in Chief: William Bierce of Bierce & Kenerson, P.C. located at 420 Lexington Avenue, Suite 2920, New York, NY 10170, 212-840-0080.
“Startup America”: A Vision for American Entrepreneurs: What Role for Global American Entrepreneurship?
February 11, 2011 by Bierce & Kenerson, P.C.
On January 31, 2011, President Barack Obama’s office released a “Startup America” plan to promote entrepreneurship. The “Startup America” initiative proposes to “celebrate, inspire, and accelerate high-growth entrepreneurship” throughout the nation by coordinating public and private effort to create “innovation ecosystems” that brings together innovative entrepreneurs, corporations, universities, foundations, and other leaders, working in concert with a wide range of federal agencies. The “Startup America” initiative seeks to promote entrepreneurship as the core of an innovation strategy for achieving sustainable growth and quality jobs. It builds on the Job Creation Act of 2010, but does not address many legal issues in the global economy.
Overview. Given the high level of unemployment in America, President Obama is taking a new initiative to promote small businesses for U.S. job growth. The program addresses key issues in:
- capital investment in “high-growth startups,”
- education and mentorship to empower entrepreneurs,
- commercialization of federally-funded research and development in which taxpayers invest about $148 billion per year,
- identification and removal of “unnecessary barriers” to high-growth startups; and
- collaborations between large companies and startups.
Tax Incentives for Small Businesses.
Capital Gains Tax Exemption. “Eligible small businesses” would qualify for permanent elimination of capital gains taxes on their share. Already the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“2010 Job Creation Act”) provides a 100-percent exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years. Under current law, the amount of gain eligible for the exclusion is limited to the greater of $10 million or ten times the taxpayer’s basis (net investment) in the stock. This tax relief applies to qualified small business stock issued after December 31, 2010, and before January 1, 2012. President Obama’s FY2012 budget proposal would make this provision permanent to increase private sector investment in small businesses.
Eligiblity Rules. The 2010 Job Creation Act limits the tax incentive to C corporations, whose profits are taxed at the corporate level and again, upon distribution of dividends, at the shareholder level (where shareholders pay their proportionate tax share on dividends received) This limitation contradicts decades of efforts to promote small business through S corporations, limited liability companies and limited partnerships, whose owners are taxed on the entity’s income but the entity does pay taxes.
Empowerment Zones. The Job Creation Act of 2010 extended through 2011 the period for designation of “empowerment zones” in the U.S. Jobs created in “empowerment zones” allow certain tax incentives for investment in such zones, including wage credits, accelerated depreciation of business equipment, tax-exempt bond financing, and deferral of capital gains on the sale of business and investment property. The one-year extension would become permanent under the “Startup America” initiative.
Work Opportunity Credit. The Job Creation Act of 2011 extended through 2011 the existing work opportunity credit for employers.
Small Business Administration.
The Obama initiative would use the SBA for additional lending to small businesses. This would be useful but is already available and merely represents an effort to allow some adjustments in existing lending criteria.
Piggybacking on Private Sector Initiatives.
The “Startup America” program would rely on existing non-profit organizations and private businesses to promote mentorship, special educational training in entrepreneurship and private equity investments in new small businesses. This is nothing new, including “partnership” with existing initiatives that the government did not initiate or specially support till now.
Critique.
Dysfunctional Tax Policy. As a matter of tax policy, exemption from capital gains stimulates capital risk investment. New business investment typically includes R&D, capital expenditures and jobs. But most entrepreneurial ventures are small, do not hire large numbers of employees and cannot expand employment because they focus on R&D and product development. Venture capital is essential since, unlike large corporations, small businesses lack cash reserves and the ability to issue bonds in capital markets.
This tax policy is dysfunctional because it fails to grant tax benefits for operations and thus fails to assist investors who would invest (or not) regardless of the capital gains incentives. Small businesses lack working capital, so long-term capital gains exemptions do not fill the gap caused by increased caution and reduced levels of bank lending. As one commentator noted, with no working capital, small businesses just go bankrupt. The legislation would have been more effective if it hadincluded some incentive for increased lending rates for banks (allowing the banks to lend to smaller companies with some levels of viability risk). Further, capital gains tax exemption is not the prime motivator for venture capital or private equity, which both seek high growth in cash flow, market share and slower growth in employment and capital expense costs.
Band-Aid® Solutions. The Job Creation Act of 2010 was a temporary palliative to extend expiring tax incentives, expiring exemptions under Bush-era estate tax reductions and other plans. The Startup America program focuses on making such incentives permanent.
Aside from putting one Band-Aid® on top of another, the Startup America initiative fails to address the core challenges of the global “knowledge economy” built on the WTO’s Uruguay Round agreements in 1993. The initiative lacks inspiration or information about the global services economy, global sourcing, comparative advantage in sourcing of services, and the viability of the American entrepreneur as a competitor in global markets. The vision for “entrepreneurial education” has roots in private enterprise and private initiatives for private enterprise. It does not seek to understand foreign cultures, purchasing habits or languages. It seeks to promote clean-tech and “innovative” jobs, but these sectors are small. There are limits to both the wisdom and financial capacity of the Government to promote local jobs.
But, at least, it’s not as nationalistic as certain countries, which merely convert the Government into the Employer of Last Resort in lieu of the dole.
Global Entrepreneurship. President Obama’s newfound zeal for promoting small business might be more effective if he were to promote “global American entrepreneurship.” A global approach would promote:
- sustainable cash flows from global revenues to support, upon repatriation, American investors;
- increased American wealth from classic global capitalism;
- increased American competitiveness, as to small and large businesses, as entrepreneurs look to global markets for both sourcing of innovative talent and sales of goods and services;
- substitution of American services for foreign services, in cases where foreign BPO service providers have developed robust service delivery models with lower costs per employee.
Global entrepreneurship needs to address key challenges for any modern business:
- the procedures for developing and implementing an entrepreneur’s business plan, including the unique selling proposition that relies upon proximity to the customer, cultural fit, flexibility and speedy adaptability;
- the uses of insourcing and outsourcing in innovation, global entrepreneurship, strategic alliances and capital allocation;
- mobility of people, process, technology and products and services to reach growth markets;
- technological innovation, including process innovation;
- intellectual property rights as the core foundation for a knowledge-management economy, especially in countries that lack either the laws or the culture for protection and vigorous enforcement;
- redundancy, resiliency and robustness of the technological platforms, such as the public cloud;
- branding;
- compliance with complex regulatory mandates;
- internal operational governance including transparency and responsiveness to stakeholders (as broadly defined); and
- risk management.
The editors welcome your thoughts on this controversial topic of law, public policy and international trade in managed services. To contact us, please e-mail: publisher@outsourcing-law.com.
Further reading:
• “Startup America” Initiative: http://www.whitehouse.gov/startup-america-fact-sheet (Federal Government website)
• Private Sector Entrepreneurship Training: www.startupamericapartnership.org (Not-for-profit organization)