Outsourcing Law & Business Journal™: Feb/March 2010

March 20, 2010 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 for commentary on current events.

Insights by Bierce & Kenerson, P.C., Editors. www.biercekenerson.com

Editor’s Note: Back by popular demand, we are repeating our Webinar on Sourcing of Global Talent on Tuesday, March 23, 2010. If you missed this event last November, you can register for it now by clicking here. This webinar will discuss the human capital management for the contingent workforce in our current economic climate. The speakers will address issues in designing a contingent workforce strategy, managing this contingent workforce, effective governance and the managing risks and legal issues that arise with the implementation of such a workforce using internal and external resources.

Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent
A webinar, Tuesday, March 23, 2010, 11 AM Eastern Daylight Time U.S. (45 minutes)
Speakers:
· William B. Bierce, Esq., Bierce & Kenerson, P.C. – outsourcing lawyer
· Chris Nuttall, PA Consulting, Member of PA’s Management Group
· Larry Scinto, PA Consulting, Managing Consultant

Vol. 10, No. 2 (Feb/March 2010)
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1. How to Achieve Innovation Through Outsourcing: Shifting the Paradigm.

2. U.S.-India Bilateral Cooperation on Trade and Investment: Impact of Joint “Framework” upon Global Services Industries.

3. Humor.

4. Conferences
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1. How to Achieve Innovation Through Outsourcing: Shifting the Paradigm. Can an enterprise customer get real innovation through outsourcing? It depends. After looking at a case study in contract manufacturing and finance and accounting outsourcing, we can draw some lessons on the squeaky wheel that will need lubrication beyond effective governance.

New Product Development. Recently, Bierce & Kenerson, P.C. was engaged by a global enterprise to assist in a two-phase deal with a supplier. In phase one, the parties entered into an agreement for the joint development of a new type of product to retrofit an old product using new energy-efficient technology. In phase two, the enterprise customer agreed to either buy the new product from the supplier or to pay a royalty for the value of the supplier’s intellectual property and development efforts. The risk of failure was essentially nil, since the enterprise customer could have developed the product alone. Yet it chose to work in tandem with the supplier to achieve a speedier path to market for a hot product with a big potential demand in order to avoid loss of market share to well-financed agile competitors.

The contract development process took much longer than the product development process….For the complete article, please click here.

2. U.S.-India Bilateral Cooperation on Trade and Investment: Impact of Joint “Framework” upon Global Services Industries. On March 17, 2010, the U.S. and India signed a “Framework for Cooperation on Trade and Investment” to strengthen bilateral economic cooperation. The three-page agreement is short on details and relies upon inter-ministerial meetings and “Focus Groups” to identify and overcome impediments to bilateral l trade and investment. Five Focus Groups cover agriculture, innovation and creativity, investment, service industries and tariff and non-tariff barriers to bilateral trade in goods. The Framework agreement responds to a number of complaints by American businesses about the Indian legal framework governing intellectual property protections. For the complete article, click here.

3. Humor.

Innovation, n. (1) an improvement that is clearly better than mere continuous improvement; (2) any cost saving that merits a special reward; (3) a joint venture in “process management” clothing.

Framework agreement, n. (1) a house with wall-size windows and no roof; (2) statement of work for unspecified deliverables; (3) a milestone with no end in sight.

Investor, n. (1) someone willing to give up a sure thing in the hope for a better sure thing; (2) hostage to hope; (3) optimist.

Investor protection, n. (1) shield for avoiding an instant capital loss; (2) a one-handed wind-shifter.

Publicity, n. (1) good news, even if it’s bad news; (2) bad news when it’s not good news; (3) what a public figure craves but a private individual avoids.

4. Conferences.

March 22-26, 2010, SSON presents the 14th Annual North American Shared Services & Outsourcing Week, Orlando, FL. This event goes above and beyond the typical conference, with 8 tracks, 13 workshops/site tour, 1 Master Class, the Shared Services Excellence Awards and 7+ hours of networking! This year, the platform has been completely revitalized and revamped, featuring raw and honest onstage interviews to the “no personal agendas” G8 Panel discussions. The expert speaker faculty comes from leading companies including Coca-Cola, NASA, General Motors, Unilever, AstraZeneca, Schering-Plough, CA, Microsoft, Orbitz Worldwide and more! View the complete agenda on http://www.sharedservicesweek.com/brochure.php.

Receive an exclusive 20% discount with special code SSW-MP10. Contact Kim Vigilia at kim.vigilia@iqpc.com.

March 25-26, 2010, American Conference Institute’s 4th National Forum on Reducing Legal Costs, Dallas, Texas. This essential cross-industry benchmarking forum gathers together more than 30 senior corporate counsel and legal sourcing managers responsible for cost-reduction success stories, as well as leaders from law firms who are pioneers in the alternative fee world, to guide those in attendance on the complexities of keeping legal department costs in check. Now in its fourth installment, this event also offers unique networking opportunities with senior practitioners in the field, includingin-house counsel across a wide spectrum of companies and industries. For more information, visit their website.

April 26-28, 2010, Legal IQ and IQPC present its 9th Annual eDiscovery Conference, San Francisco, California, bringing industry leaders together to explore eDiscovery project management, best practices for preserving and producing ESI, defending keyword searches, and protecting privileged ESI. Topics include:

Cloud Computing and eDiscovery – What’s in it for you?
Emerging Technologies and Social Networking: Ethics and New Challenges
New Models and Structures for Managing eDiscovery
Statistical Validation and Data Analytics in eDiscovery
Protecting Privileged Communications and Rule 502
Vendor Partnership and What Happens After the End of Litigation
ESI Preservation and Collections

Outsourcing-law.com subscribers receive a 20% discount off All-Access conference pricing using code IUS_OSL_#5. Click here to get more information.

May 10-12, IQPC’s 7th Annual HR Shared Services and Outsourcing Summit, Chicago, Illinois. This event will be a gathering for corporate HR & shared services executives from companies across North America to exchange ideas, develop new partnerships and discuss the latest tools, technologies and strategies being employed in the profession to enhance departmental efficiencies and propel corporate growth. The event will focus on the most current topics in the HR shared services industry including metrics, automation, outsourcing, globalization, compensation & rewards, benefits and an overall focus on the new strategic role of HR shared services.how to tackle change management, analyze current and future projects and further develop the instrumental key areas within HR shared services. Visit their website to register and get more information.

May 17-19, IQPC presents its Information Retention & E-Disclosure Management Summit, London, UK. This is Europe’s premier event in this field, designed to help you steer your organisation successfully through lawsuits and regulatory inquiries. Topics include:

Fast track your understanding of the Civil Litigation Costs Review: Hear directly from Lord Justice Jackson and engage in debate with our acclaimed international Judge’s panel
Develop a legally defensible and technically sound Information Retention policy with a multidisciplinary approach with insights from Debra Logan of Gartner plus Pfizer, and Kleinwort Benson
Reduce risk, cost, time and complexity of eDisclosure with critical updates on advances in technology
Ensure compliance by sanity checking your strategy with the FSA and ICO

For more information, visit their website.

June 6-8, 4th Annual IQPC Shared Services Exchange™, Austin, Texas, United States, an elite event for shared services executives who are looking to develop new strategy, solve challenges and source partners that will allow them to create efficiency and drive more value out of their shared services centers.

This event will continue IQPC Exchange’s ongoing tradition of offering cutting-edge, strategic networking and learning opportunities for senior level shared services executives, combining conference sessions, one-on-one business meetings and numerous networking functions to allow executives to speak with their peers. With pre-scheduled one-on-one advisory meetings and personalized itineraries, the Share Services Exchange™ provides the opportunity to create an agenda that directly reflect the goals and initiatives of participating executives.

To request a complimentary delegate invitation or for information on solution provider packages, please contact: exchange@iqpc.com, call 1-866-296-4580 or visit their website.

September 26-28, 2010. Another IQPC Shared Services Exchange™ Event, 2nd Annual, to be held in The Hague, Netherlands. Shared Service Centres have long been seen as the cost saving centre of HR, Finance & Accounting and IT processes, but with changing employment trends and global challenges facing organisations, how can SSC’s continually offer service value?

Unlike typical conferences, the Shared Services Exchange™ , which will be co-located with the Corporate Finance Exchange™, focuses on networking, strategic conference sessions and one-on-one meetings with solution providers. The Exchange invites strategic decision makers to take a step back from their current operations, see what strategies and solutions others are adopting, develop new partnerships and make investment choices that deliver innovative solutions and benefits to their businesses.

To request your complimentary delegate invitation or for information on solution provider packages, please contact: exchangeinfo@iqpc.com, call +44 (0) 207 368 9709, or 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: webmaster@outsourcing-law.comThe 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: publisher@outsourcing-law.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.

Filed under: Newsletter
Tagged: bilateral trade investment, framework agreement, humor, India, innovation, Newsletter, US

Outsourcing Law & Business Journal™: January 2010

January 25, 2010 by Bierce & Kenerson, P.C.

Insights by Bierce & Kenerson, P.C., Editors. www.biercekenerson.com

Editor’s Note: As we welcome 2010, we continue to develop our newly re-launched Outsourcing-Law.com™ website and e-newsletter! We invite your feedback on the new Beta site as well as your contributions of content on international jurisdictions or legal issues in governance, risk management and compliance. Please contact us.

Vol. 10, No. 1 (January, 2010)
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1. Cyber Security Threat Management in Outsourcing: The Coming National Security Regulation of ITO, BPO and KPO.

2. Social Security Tax Agreements: The Cost of Expatriate Workers.

3. Humor.

4. Conferences/Webinar.
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1. Cyber Security Threat Management in Outsourcing: The Coming National Security Regulation of ITO, BPO and KPO. Imminent national regulation of Internet-based services will impact all companies that use the Internet for project management, collaboration, and remote transaction processing. Google and China have precipitated a showdown that may cause the nationalization of Internet regulation, with many consequences on the freedom and costs of running a global business or servicing customers remotely. The showdown highlights the fact that cybersecurity threats come from many sources, including foreign nation states, domestic criminals and hackers and disgruntled employees….

Cybersecurity is a critical foundation for any country’s national security and economic security and, indirectly, global trade in IT-enabled services and in the global supply chain….In global sourcing, cyber security is an essential commitment by anyone business seeking to acquire and be a trusted custodian of personally identifiable information (“PII”). If enterprises (“data controllers” under the European Union Data Protection Directive) are going to gather PII and contract with service providers (“data processors”) to process it, the risk of cyber attacks frames the debate on risk allocation, roles, responsibilities, pricing and process integration.

For all participants in the outsourcing industry, it’s time to fresh look at legal structures and financial implications of cybersecurity. For the complete article, click here.

2. Social Security Tax Agreements: The Cost of Expatriate Workers. Whenever citizens of one country set up operations or perform services in another country, they face the challenge of dual taxation. Dual taxation can be particularly oppressive where two countries tax the same income, or require payments of some form of tax on the same business activities. To avoid such burdens, model income tax treaties and estate tax treaties have evolved under the aegis of the OECD. Other treaties may apply to allow workers from one country to avoid paying social security to the government of another country. This article addresses the question whether bilateral social security tax agreements have a material impact on mobility of technical service workers moving between a service delivery center (such as India) and a service recipient’s facilities (such as in the United States). Click here to see the entire article.

3. Humor.

Cybersecurity, n. (1) a locked door; (2) an open door with pass key; (3) trust; (4) hope.

4. Conferences/Webinar.

January 22, 2010, Webinar on How Can You Leverage An Economic Development Group In Your Global Sourcing Strategy? Presented by Global Sourcing Council. Eric Hochstein of the Ontario Ministry of Economic Development and Trade will discuss the pros and cons of near-shore sourcing and the socially responsible aspects of sourcing to Canadanderstanding how successful and growing partnerships between companies in the United States and Canada have strengthened businesses on both sides of the border and around the world. To register, please click here.

January, 24-26, 2010, IQPC Business Process Outsourcing and Shared Services Exchange 2010, San Diego, California. This is an invitation-only gathering for VP and C-Level senior Shared Services and Outsourcing executives made up of highly crafted, executive level conference sessions, interactive “Brain Weave” discussions, engaging networking opportunities and strategic one-on-one advisory meetings between solution providers and delegates. With a distinguished speaking faculty from McGraw-Hill, Ingram Micro and Pfizer, amongst others, the seats at the 2010 Exchange are limited and filling up quickly. We have limited complimentary invitations available for qualified delegates for a limited time. Please give us your reference ‘Outsourcing Law’ when inquiring. There are solution provider opportunities also available for companies who want to be represented. You can request your invitation at exchange@iqpc.com, call at 1866-296-4580 or visit their website.

January 28-29, 2010, Global Services Conference, Jersey City, New Jersey. Through the entire episode of the global economic meltdown, the global outsourcing services industry has seen the rise of a group of suppliers who are redefining many traditional management practices; changing the long-standing model for contracting offshore services; collaborating with clients in new ways; and gaining more control over outsourcing strategies. This conference focuses on these changes in the global services model and the learning from this period. OSL subscribers qualify for a special rate. Use code GSCOLJ for free/ complimentary registration to buyers. Buyers include buyers of outsourcing and offshoring services in IT and BPO. For more information, visit their website.

February 15-17, IAOP’s 13th Annual 2010 Outsourcing World Summit, Lake Buena Vista, Florida. This event is designed for outsourcing executives from across the industry and around the world who are seeking the very latest insights and ideasand is themed as “Using Outsourcing to Emerge as a Leader in the New Global Economy”. Educational sessions deliver specific actionable solutions to current challenges faced by experienced professionals. Case studies feature actual experiences and the lessons learned, feature new ideas, approaches and opportunities. For more information, click here.

February 22-24, 2010, SSON and IQPC 8th Procure-to-Pay Summit, Miami, Florida focuses on “Fostering Smart Partnerships to Optimize Cash Flow and Deliver Positive Business Outcomes from End to End.” This Summit is all about making the most of your smart partnerships to increase cash flow and improve business outcomes as companies move away from a reactionary mode toward sustainable practices. While we may not yet be out of the woods, so to speak, it is clear that the economic landscape in 2009 has created opportunities for companies to create new synergies with their P2P partners to help promote growth for 2010 and beyond. For more information, click here.

February 24-25, 2010, IQPC’s 3rd E-Discovery for Financial Services Conference, New York, New York. Learn the Best Review, Retention and Destruction Procedures to Cut Costs and Response Time During a Financially Troubled Economy. This event examines, from the unique perspective of high-level financial executives, how the challenges of each financial sector intersect with e-discovery proceedings and processes. View the complete program agenda at www.ediscoveryevent.com/finance.

March 22-26, 2010, SSON presents the 14th Annual North American Shared Services & Outsourcing Week, Orlando, FL. This event includes speakers from top companies: Aramark, Arbys/Wendy’s, AstraZeneca, Chevron, Coca-Cola, Conagra Foods, General Motors, Kellogg, Kraft, Microsoft, Monster, NASA, Northrop Grumman, Oakley, Perdue Farms, Schering Plough, Warner Brothers and more. It will include new and enhanced features:

* G8: Global Sourcing Think Tank Eliminating the White Noise: The first ever neutral platform to help shape a common industry agenda in the US
* Under the C-Suite Spotlight with Rene Carayol, An Exclusive Onstage CXO Interview: Board-room revelations regarding shared service & sourcing model strategy
* New, Strong, Business Outcome-Focused Content: 8 content-intense tracks, from Planning & Launching and BPO Evolution to IACCM’s Contracting to Collaboration
* Enhanced Annual Features: Quick Wins Energizers, Speed Networking, Blue Sky Innovation Room for Mature SSO’s, and more.

Please contact Kim Vigilia directly at 1-212-885-2753 or at kim.vigilia@iqpc.com with your special code IUS_OSL_#1 to get a 20% discount off the all-access pass. You can also visit the website at www.sharedservicesweek.com.

March, 25-26, 2010, American Conference Institute’s 4th National Forum on Reducing Legal Costs, Dallas, Texas. This essential cross-industry benchmarking forum gathers together more than 30 senior corporate counsel and legal sourcing managers responsible for cost-reduction success stories, as well as leaders from law firms who are pioneers in the alternative fee world, to guide those in attendance on the complexities of keeping legal department costs in check. Now in its fourth installment, this event also offers unique networking opportunities with senior practitioners in the field, includingin-house counsel across a wide spectrum of companies and industries. For more information, visit their website.

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Filed under: Newsletter
Tagged: agreements, contracting, data protection, humor, legal, outsourcing, privacy, security, services, sourcing, US

“ObamaCare”: Promotion of Automation, Offshore Outsourcing and Job Losses; Penalizing Foreign Companies Based in Tax Havens (and Other Non-Treaty Countries)

November 16, 2009 by Bierce & Kenerson, P.C.

If enacted, President Obama’s healthcare reform would probably hurt domestic employment and accelerate automation, outsourcing and offshoring. It would change the economic incentives for keeping service industries in America. And it would hurt foreign-owned businesses whose ultimate parent company is based in a tax haven or other country that has no U.S. income tax treaty.

On November 6, 2009, by a paper-thin margin of 220 votes to 215, the U.S. House of Representatives passed the “Affordable Health Care for America Act,” H.R. 3962, the 1,990-page health care reform law that has been frequently called “ObamaCare.” If substantially adopted by the Senate and passed into law, the bill would impose significant new burdens on employers and self-employed persons.

Automate, Outsource, Offshore. As a result of the new mandatory taxes and/or health costs, American employers would be encouraged to automate processes, outsource many business functions to external service providers for more automation, and offshore many business functions. At a time when the U.S. unemployment rate is over 10%, this health care bill could permanently kill re-hiring in many service jobs that have been lost. It would encourage further globalization of American enterprises to establish foreign shared-service captives.

Taxing American Employers Encourages Export of U.S. Jobs. This version of ObamaCare would require every American citizen and lawful permanent resident (but not illegal immigrants) to enroll in a “qualified plan.” §§ 202 and 224. Every plan must be identical in coverages, except only for differences in co-payments and deductibles. § 303. If your employer fails to pay 72.5% of the cost of the “qualified plan” for individual plans (or a 65% share for your family coverage), your employer must pay an 8% payroll tax. § 412(b)(1). If you are the employer, your cost of hiring a U.S. employee would increase by at least 8% of the employee compensation. This would not affect independent contractors and consultants.

Part-time employees would be affected too. For part-time employees, the employer contributions are required in proportion of the average weekly hours of employment to the minimum weekly hours specified by the health insurance Commissioner for an employee to be a full-time employee. § 412(b)(3).

Small Business. Small businesses (with payrolls from $500,000 to $750,000 including owner salaries) would pay a lower tax in 2% increments for payrolls of $585,000 or more. § 413. If the small business has affiliates doing different businesses, they are aggregated for determining whether they get “small business” treatment. While small business might not consider offshore outsourcing, the House ObamaCare bill would encourage small business to automate and use independent contractors, staffing companies and outsourcing service providers domestically.

Taxation of High-Income Americans. The House ObamaCare bill would impose an additional 5.4% personal income tax on citizens and resident aliens earning $1.0 million per year (for married persons filing jointly), or $500,000 for individuals filing singly. This could be enough to encourage some high-earners to re-consider their personal tax planning and expatriation or non-residency for high-income years.

Hardships to Be Studied. The ObamaCare bill acknowledges that employer responsibility requirements may pose significant hardships. Yet it failed to take into consideration any special provisions for any employers by industry, profit margin, length of time in business, size or economic conditions (such as the rate of increase in business costs, the availability of short-term credit lines, and ability to restructure debt). Instead, the bill contemplates a future study of such hardships. § 416. The “hardships” listed do not include the impact of the ObamaCare system on the use of automation, outsourcing or offshoring.

Classification of Workers as Employees or Independent Contractors. The ObamaCare bill contemplates new regulations (in addition to existing tax and labor regulations) for “recordkeeping requirements for employers to account for both employees of the employer and individuals whom the employer has not treated as employees of the employer but with whom the employer, in the course of its trade or business, has engaged for the performance of labor or services” to “ensure that employees who are not properly treated as such may be identified and properly treated.” § 423(a). Existing regulations of the Department of Labor, the Internal Revenue Service and other agencies already address this issue. It will become a pivotal issue and encourage unemployed persons to set up new personal service companies or to work through staffing companies in lieu of permanent employment.

Individuals Taxed if Not Adequately Insured. For individuals who fail to purchase (or be covered by their employer’s purchase of) “acceptable” health insurance, the House bill would impose a federal income tax equal to 2.5 percent of a slice of income as especially defined in section 6012(a)(1)). § 501. Exemptions would apply to non-resident aliens, non-resident U.S. citizens, residents of U.S. possessions and religious conscientious objectors.

Collateral Targets: Foreign Business with U.S. Subsidiaries. Foreigner-controlled businesses would help pay for ObamaCare unless the controlling parent is in a treaty with a U.S. income tax treaty. The ObamaCare health “reform” would thus significantly increase the cost of doing business for foreign businesses that are not based in a country that has an income tax treaty with the United States. Amending U.S. federal income tax law (and bundling a tax provision unrelated to healthcare), the ObamaCare bill would require the U.S. subsidiaries of foreign-controlled companies to apply the normal 30% withholding tax on all deductible income paid unless an income tax treaty applies to the foreign-controlled parent company. “In the case of any deductible related-party payment, any withholding tax … with respect to such payment may not be reduced under any treaty of the United States if such payment were made directly to the foreign parent corporation.” Payments subject to withholding consist of passive income such as dividends, interest, rents and royalties. § 561, adding a new §894(d) to the Internal Revenue Code of 1986. The bill would apply to U.S. subsidiaries that are part of a “foreign controlled group of entities” that have a common parent that is a foreign corporation.

The U.S. currently has income tax treaties with 67 countries, including Russia, India, China and the Philippines. For the entire list, see http://www.irs.gov/businesses/international/article/0,,id=96739,00.html.

Foreign-controlled companies established in low-tax jurisdictions are targeted, including Aruba, Barbados, Bermuda, the British Virgin Islands, the Channel Islands (Jersey and Guernsey), Hong Kong and Panama. Formerly U.S.-based companies that moved their situs of incorporation from the United States to tax havens, such as Accenture did, will be directly affected.

However, the draft healthcare legislation would also have an impact on foreign businesses established in other industrial and commercial countries that provide significant levels of business process and IT services to U.S. enterprise customers. These countries include Brazil, Columbia, Costa Rico, Malaysia, Mauritius, South Korea and Taiwan. Companies in such countries that provide call center services, customer care and other remote offshore services would find that the cost of doing business in the United States is increased.

Conclusions. ObamaCare will cost American employers and American taxpayers. These costs will give a new comparative cost advantage to foreign service providers, assuming their ultimate parent company is based in a country with a U.S. income tax treaty.

Filed under: Newsletter Article
Tagged: business process, enterprise customers, healthcare reform, IT services, ObamaCare, President Obama, risk management, service providers, US

Outsourcing Law & Business Journal™: Feb/March 2010

Outsourcing Law & Business Journal™: January 2010

“ObamaCare”: Promotion of Automation, Offshore Outsourcing and Job Losses; Penalizing Foreign Companies Based in Tax Havens (and Other Non-Treaty Countries)

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