BPO Trend Spotting – “Nearshoring”

For major U.S. corporations looking to outsource non-core business processes, the selection of BPO partners with call centers or IT operation centers in Latin America and the Caribbean is not new. However, the “pitch” that having these operations in a time zone more convenient to the U.S. was never compelling enough to warrant the higher cost relative to the options available in southeast Asia. But things have changed – specifically, India is no longer so cheap as it once was. American firms are finding that native proficiency in languages such as Italian and German, as well as Spanish, coupled with the closer proximity to headquarters are some of the benefits that client corporations can obtain from “nearshore” BPO.

According to Tholon’s 2013 “Top 100 Outsourcing Destinations”, Colombia has been realizing its real-world potential as a viable destination in the region for IT BPO services. Bogota, Medellin, Cali, and Bucaramanga all ranked among top cities for outsourcing on this year’s list. Colombia’s progress is attributed to the unwavering support from its industry and government stakeholders to promote Colombia as a global IT-BPO destination. Moreover, Colombian industry leaders have done well in collaborating with large Western providers in setting up operations in the country. “Invest in Bogota” extended its support to Convergys when it needed bilingual speakers. Aravato Iberia has just started its back-office operations in Bucaramanga, creating 1,000 jobs in the city.

Uruguay’s Montevideo was another fast moving destination in the region. A small outsourcing destination which has long proven its strength in ITO services, Uruguay has maintained a vibrant, yet stable business ecosystem – establishing itself as a seemingly more predictable alternative to Argentina and Brazil. Ongoing support from local stakeholders and promotion agencies, a maturing ITO sector and increasing interest by regional and American providers in the country, should propel Montevideo in coming years.

San Jose, Costa Rica has also been one of the most impressive destinations in the region, becoming a fast-growing hub for IT operations. A significant catalyst for this has been the sustained government support in promoting the local IT-BPO sector.

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M&A Activity Heats Up in the BPO Space

As the economy strengthens and businesses expand, demand has increased for Business Process Outsourcing (BPO) services. This trend, paired with a lower cost of capital for would-be acquirers has resulted in a spate of transactions in recent weeks.

Accenture (NYSE:ACN) announced on October 3rd that it will acquire Procurian, a leading provider of procurement outsourcing services, for $375 million in cash. Procurian is a specialist in providing comprehensive procurement solutions to large corporate clients from locations in the US, UK, India, the Czech Republic, China and Brazil. Procurian’s revenue was reportedly $142.6 million for the twelve months prior to the deal, indicating that Accenture paid up for the transaction.

The acquisition of Procurian enhances Accenture’s leadership in the procurement outsourcing space – a position that was strengthened in late 2010 when the firm acquired Ariba’s sourcing and BPO services assets for $51 million. Accenture has now announced 13 acquisitions this year.

Pactera Technology International Ltd , the largest technology outsourcing firm in China, announced in mid-October that is has agreed to be taken private by a consortium led by Blackstone Group LP for $625 million. Beijing-based Pactera was itself formed just last year through a merger of HiSoft Technology International Ltd and VanceInfo Technologies Inc. Pactera offers technology outsourcing and consulting services to companies worldwide.

On October 22nd, Progressive Medical and PMSI announced the successful completion of their merger. The combined company will provide best in class pharmacy benefit management, medical equipment services, home health care, transportation, and Medicare compliance solutions for workers’ compensation and automotive accident claimants. Progressive Medical is a leading provider of services associated with workers’ compensation-related medical claims.

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R&D conference at MIT Features Presentations by Leading Experts

Please consider participating as a start-up exhibitor in this year’s MIT R&D conference, November 13-14, 2013. The conference features research presentations by leading experts and provides opportunities to network with MIT faculty and industry executives. In addition to general sessions, attendees will choose among multiple concurrent tracks with themes that include:

  • Critical Materials
  • Manufacturing
  • Water
  • Solar Power
  • Safety Risk and Quality
  • Advanced Urbanism
  • Cognitive Computing
  • Nano Materials, Structures and Systems

A segment of the conference’s agenda will be dedicated to showcasing innovative products developed by MIT-affiliated start-ups. Specifically, they are looking for start-ups that meet the following general guidelines:

  • Have an MIT affiliation*
  • Are developing a tangible good (no content, software companies)
  • The tangible good must be demonstrable on site (no videos, please)
  • The demonstration must illustrate the utility of the product

Please submit if you feel your start-up fits these general guidelines. To submit, simply go to http://tinyurl.com/mit2013rdconf. The application will take less than 5 minutes.

For more information, contact:

Enrique S. Shadah

Senior Industrial Liaison Officer

MIT Office of Corporate Relations/ Industrial Liaison Program

617/253-8129

shadah@ilp.mit.edu

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When a Non-binding Term Sheet Becomes Binding

From Mintz Levin

By Robert Burwell, Meryl Epstein, Christopher Lhulier, and Howard Miller

July 8‚ 2013

Tire-kickers, prevaricators and those who might otherwise agree on a term sheet with little intention of closing the deal beware: A “non-binding” term sheet is sometimes binding. At least so says the Delaware Supreme Court. In SIGA Technologies v. PharmAthene, Inc., No. 314, 2012 2013 Del. LEXIS 265, 1-2 (Del. May 24, 2013), Delaware’s highest court held that where a party to a detailed term sheet breaches its duty to negotiate in good faith, the spurned party may be entitled to recover an award of so-called “benefit of the bargain” contract damages. In such a case, the breaching party would be required to pay the non-breaching party an amount equal to the value the non-breaching party could have reasonably expected to receive under a definitive agreement having the same terms as set forth in the term sheet. This alert discusses the SIGA case and proposes ways to mitigate the risk that a court might award expectation damages based on a “non-binding” term sheet or letter of intent.

SIGA Technologies v. PharmAthene, Inc.

In SIGA, PharmAthene — a pharmaceutical company specializing in “biodefense” against chemical weapons such as anthrax — sued to enforce a term sheet for a license agreement with SIGA. The relationship began like many drug development collaborations: SIGA had acquired an untested, unproven treatment for smallpox, but it had limited resources. As a result, it sought funding, ultimately entering into discussions with PharmAthene to help it finance development of the product. PharmAthene proposed a merger of the two companies but SIGA, although cash strapped, was hesitant. The parties nonetheless negotiated and agreed on a definitive merger agreement and a similarly detailed term sheet for a license agreement just in case the merger fell through. During the negotiations, SIGA asked PharmAthene for a bridge loan to cover SIGA’s ongoing development costs. PharmAthene agreed to the loan on the condition it would, at minimum, receive a license for the product. Both the bridge loan documents and the merger agreement included language confirming that if the merger fell through, the parties would

negotiate in good faith with the intention of executing a definitive License in accordance with the terms set forth in the License Agreement Term Sheet attached. . . . (SIGA, 2013 Del. LEXIS 265 at 13.)

Before the parties concluded a merger, SIGA secured over $21 million in grant money from the National Institutes of Health to complete the product’s development. SIGA then terminated the merger agreement when the “drop dead” date came before the merger could be consummated.

After the announcement, PharmAthene sent SIGA a proposed license agreement consistent with the license agreement term sheet. SIGA rejected the license agreement and tried to renegotiate significantly more favorable terms. Negotiations broke down, and PharmAthene sued.

The SIGA court held that expectation or “benefit of the bargain” damages would be an appropriate remedy where (1) the parties memorialized the basic terms of a transaction in a term sheet; (2) the parties expressly agreed to negotiate in good faith a final transaction in accordance with those terms; and (3) but for the breaching party’s bad faith negotiations, the parties would have consummated a definitive agreement having the terms set forth in the term sheet. See SIGA, 2013 Del. LEXIS 265 at 52. Benefit of the bargain damages are meant to compensate a party with what it would have received had the contract been finalized and fully performed. It is usually measured in terms of reasonably expected profits. The reliance measure of damages, in comparison, provides reimbursement to the non-breaching party for expenses it incurred in reliance on the contract.

The SIGA court’s decision is notable for the remedies it contemplates, i.e., expectation damages, not for its determination that a party can be held liable for breaching a duty to negotiate in good faith. Numerous courts have recognized a cause of action for breach of a duty to negotiate in good faith.1 In fact, at least one California court has gone so far as to recognize a cause of action for breach of the implied covenant of good faith and fair dealing in a case where the parties’ term sheet did not expressly impose an obligation to negotiate in good faith. Copeland v. Baskin Robbins U.S.A., 96 Cal. App. 4th 1251 (2002). But these prior court rulings have typically favored reliance, not expectancy damages.2

For the rest of this article, as well as recommendations and proposed language, check out the Mintz Levin newsletter at the link below:

Article: When a Non-binding Term Sheet Becomes Binding

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Entrepreneurs need not apply: Companies shun the self employed

In this economy, some unlucky workers are getting snubbed—twice.

Recession prompted millions of laid off workers and new graduates to jump into self-employment—some with enthusiasm and others with reluctance because they couldn’t find anything better. Now, according to new research, it seems they aren’t wanted back.

That’s only ironic because company executives and human resources say they want self starters, innovative hires, a certain entrepreneurial spirit.

Entrepreneurs and freelancers attract fewer interview invitations than comparable candidates who have spent the last few years working for someone else, according to research which will be presented to the Academy of Management annual conference in August. In the UK, the self-employed received almost two-thirds fewer interview requests than people with similar professional experience who worked only at employers.

“The choice to become an entrepreneur can result in an involuntary lock-in, a factor that should be taken into account in planning one’s future career,” wrote the five professors from the University of Vienna, Munich School of Management and Erasmus University Rotterdam.

Men who were self employed fared far worse than women at landing job interviews, a difference the researchers cannot explain but say they hope to look into later.

The stigma against the self-employed may indicate that hiring managers just don’t see them as a good fit in their corporate culture. Traits that work for start-ups—risk-taking, taking charge and adopting “unusual points of view”—don’t necessarily work well in corporate careers, the paper noted.

“My hunch is that many entrepreneurs would actually not fit very well into established organizations, although they may be very productive and able managers themselves—as long as they don’t have a boss,” said Philipp Koellinger, an associate professor of economics at the Erasmus University Rotterdam, and one of the study’s authors. “Employers may attach that stereotype to everyone who was self-employed.”

He estimates that approximately one in seven entrepreneurs who started their businesses in the last four years did so because they couldn’t find jobs, and his previous research shows they are considerably less satisfied with their start-up than others. (That 2008-2009 research was called ”I Can’t Get No Satisfaction.”(abstract))

In the latest experiment, researchers sent pairs of cover letters and fictional resumes to real human resources management jobs in the UK over two years. In both fictional candidates’ CVs, the skills and training in the first seven years of the “applicant’s” careers were the same, with experience at large- and mid-sized companies. The key difference showed up after 2009: One of them was said to have owned a small HR consultancy with three employees while the other worked in a company’s HR department consulting with different groups.

The latest findings sound a lot like discrimination—except freelancers or consultants have few protections. Judging by a similar reception the unemployed have received, it’s likely best for applicants to sell their entrepreneurial spirit more than the actual record.

Follow Vickie Elmer on Twitter @WorkingKind. We welcome your comments at ideas@qz.com.

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