Situation: A company is in contact with an Eastern European company that seeks outsourced business from the US. The CEO seeks guidance on challenges managing as well as formalizing this relationship. What is your experience outsourcing to Eastern Europe?

Advice from the CEOs:

• Location in Eastern Europe is important. There have been concerns with both corruption and IP protection in Russia. Some other Eastern European are more aligned with US/European values and farther up the ramp as outsource partners.
• Experience of other US companies suggests that your spec must be written much more tightly than if you were doing the work here. If you can’t write a tight spec on the work, don’t outsource it!
• Contract outsourced work on a fixed fee basis with the bulk of payment due on completion. This helps to assure that you receive timely delivery and the quality of work required.
• Set up thresholds for the circumstances to engage an outsource partner.
  • Say one US worker is economically worth 5 foreign workers in your domain. Do you have enough work to support this?
  • Determine who will manage the outsourced work. A European is fine, as long as they have experience managing outsourced work.
  • Someone on your team will become their Project Manager. This can be VERY time consuming.
• Consider setting up an offshore company to shelter some of the revenue from the outsourced work.
  • You want to locate the offshore company in a tax-free country, and to have them handle the funds connected with the outsourced work.
  • The contact in the tax-free country will likely be an accountant, lawyer or both. There are many reputable individuals who do this in tax-free countries, but be sure to check references and background carefully.

Key Words: Outsource, Eastern Europe, Challenges, Manage, Relationship, Experience, Concerns, Alignment, IP, Corruption, Contract, Protect, Spec, Fee Basis, Delivery, Quality, Parameters, Tax Shelter

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