WisBusiness: ‘Rightshoring’ trend will continue, experts say

By Brian E. Clark

Wisconsin companies are sure to expand their presence in the global marketplace in coming years – both by exporting abroad and by sending work off shore, three Badger State experts in emerging overseas markets said Tuesday.

Speaking at a Wisconsin Innovation Network luncheon, the trio said businesses face numerous challenges and opportunities. Exporting products may be the relatively easy part because the world needs the manufactured products the Badger State is producing. In 2006, Wisconsin sold $17.2 billion worth of products and services abroad – up 15 percent over 2005.

But sending work abroad – now called “rightshoring” – is a more nuanced affair and companies must be willing to spend time, learn the local culture and not grow frustrated and pull out if they are not 100 percent satisfied with the initial results, the experts said.

Murali Iyer, director of IT strategy and global sourcing for Wipfli LLp and SpiderLogic, said he has seen the outsourcing concept mature over the past two decades.

“The ground is now ready for midsized and smaller companies with considerably less risk involved,” said Iyer, who is based in Madison. “It’s not just for the big players anymore. And what is manufactured over there isn’t only for the U.S. market. You can sell to other parts of the world, too.”

Scott Papador, of Delafield-based Global Health Direct, said sending work offshore means companies can have products produced faster and at lower costs, allowing them to grow and in some cases add workers domestically.

“There are pitfalls, of course, but you can make it work for you,” said Papador, who works mostly with IT companies in India. “But you can’t necessarily impose your methodology. You have to work with and adapt to your (environment).”

Gary Pond, president of Racine-based Inter-Med (Vista Dental Products), has made more than 65 trips to China in the past dozen years.

In the first year, he spent 10 months “on the ground” in China, touring factories and learning about the country first hand.

Pond, who now has his own joint venture in China, had revenues of $80,000 the first year and $1 million the next. In the following decade, earnings have increased by 25 percent annually. He now employs more than 40 engineers, marketers and designers in his Racine offices.

Though still a small operator, Pond works with multi-national companies and has earned credibility because he established a “beach head” in China.

“I have not lost a dime in China,” he said. “But I have had lots of products rejected. To be successful there, you must be tenacious and you must also send the right people to represent you there.”

Unfortunately, Pond said, Americans “tend to be lousy at finding partners, building relationships and doing due diligence in China.”
Pond warned that it is foolhardy to send a product in transition to China.

“It must be an established product,” he said. “They are not very good with unexpected changes and they do not like surprises.”

Pond also said “yes does not necessarily mean yes” in China.

“You often have to triangulate, be patient and ask your questions different ways to be sure. But you also don’t have to win every argument.

“I’ve succeeded there because I’ve been open and honest with them,” he said.

On the subject of intellectual property protection, the trio said India and China are poles apart.

While India recognizes U.S. patents, China does not.

“It’s the Wild West over there in China,” Pond said. “And in some ways that has worked in my favor.”

To make sure the intellectual property for products he makes are not stolen, he often parcels out the work and then brings the pieces to a joint venture factory for assembling.

But he said some companies have suffered and noted that Motorola was “raped” by Chinese companies that hired away its engineers and used their knowledge to make televisions.

“It can sometimes be difficult to work in China,” he acknowledged. “But there are huge rewards. You have to stay ahead of the curve so if they steal something, it will be old technology.”

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