Barry Cohen

Wednesday, 28 December 2005 05:05

International business

As a businessperson, you may have struggled with offshore outsourcing, or offshoring. In spite of its many promises, offshoring is difficult to do well. While there can be significant cost savings by offshoring, that’s not always true.

Realistically, resource shortages, long distances, different time zones, and written, verbal, and technological communication issues add costs that require businesspeople to re-evaluate if and how offshore business is conducted.

The critical difference between a failing and a successful offshoring engagement is the underlying strategy. Failing engagements are often the result of a poorly planned strategy, while successful engagements result from a well-considered strategy that addresses four key ingredients: people, processes, tools/infrastructure and frameworks.

When these ingredients work well together — when the whole is greater than the sum of its parts — you will dramatically increase the odds that your offshoring experience will be positive and productive.

People
People are the hardest part of the mix to get right and require the most care. Working with skilled people is one key to success. But too many organizations view offshore resources as cogs — interchangeable and easily replaceable.

Nothing could be further from the truth.

In disciplines like application outsourcing, the exact opposite is true. Instead of the more, the merrier, think less is more. Just throwing bodies at a problem won’t fix it. In fact, many offshore development projects fail because labor shortages force employers to staff projects with inadequately skilled workers When things go wrong (as they always do at some point), often more inadequately skilled resources are added, exacerbating the problem.

By contrast, successful offshoring engagements employ fewer, but highly skilled professionals who are strong communicators, technically savvy and proficient at time management. They can be asked to do more, and often appreciate the challenge. Less skilled people cannot and often do not.

Process
Good communication is essential. All of the best technical knowledge available isn’t beneficial if it can’t be communicated to the people who need that knowledge most. And offshoring raises significant challenges in this area.

Aside from language and cultural differences, distances and time zones create communication challenges. With vendors overseas, you can’t easily or cost-effectively attend an on-site meeting, nor speak to a person live — in many cases, your workday is starting when theirs has ended.

To work around this, develop process templates that define when, how and under what circumstances communication is to happen. Train your team to use the templates, and be sure to provide the necessary tools. Disciplined use of consistent communication strategies and templates can reduce the inefficiencies caused by time zones, distance, language and culture.

Tools and infrastructure
Great tools and infrastructure won’t guarantee a successful offshoring strategy, but poor tools and infrastructure will guarantee a failing one. Tools and infrastructure are the central nervous system of an offshoring strategy. They enable quick and efficient work, but only if good people — governed by good processes — are there to use them.

For example, a Web-based project management tool will enhance project delivery processes and methodologies, allowing project managers, team members and stakeholders to easily share information anytime, anywhere.

Frameworks
In booming economies like India, where demand for talented, English-speaking professionals exceeds supply, it is difficult to ensure that skilled resources are available. This is where frameworks and patterns come in.

Reusing solutions that reduce complexity lets you use available lower skilled resources to do similar work as unavailable highly skilled resources, thereby mitigating skill shortages. When work is standardized with frameworks, work products can integrate domain-specific, pluggable framework components, instead of building solutions from scratch. This provides better quality, uniformity, supportability and maintainability for clients and providers.

Optimizing your offshoring strategy means finding the right balance of people, processes, tools/infrastructure and frameworks for your business, so each ingredient supports and enhances the others. While balancing these ingredients does not ensure success, doing so greatly increases your chances.

Mitchell Cohen, senior solutions architect in CIBER’s Detroit office, can be reached at (248) 352-8650 or at mcohen@ciber.com. CIBER Inc. is a global IT consulting firm which builds, integrates and supports mission-critical business applications. Find out more at www.ciber.com.

Friday, 01 July 2005 05:25

Passion and perseverance

Few people have the passion and perseverance to turn a bright idea into a brilliant business like the men and women recognized by the Ernst & Young Entrepreneur Of The Year (EOY) program.

Recognized globally, EOY celebrates the best of our nation’s entrepreneurial talent, whose achievements in building dynamic and growing businesses are a testament to their vision, tenacity and leadership.

Entrepreneurs are people who see an idea and make it happen. They have the vision and determination to create new ideas and solutions that make a difference right here in our own community. Northeast Ohio’s entrepreneurs continue to astonish us with their distinctive and inspiring stories. You’ll learn more about the ambitious journeys of this year’s Northeast Ohio Ernst & Young EOY finalists and award recipients in the following profiles.

As the first truly global award program of its kind, EOY celebrates entrepreneurs who are building and leading successful, growing and dynamic businesses. These remarkable men and women — who provide jobs, grow our communities, strengthen our economies and improve the world — are recognized through regional, national and global awards in more than 150 cities and 35 countries.

Since the program’s founding in 1986, Ernst & Young and EOY partner sponsors have recognized thousands of outstanding business entrepreneurs who have developed new technologies, created faster ways to distribute goods and services, and improved the quality of life in their communities. Locally, the EOY program was introduced in 1988, and in 2005, we continue the tradition of honoring the Northeast Ohio entrepreneurs whose dreams have led them down the path of success.

We celebrate each of these extraordinary individuals for their hard work and dedication. On behalf of everyone at Ernst & Young, congratulations to the 2005 Northeast Ohio Entrepreneur Of The Year Awards Program finalists and award recipients.

Ben Cohen is a tax partner and EOY program director for Ernst & Young LLP. Reach him at (216) 583-8852.

Wednesday, 23 February 2005 09:30

To commit or not to commit

Using real estate as collateral when borrowing money can be an agonizing and confusing experience. The lender, terms, process, law, qualifications and requirements change periodically.

It doesn't matter what the money is needed for; as soon as you determine you need money, the process commences with one or more lenders.

Discussions and applications lead to negotiations, which lead to written documentation of the understanding. The next step is usually to submit the loan to the lender's loan committee for approval and completion of the loan terms, reduced to writing in a Loan Commitment Letter (LCL). Generally, an LCL will set forth the loan's terms, provisions and conditions.

LCLs vary from lender to lender but commonly include the loan amount, interest rate, payments, term or maturity date, lender fees, cost reimbursement and a general description of other terms, conditions and requirements of the loan.

As frequently occurs with legal documents, the devil is in the details. To avoid problems, there are several issues you should address early in the process and include in the LCL. These include:

* Borrowing entity

* Uses of the money

* Personal guarantors (if appropriate)

* Terms of the guaranty

* Prepayment right or penalty or dollar amount

* Percentage of principal payoff amount

* Escrows for taxes, insurance, repairs and maintenance, etc.

* Draw schedules, if money is not advanced in one lump sum at the closing but disbursed at intervals and occurrence of certain events

* Insurance for property, hazard, and life

* Financial data required for final loan approval and in the future

* Restrictions on transfer of title or any interest in the property, including sales and junior financing

Further inquiry should be made if the loan is styled "nonrecourse with carve outs." Borrowers are liable for carve outs. Recently, a client was told that his loan was nonrecourse except for carve outs. When he examined the loan documents, there were 34 carve outs or things that he was liable for, even though he was told it was nonrecourse.

Many lenders are reluctant to change their standard LCL but may be willing to give the borrower a separate letter containing additional agreements. Since most agreements state that the only thing that counts is what is in writing, not anything stated orally, the former is the prudent course of action for a borrower.

Prior to signing the LCL and paying any fees, the borrower should request and review a blank set of closing documents from the lender. An inquiry of the lender about terms, conditions and provisions that results in the answer that the standard lender's documents will be used is not informative or helpful to the borrower.

On the other hand, there is an administrative and time cost to the lender to furnish this documentation prior to receiving any fees or a signed loan commitment letter, as the loan could be shopped to other lenders.

The bottom line is that, because the LCL is the foundation or base on which the loan closing documents are drawn, it is critical to closing the loan that you avoid mistakes and surprises. You are advised not to routinely sign the LCL you are presented and then call your lawyer and ask, 'Tell me what have I gotten myself into?'

Bruce P. Cohen is a partner with Gambrell & Stolz LLP. His practice areas include real estate, commercial and residential, finance, foreclosures, title insurance and leases. Reach him at (404) 221-3401 or bcohen@gambrell.com.

Monday, 22 July 2002 09:48

The 21st century patent

So, you want to be the next Alexander Graham Bell. The goal of an inventor is the coveted patent. It’s quite simple. Invent something, patent it, then move to Palm Beach and collect royalties from the 18th green for years to come.

That’s great, but what’s really left to invent, especially if you’re not a physicist or chemist?

In 1876, Mr. Bell received his patent for a process that transmitted sounds, and Thomas Edison obtained more than 1,000 patents, including one for his favorite, the phonograph.

Thanks to the Supreme Court, your invention may be right in front of you and your business.

What changed? The Constitution always authorized Congress to “promote the progress of science and the useful arts by securing for limited times to authors and inventors the exclusive rights to their respective writings and discoveries.” Even Thomas Jefferson, our country’s first patent examiner, stated, “Ingenuity should receive a liberal encouragement.”

You’ve been able to obtain a patent for computer software, but not for business methods. In the past few years, the court has chipped away at the mathematical algorithm exception, which limited patents for a mathematical process.

Yet, the court didn’t directly review a case with a business method exception, so the limitation remained intact. Accordingly, businesses didn’t seek patent protection for the computerized processes of how they ran their businesses.

Not any more. All of this has changed — and created some billionaires in the process. Take Jay Walker of Priceline.com, who became a billionaire, at least on paper. Not bad for reselling tickets.

Think about it. Priceline doesn’t even produce or manufacture a product. Its ingenious concept is to provide a simple means for airlines to sell discounted unsold tickets, which otherwise would go to waste.

The consumer, using the Internet, names a price that he or she is willing to pay for a particular flight. If accepted by the airline, an electronic ticket is issued, and Priceline receives a small commission — plus all the advertising revenue it can obtain from selling banner ads on its site.

Priceline sells about 40,000 tickets per week. Why didn’t I think of this?

So what was the invention? Mr. Walker patented the software which allows buyers to determine binding purchases to potential sellers. Arguably, he now has a patent for any Web site that allows a buyer to name a purchase price.

He may not sound like Thomas Edison, but he was able to license the rights of his patent to Priceline for, among other things, $7.5 million worth of company stock, which recently was trading at $112 per share.

How did he do this? In 1998, the Supreme Court upheld a Court of Appeals decision that allowed the patent of a business method in State Street Bank v. Signature Financial Group. Signature Financial developed software for a process that created a hub and spoke mutual fund system. This allowed a group of small funds to be pooled into a single portfolio to save money through economies of scale.

This may have nothing to do with your business, but the court decision may. If your business method, or “invention,” can be expressed as a process to produce a “useful, concrete and tangible result,” it may be worthy of a patent.

The downside is that, if your business has been utilizing someone else’s business method that was unprotected, it too may now be patentable. Thus, you may be infringing on someone else’s rights and have to pay a royalty for the way you conduct your computerized business.

The upside of such a patent is clear: While you may not be as successful as Mr. Walker, you still might find that you now have an edge over your competition.

Barry Cohen is a senior associate with the law firm of Thorp Reed & Armstrong, LLP. He concentrates his practice in the area of intellectual property, including trademark and copyright infringement as well as commercial/business litigation. Reach him at (215) 563-6711 or bcohen@thorpreed.com.

Tuesday, 19 October 2004 20:00

Opportunity knocks

"Hurry, before they're gone!"

I'm sure you've heard that warning many times in an attempt to pressure you into making a decision. The tax law also expresses that thought by setting deadlines for the phasing out of various tax incentives.

At the end of 2004, a substantial and important business incentive -- the ability to write off as "bonus depreciation" 50 percent of the purchase of new equipment, furniture, fixtures, qualifying business vehicles and computer software purchased and put into service by Dec. 31, 2004 -- will be phased out.

This tax incentive was implemented for purchases made after May 5, 2003, to spur the economy.

A qualifying business vehicle is one that weighs more than 6,000 pounds. For vehicles weighing less, the 2004 depreciation write-off for 100 percent business vehicles is limited to $10,610. In 2005, the maximum depreciation deduction for a typical passenger car or light duty truck used 100 percent for business will be limited to a maximum of $7,560.

Other depreciation incentives are still in effect for 2004 and 2005, such as section 179, which allows for the deduction of the first $100,000 of new and used personal property purchases, such as furniture, fixtures, equipment and certain vehicles, in a year. The $100,000 write-off is available for a business that hasn't spent more than $400,000 for those types of assets during its business year. This provision is still in place through 2005.

However, it's imperative to recognize that the 50 percent depreciation deduction provision is not limited to a maximum purchase of personal property during the year. In fact, the bonus depreciation can be used to create a net operating loss that can be carried back to the previous two tax years to generate refunds of taxes paid in those years.

Business owners with large capital outlays should consider the cash flow and tax savings from accelerating their purchases into 2004 to take advantage of this 50 percent write-off.

Additionally, with respect to building new facilities or additions, a cost segregation study should be considered in order to identify aspects of the construction that will qualify as equipment and machinery and thus the 50 percent write-off incentive.

Business owners considering leasing equipment, machinery or qualifying vehicles should consider as an alternative arranging for an installment purchase in order to qualify for the 50 percent write-off of the leveraged purchase. Now is the time to begin discussing year-end equipment financing with your banker or supplier.

The term "placed in service" means that the equipment or other personal assets are in a delivered stage and are in a condition and state of readiness to be used. Therefore, it is important that end-of-the-year purchases be installed to the point of flipping a switch to begin their operation.

The federal income tax law also provides an incentive for individuals who are planning on getting married in 2004 versus early in 2005. The "marriage penalty" is imposed on a couple filing a joint return, which causes them to pay an increased amount of tax over what they would pay if they were single.

The tax law approached providing some relief to couples by expanding the amount of income taxed at the 15 percent bracket. At the end of 2004, the marriage penalty will increase and could cost a newly married couple an additional $338 in 2005. Individuals planning on marriage shortly after Dec. 31 might want to accelerate their plans to 2004 to take advantage of the lower "marriage penalty" tax rates of 2004.

A tax principal at Tauber & Balser, Harvey S. Cohen (hcohen@tbcpa.com) has more than 33 years of experience with a strong concentration in taxation, tax aspects of bankruptcies and small to mid-size businesses. Harvey has developed expertise in S corporations and limited liability companies. He has worked with clients establishing their retirement plans and has experience in forensic accounting focusing on tax matters. You can reach Harvey at (404) 814-4930.

Monday, 26 June 2006 06:39

20 years of leadership

This year marks the 20th anniversary of the Ernst & Young Entrepreneur Of The Year awards program.

In our 20-year history, Ernst & Young has recognized thousands of business entrepreneurs around the country and in Northeast Ohio whose vision, leadership and record of achievement continue to impact our communities. Their drive and determination have created new ideas that have made a difference in our area.

Each year, EOY finalists and award recipients demonstrate incredible depth of character as they develop new technologies, create faster ways to distribute goods and services, and improve the quality of life for people around them.

The individuals we honor this year are no exception. These leaders have created businesses that reach into the global market and have provided us with goods and services that have not only impacted our lives but the lives of people all over the world.

This year’s EOY program participants have succeeded through turbulent economic times and emerged even stronger. As they forged ahead, they may not have listened when told it couldn’t be done, and they continue to take chances that others would consider too risky. They are leaders rather than followers, and we are inspired by their achievements.

First, congratulations to all of the entrepreneurs who have been successful throughout the award’s 20-year history. Secondly, on behalf of everyone at Ernst & Young, congratulations to the 2006 Northeast Ohio Entrepreneur Of The Year Awards program finalists and award recipients. The following profiles highlight those individuals who pursued this coveted distinction.

Congratulations on your continued success.

Ben Cohen is a tax partner and EOY program director for Ernst & Young LLP. Reach him at (216) 583-8852.

Thursday, 30 June 2005 20:00

Passion and perseverance

Full coverage of the 2005 Entrepreneur Of The Year program is available in our July 2005 Cleveland edition.

Few people have the passion and perseverance to turn a bright idea into a brilliant business like the men and women recognized by the Ernst & Young Entrepreneur Of The Year (EOY) program.

Recognized globally, EOY celebrates the best of our nation’s entrepreneurial talent, whose achievements in building dynamic and growing businesses are a testament to their vision, tenacity and leadership.

Entrepreneurs are people who see an idea and make it happen. They have the vision and determination to create new ideas and solutions that make a difference right here in our own community. Northeast Ohio’s entrepreneurs continue to astonish us with their distinctive and inspiring stories. You’ll learn more about the ambitious journeys of this year’s Northeast Ohio Ernst & Young EOY finalists and award recipients in the following profiles.

As the first truly global award program of its kind, EOY celebrates entrepreneurs who are building and leading successful, growing and dynamic businesses. These remarkable men and women — who provide jobs, grow our communities, strengthen our economies and improve the world — are recognized through regional, national and global awards in more than 150 cities and 35 countries.

Since the program’s founding in 1986, Ernst & Young and EOY partner sponsors have recognized thousands of outstanding business entrepreneurs who have developed new technologies, created faster ways to distribute goods and services, and improved the quality of life in their communities. Locally, the EOY program was introduced in 1988, and in 2005, we continue the tradition of honoring the Northeast Ohio entrepreneurs whose dreams have led them down the path of success.

We celebrate each of these extraordinary individuals for their hard work and dedication. On behalf of everyone at Ernst & Young, congratulations to the 2005 Northeast Ohio Entrepreneur Of The Year Awards Program finalists and award recipients.

Ben Cohen is a tax partner and EOY program director for Ernst & Young LLP. Reach him at (216) 583-8852.

Sunday, 25 June 2006 20:00

20 years of leadership

Full coverage of the 2006 Entrepreneur Of The Year program is available in our July 2006 Cleveland edition.

This year marks the 20th anniversary of the Ernst & Young Entrepreneur Of The Year awards program.

In our 20-year history, Ernst & Young has recognized thousands of business entrepreneurs around the country and in Northeast Ohio whose vision, leadership and record of achievement continue to impact our communities. Their drive and determination have created new ideas that have made a difference in our area.

Each year, EOY finalists and award recipients demonstrate incredible depth of character as they develop new technologies, create faster ways to distribute goods and services, and improve the quality of life for people around them.

The individuals we honor this year are no exception. These leaders have created businesses that reach into the global market and have provided us with goods and services that have not only impacted our lives but the lives of people all over the world.

This year’s EOY program participants have succeeded through turbulent economic times and emerged even stronger. As they forged ahead, they may not have listened when told it couldn’t be done, and they continue to take chances that others would consider too risky. They are leaders rather than followers, and we are inspired by their achievements.

First, congratulations to all of the entrepreneurs who have been successful throughout the award’s 20-year history. Secondly, on behalf of everyone at Ernst & Young, congratulations to the 2006 Northeast Ohio Entrepreneur Of The Year Awards program finalists and award recipients. The following profiles highlight those individuals who pursued this coveted distinction.

Congratulations on your continued success.

Ben Cohen is a tax partner and EOY program director for Ernst & Young LLP. Reach him at (216) 583-8852.