How to protect IP in offshoring craze

Unfortunately, many corporations have embraced the concept of offshoring with little attention to its details. Many once believed a local work force was easier to manage, thereby speeding time-to-market and reducing risk. Today, the extreme opposite is true: blind offshoring is extensive, and a local work force is seen as low return on investment.

In the long term, blind offshoring will not only hurt companies through inefficiency but will also jeopardize their intellectual property. Culture, local laws and lack of visibility impose significant challenges in protecting IP when offshoring. For example, in many cultures knowledge cannot be shielded, and virtue exists in sharing it. Experience shows that information is often leaked by junior engineers without a desire for financial gain but just to fulfill a "comrading" obligation.

The other side of the spectrum also exists where IP has found its way to the competitor for financial gains by all levels involved. Whatever the reasons, the lack of local laws or the means of enforcing them has not been favorable. Furthermore, lack of visibility usually allows issues to escalate too far before being noticed-or it may often even go unnoticed altogether.

What follows are protection mechanisms that designers and companies can adopt to lessen the risk of IP loss when offshoring.

- Perform background and reference checks on the prospective company and its executives. Get to know them at a personal level. Technical skills should not be the only benchmark for selecting an offshore partner. Personal traits outweigh all in a long-term relationship where trust is the foundation.

- Start with a small job before moving to bigger jobs. This will build the trust and streamline the process.

- Contracts, nondisclosure agreements and noncompete agreements are drafted according to the local laws. If the local laws do not provide enough protection, or are hard to enforce, it may be necessary to form the contract within the United States or a third country where the law is more favorable.

- Interview and get to know individual engineers assigned to the project. Investigate their history with the company, background and personal and technical strengths and weakness. Make sure that the contract prohibits them from committing to other projects during your project's life cycle.

- Secure the development environment. Ask for designated and secure rooms and labs with isolated networks and computers without copying devices such as a CD writer and floppy drive.

- Continuous visibility to the project, progress and resources is a must. Make frequent site visits and maintain regular meetings using tele- or videoconferencing. They need to know you personally as well and be able to relate to you.

- Make continuous education and training on IP mandatory, with an emphasis on its protection and financial and legal consequences to the managers and the employees involved.

- The best IP-protection technique is the system knowledge possessed locally. With that knowledge, a complex engineering project can be subdivided into smaller modules that are transferred to counterparts overseas. The partitioning must be done in such a way that each module alone has little IP value. Reverse integration of the modules is done locally. Implementing this model requires significant local system knowledge and good understanding of the skill sets overseas. If not implemented properly, it could lead to deficiencies and risk the success of the project.

- The most important point is not to underestimate the challenge of executing a successful project with resources on two continents. Don't shy away from it, but get to know the song before you dance to it.

For further reading on managed offshoring, refer to http://www.doradus-tech.com/whitepapers/.

Sam Heidari (sam.heidari@doradus-tech.com), president and CEO of Doradus Technologies Inc. (San Jose, Calif.)