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OUTSOURCING LAW & BUSINESS JOURNAL (TM)

OUTSOURCING LAW & BUSINESS JOURNAL (TM): Strategies and rules for adding value through strategic alliances, joint ventures, shared services and cost-effective, durable and flexible sourcing of services.

Insights by Bierce & Kenerson, P.C. www.outsourcing-law.com

Vol. 5, No. 1 (January 2005) 

---------International Outsourcing Legal Seminar - Jan. 12, 2005----------

REMINDER: You are cordially invited to attend an International Outsourcing Law seminar, networking and discussion on:

Outsourcing Hybrid: 
Structuring International Sourcing Operations

This seminar will highlight legal issues in structuring international outsourcing operations including compliance with WTO agreements and enforcement, American, Canadian and European labor law, the American Jobs Creation Act of 2004 and Sarbanes-Oxley.   1.0 hours of NY CLE credit.

The featured speaker will be Bill Bierce, President of Bierce & Kenerson, P.C.  Attendees will be able to explore opportunities, challenges, risks, questions and concerns relating to international outsourcing operations structure. 

To register, go to: http://www.outsourcing-law.com/CLESeminar1.12.04.htm

1.    Tsunami Condolences

2.    Deal Structure: Outsourcing after Divestiture of Manufacturing Operations: IBM's Services Agreement with Lenovo for Personal Computers -- Financial, Human Resources, Legal and Regulatory Issues in International Mergers and Acquisitions.

3.    Deal Structure: BPO / F&AO / Finance & Accounting for Governments.

4.    Tax Law: Homesourcing: Telecommuting Globally - A Brief Travel (at the Speed of Light) through Taxation and Jurisdiction.

5.    England - Labor Law: Employer’s Motive to Avoid TUPE Not Sufficient to Establish a TUPE-protected Job Transfer -- The Impact of Business Process Transformation. 

6.    India - News Flash

7.    Humor
       
8.    Survey Question of the Month

9.    Seminars & Conferences

10.  Calling All International Outsourcing Lawyers

11.  Store

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1.    Tsunami Condolences: We extend our sympathy and best wishes to our friends in South Asia. 


2.    Deal Structure: Outsourcing after Divestiture of Manufacturing Operations: IBM's Services Agreement with Lenovo for Personal Computers.   On December 7, 2004, IBM announced a definitive agreement to transfer its personal computer division ("PCD") to Lenovo Group Limited (formerly known as Legend), a Chinese state-owned enterprise.  The deal heralds a new era in post-sale support. Sensitive issues of foreign ownership (especially from China), marketing, finance, human resources management, brand management and customer support, management control need to be addressed on cases of divestiture.  The new model breaks ground in the degree of the "seller's" ongoing involvement in the operations of the divested operation.  Chief executives, business development officers, marketing officers and M&A advisors can benefit from the lessons of the transaction. 
See: www.outsourcing-law.com/dealstructures/IBM.Lenovo.2005.01.06.asp


3.    Deal Structure: BPO / F&AO / Finance & Accounting for Governments. Governments of all sizes have hired external service providers to support their operations.   In one late-2004 non-U.S. contract, the government hired a U.S. contractor's local affiliate for ten years to manage information technology infrastructure and design new processes and systems to administer the government's non-tax revenue collection.  Aggregate cost is estimated at between $400 million and $500 million. Ironically, that country's very strict privacy laws were not an impediment to hiring a foreign-owned firm.  Elements of "best practices" in governmental outsourcing may refocus the attention of private industry that hires outsourcers to manage sensitive personal data.  For a discussion of the interplay of privacy, potential xenophobia and prudent business practices, see www.outsourcing-law.com/dealstructures/Govt_collections.2005.01.01.htm

4.    Tax Law: Homesourcing: Telecommuting Globally - A Brief Travel through Taxation and Jurisdiction. Outsourcing and offshoring owe their existence to the telecommunications revolution: low rates, abundant supply, high bandwidth capacity, high quality and deregulation.  "Homesourcing" can be defined as the long-distant employment relationships with individuals who are treated as direct employees for contract, regulatory or tax reasons. The loss of employment tax revenues from telecommuters has inspired states to tax and employee advocates to introduce anti-taxation legislation in the U.S. Congress.  For a discussion, see www.outsourcing-law.com/homesourcing.tax.2005.01.03


5.    England - Labor Law: Employer’s Motive to Avoid TUPE Not Sufficient to Establish a TUPE-protected Transfer -- The Impact of Business Process Transformation. In England, the Transfer of Undertakings (Protection of Employment) Act 1981 (as amended, "TUPE") puts the employee in a preferred position, allowing continuity of emoluments if the job group ("undertaking") is transferred.  The case law interpreting this workers' rights law is evolving.   This month's guest article addresses the question whether an employer's motivation is relevant to the employee's right to continue old emoluments of employment including salary, job description and entitlements.   The article highlights the need for careful planning when engaging in outsourcing that includes European employees.  
See www.outsourcing-law.com/tupe.2005.01.06.htm

We thank Matthew Tom, a solicitor in the Employment and Resourcing Department of Tarlo-Lyons, London, England, for this month's guest contribution.  

6.    India - News Flash. On December 26, 2004 , India 's President promulgated The Patents (Amendment) Ordinance, 2004.  According to New Delhi advocates Viswanathan Associates, India will not grant patents for software that is designed for use in "its technical application to industry or a combination with hardware."  It is unclear whether this applies only to software embedded in useful devices or extends also to business process that are "technical applications to industry."   The ordinance expires six weeks after the beginning of the next session of Parliament, unless extended or adopted legislatively.  We thank Viswanathan Associates, New Delhi , for this information.   


7.    Humor: At the beginning of any new year, tax planning opportunities arise anew.  We are inspired by the ability of tax authorities to develop creative means of collecting taxes and the corresponding innovations by business and investors to take full advantage of what is lawfully theirs.  Tax planning, compliance and mitigation are an important part of the outsourcing relationship.  Accordingly, we explore some incongruities in taxation (which is just another way to say there is competition for your resources).  We compare and contrast clauses for "tax savings" (tax mitigation), double taxation and "double dipping."  As a "modest proposal" in the best tradition of Jonathan Swift, we extrapolate into a revolutionary "Yukos tax savings" clause.  
See: www.outsourcing-law.com/humor_taxclauses.1.04.htm   


8.    Survey Question of the Month:

Does Lenovo's acquisition of IBM's Personal Computer Division (and the ensuing joint venture in which IBM provides extensive business support to Lenovo as a Chinese-government controlled business) threaten the national security interests of the United States? Go to: http://outsourcing-law.com/survey.asp?ID=78


9.   Seminars & Conferences:

Strategic Research Institute Presents: 2^nd Annual Global Sourcing Symposium. January 19-20, 2005 , Metropolitan Hotel – New York City . This event is specifically designed for today’s business leader who must attain a competitive advantage in order to build their business and stay ahead of the curve.  The symposium will help delegates make vital decisions that address both strategy and implementation issues of offshore outsourcing, while providing a blueprint their company can apply to achieve optimal results. Delegates will gain valuable insight, real-world data, and specific next steps from industry experts. For more information and to register, please visit www.srinstitute.com/ci297 or call 1-888-666-8514.

Association of American Publishers, Annual conference of the Professional and Scholarly Publishing Division, Mayflower Hotel, Washington, D.C., February  7-8, 2005.  Publishers confront an Internet-based world of search engines.  Bill Bierce will present on dealing with the business imperatives to outsource and legal issues in managing an effective outsourcing relationship.  Contact: www.pspcentral.org.  

The Outsourcing World Summit^® is the field’s premier annual gathering, attended by hundreds of professionals from all around the world. This unique forum is based on a simple premise: that outsourcing can only be successful when all participants – customers, providers, and consultants alike – work together to break through the myths, misunderstandings, and occasional missteps that come with organizational change of this magnitude.    
                                                                                                                  
The 2005 Summit, being held February 21-23, 2005 at the incomparable Hotel del Coronado in San Diego, features industry pioneer Michael Corbett, Dartmouth’s legendary James Brian Quinn, former U.S. Secretary of Labor Robert Reich, and others.  Look for us there too.  For more information, go to: http://www.corbettassociates.com/content/10/78/250/ 

10.    Calling All International Outsourcing Lawyers: 

Are you a creative non-U.S. lawyer with significant experience in international outsourcing? Do you know anyone who fits this description? If so, we would like to get to know you. Please contact Ed Fortune at efortune@biercekenerson.com about the types of services that you have helped outsource, whether you focus on service providers or enterprise customers (or both), and any deal structures that you have found particularly useful. 

Please send us your newsletters on outsourcing-related topics and advise us on your policy regarding republication in Outsourcing Law & Business Journal™ and www.outsourcing-law.com. Thanks you.


11.    Store: Informative, Timely, Comprehensive. Purchase our exclusive White Papers and Articles now:

• Business Process Transformation: Legal and Business Issues in Business Renewal and Sourcing Strategy. 
  

• Impact of New Sarbanes-Oxley-Based Disclosure Rules on Business Process Outsourcing: 
  

• Limitations on Liability Article: Public Policy Exceptions Under New York Law

To purchase, go to: www.outsourcing-law.com/store


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