VCs' POV on outsourcing

In his Venture Capital Notebook today, John Cook looks at the outsourcing issue from the perspective of the money men and the startups they fund. Yes, there are compelling financial incentives to use lower-cost labor overseas. For many entrepreneurs, John writes, "the writing is on the wall: Either cut costs through outsourcing or cease to exist."

But outsourcing doesn't always make sense, John's sources point out. Sometimes, the logistics of coordinating a work force several times zones away are too daunting. And certain things just can't be done as well via extreme telecommuters. AskMe Corp. CEO Udai Shekawat says:

"Ultimately it makes sense if you can do some things like product support and low-level things. ... But when you talk about leading-edge innovation, inventing new software categories or new medicines, that sort of stuff is very hard to do out there because it is a combination of science and art and half magic."

Nonetheless, offshoring is likely here to stay. Another VC, Ignition's John Ludwig, offers this advice to his college-age children:

"I tell them to make sure they are trained the best in the world because they are going to have to compete worldwide. And I tell them to think hard about careers and jobs that have to be done in the U.S."