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Tiny Michigan firms offer outsourcing
Following lead of big companies, outsourcers link local businesses to cheap overseas labor.
Louis Aguilar / The Detroit News
December 6, 2005

The next wave of outsourcing to hit Michigan isn't coming from General Motors Corp. or Whirlpool Corp., but from tiny firms that are far from household names.
They are run by people like Raphael Juarez, who works out of his den in Ann Arbor, Praveen Suthrum, a freshly minted MBA from the University of Michigan, and Dave Galbenski, who is hiring in India, Sri Lanka and Royal Oak.
They represent a new breed of niche outsourcers who help small and midsize companies in Michigan gain access to cheap labor as far away as India and China. It's a new business model for a new time, and it may just be a lifeline for Michigan companies trying to survive in the global age.
US/China Manufacturing Inc., the firm set up by Juarez and a partner in Shanghai, links businesses in China to smaller U.S. auto suppliers, including struggling mom-and-pop shops in Michigan.
Your family doctor may already be a customer of Suthrum's NextServices Inc. The Ann Arbor firm takes medical billings from doctors, sends them to India for processing, and zips them to the proper insurance company within 24 hours.
Galbenski said his company, Royal Oak-based Contract Counsel, is leveling the playing field for small law firms and their clients by offering an affordable way to outsource legal research that can be too expensive to perform in-house. Galbenski sends the work to researchers in India, and soon Sri Lanka.
"I don't like the word outsourcing. I like micro multinationals," Galbenski said. "Because that's what I think entrepreneurs like me are doing, we are creating global businesses on small scales."
An entirely new venture
Such businesses did not exist before 2002 in Michigan or anywhere else.
"Five years ago, if you didn't have $10 million to establish offshore capabilities, you couldn't participate," said Robert Kennedy, associate director of the William Davidson Institute at the University of Michigan business school, who studies global business trends.
"You are describing businesses that are the cutting edge, most of them formed within the past three years. There will be many more of these kinds of businesses," Kennedy said.
"They reflect how ingrained outsourcing has become and how rapidly it's evolving."
Michigan will be lucky to nab as many as these businesses as it can, Kennedy and other analysts contend.
While they may cause the loss of some low-wage jobs here, they will also protect jobs by allowing companies to keep costs in line.
In addition, they will create high-tech and managerial jobs here in Michigan.
Taking a cue from giant firms
Kennedy says small outsourcers are pouncing on the global market recently created by the likes of Ford Motor Co. and Dow Chemical Co. And now that countries such as China, Poland and India have heavily invested in their infrastructure, creating reliable Internet connections and cheap phone lines, and dropped trade barriers, smaller competitors can enter.
"Individual entrepreneurs have figured out they can be global competitors now," Kennedy said. "Many of them are the men and women who created the offshoring opportunities for the huge corporations. A lot of them are now saying " to themselves, 'Why should I do this for them, when I can do this on my own?' he said.
That's how US/China Manufacturing Inc. was born last year. Juarez and his partner in Shanghai are former Ford Motor Co. employees who helped the automaker set up relationships with Chinese manufacturers.
Juarez said he was part of the purchasing team that went to China and negotiated the first deal where a Chinese-made part, an audio speaker, was installed in a U.S.-built vehicle.
"Our Ford experience was so invaluable" Juarez said. "It showed us the way to compete in a global, sophisticated way. I work out of my home, but really at this point it doesn't matter. Because we can guide our clients through the maze of China to save these U.S. firms money. It's our knowledge and connections that make us players," he said.
"Beyond the experience, what you really need is a reliable connection to the Web and e-mail, and we have that. Everyone has that now," Juarez said.
US/China Manufacturing can cut an auto supplier's cost by as much as 40 percent. It's also providing a way for these firms to survive, Juarez contends.
"It's not an option for these U.S. firms to ignore outsourcing. It's either do or die and we are trying to show these American firms a way to stay alive," Juarez said.
Juarez, like the leaders of the other firms, said he couldn't name specific clients due to confidentiality agreements.
Finding unique niche counts
Suthrum and Gabelinski are going after businesses not typically associated with outsourcing such as physicians and law firms.
Suthrum's NextServices has clients as small as one doctor and is pursuing groups of physicians as large as 20.
"We can save the physicians up to 50 percent in administrative costs, which gets passed on to the patient. I think everyone wants to cut health care costs," said Satish Malnik, chief executive officer of NextServices.
Galbenski's says he's adding depth to small law firms by linking them with legal workers in India and soon, Sri Lanka.
"We are basically giving (the law firms) more power and influence that they previously could not afford," he said. "We can research in the middle of a trial. We can get them that information for the next day in court."
Preparing to grow
Both NextServices and Contract Counsel have added full-time staff to their Michigan headquarters as they gear up their overseas connections and will likely add more local staff. And so it pains both companies when they get criticized for stealing jobs from Americans.
"You can't deny this revolution going on," Suthrum said in a recent phone interview from Mumbai, India
"It's the first time in history any person in any part of the world is able to access the same information at the same time.
"Michigan is a very beneficial place to do business. There is tremendous talent and international experience. I only want to contribute to the economy," Suthrum said.
"The view of whether this trend is good or bad, that simply depends on the filter or perspective you are coming from," he said. "I understand it can be very scary. But what is even scarier is that Michigan gets left behind as this amazing, exciting new way of doing business is being created."