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Ishoni, and the supposed dangers of outsourcing to India


ishoni.jpgRemember the backlash that began two years ago over outsourcing?

You know, the drum-beat of cautionary tales about how India is riddled with corruption, fails to crack down on intellectual property thievery and in general, gives U.S. venture capitalists a bad case of heartburn?

Well, we haven't done enough reporting to really comment on all of those claims. But we do want to update on a case we wrote about two years ago, that of Santa Clara's Ishoni Networks. Following several other reports about Ishoni's problems in India, we too joined in the telling of it -- of how a U.S. executive at Ishoni had made a surprise visit to India to find that several of Ishoni's engineers in India had fled to...

start a competing firm. And when, a few months after his supposed visit, we found a blue padlock hanging from the doors of a deserted Ishoni headquarters in Santa Clara, it seemed like a relevant tale of caution about outsourcing.

Here is our update in the Merc today (scroll down to second item). Basically, it turns out the story was not as clear cut as it seemed.

Satish Mugulavalli, one of the chief software architects in India for Ishoni, tells us he started Amplewave with other employees only after it was clear Ishoni was headed for bankruptcy.

Now, he tells us, Indian authorities have completed an investigation ``and completely cleared myself and my other colleagues of any violation.'' Meanwhile, the other side seems to have fallen silent.

UPDATE: We've removed a comment below which accused someone of fraud, and which used other personal slurs we were uncomfortable with. We accept fact-based comments, even when they are critical, but please do keep comments fact-based.

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From: Philips
Excerpt: SDKs availabledoes not manufacture relevant products itself, but imports or purchases such products from a third party manufac...
Tracked: August 2, 2006 5:57 AM


This type of fraud happens everywhere in the world. I think it's premature to attach India for it. How was this development firm found? How long were they around before hired? Seems like a diligence issues rather than an India issue. Our development firm in India is excellent. They are good because we got them the right way - through a friend whose farther owns a stake in the firm.

I'm happy to help anyone who needs a connection. Use the link associated with this post to drop me a line.

KM on October 28, 2005 11:05 AM
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Ishoni is an interesting story of mismanagement. Corporate investment is different from typical VC investment and has potential for multiple agendas. It appears that Philips tried to make an acquisition without paying the acquisition costs !. I think Satish & co got struck in a fight b/w the different investors. Unfortunate for them and hope they are successful in their new company.

ES on October 29, 2005 5:13 PM
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Pls do not generalize what happened at Ishoni to Outsourcing in general in India. Such things happen anywhere in the world and it is happens in every industry. What happened to Enron? Does that mean all executives running big businesses across the US are corrupt? No. These are exceptions and can happen anywhere.

FedoraRocks on November 17, 2005 10:20 PM
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Satish is telling the true story .As a person who is involved in this saga , i can vouch his claims.

- It was a clash between investors (Philips vs Other VC's)
- Philips don't want to pay much to buyout VC's
-Amin varis and few US exployees aligned with philips
- Most of the employees (including indians)where with VC's mainily because they are dealing with them for 5 years .
- When bankruptcy was imminent satish and indian employees broke away and started new company (VC's might have helped them for this)
- After that amin varis came to india and he continued running indian operations by few leftover employees.Local philips head of also came and give them lot of promises.Finally philips ditched them too. They sold the comapany to some investor groups,who closed it downed later

Nobody in the either side don't want to talk too much about it because both sides played dirty

- Philips don't want to pay much . Money was running out .With out other investors consent money won't come .So they want to lay off 80% of the people want to run the operations.

-VC's want more money .They tried to drive company into backruptcy so that after reorganization they will gain control.
Finally no one is talking about real reasons behind this clash .Real players were never came into limelight. Only small fishes get caught . I am very happy that satish and his company is doing well.

TM on December 16, 2005 3:20 AM
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