Offshore labor drove firm to brink

Matt Marshall in the San Jose Mercury News reports "the over-the-cliff tale of Ishoni Networks," which last month filed for bankruptcy, a victim of moving to India too quickly. Matt writes,

Backed with more than $68 million from venture capitalists from the United States and elsewhere, Ishoni once was branded a rising star. It was developing a cutting-edge chip to allow voice and data services over a single Internet connection -- and was valued as high as $200 million and employed 170 people.

Seeking to cut expenses, Ishoni created a subsidiary in Bangalore, India, and hired software engineers there on the cheap.

Weirdly, though, the subsidiary stopped returning phone calls from Ishoni's Santa Clara-based chief operating officer, Amin Varis, early last year.

Varis made a surprise visit to India in May and learned a big lesson about how much damage 12,000 miles of distance -- even when connected by Internet and phone lines -- can do.

Indian executives, he found, had forced their engineers to join a rival firm, Ample Wave Communications, apparently in a scam to scoop up Ishoni's intellectual assets and then bankrupt it.

Read the whole story.

Update, Jan 24.: More details on the Ishoni Networks debacle, along with a balanced view of doing business in India, can be found in this article from Venture Capital Journal.