Business, Outsourcing.
The hidden costs of outsourcing: beware and be wise - insight. IT departments have been early adaptors of outsourcing projects and services. Every day, more organizations are eagerly embracing the concept of offshore outsourcing to lower costs, increase efficiency and productivity, and enable employees to focus on the innovative, core endeavors that drive business forward.
Now manufacturers, original equipment manufacturers( OEM) , original design manufacturers( ODM) , independent software vendors( ISV) , system integrators( SI) , and value - added resellers( VAR) whose products rely on embedded software and hardware across countless industries are exploring the benefits of offshore outsourcing to stretch their R& D dollars. - unfortunately, outsourcing projects don' t always work that way. After all, lower wages and higher productivity is a winning concept that should result in significant cost savings and improve a company' s bottom line. And at the end of a project, no CTO of a company wants to total up the costs and discover that the projected savings are not there. Today' s R& D organizations, overwhelmed with projects and faced with shrinking time - to - market deadlines, are recognizing the business imperative to benefit from a global R& D strategy that includes offshore outsourcing. R& D productivity depends less on tool and process improvement and more on sufficient human capital.
But as the heart of the enterprise, the R& D department cannot afford to make costly outsourcing mistakes. - smart companies - aware that there may be hidden costs when outsourcing - recognize potential obstacles and take steps to circumvent them. The consequences to the enterprise are too grave. Cross - Cultural Communication Pitfalls. No one wants to hear that, but at any stage of a development project, it can mean that the target completion date slips. What we have here is a failure to communicate. With offshore outsourcing, miscommunication and cultural differences, even basic - "I just assumed that they understood that was one of the requirements" - misunderstandings can potentially undermine a project every step of the way.
An urban legend that still surfaces periodically claims that when President John Kennedy made his famous speech at the Berlin Wall1 and proclaimed, "Ich bin ein Berliner, " the literal translation meant" I am a jelly doughnut" instead of" I am a citizen of Berlin. " Although that was a bad joke about an incident that did not happen, sometimes meaning is, in reality lost in translation. - translation between languages can be tricky. One project manager was unhappy to get e - mails from the offshore team stating that they had" concerns. " However, the manager eventually learned that the offshore team wasn' t saying that the project manager' s directives wouldn' t work, but that they merely wanted clarification. For example, in some cultures questioning authority is frowned upon. Cultural differences can also impact a project in seemingly harmless ways. Even though the offshore team may have a better solution, they may not broach it and instead just follow the specs. When questions arise, one team may have to wait until the team on the other side of the world wakes up.
Time differences can cause a project to run into snags also. - when either engine is idling, it' s burning fuel and wasting time. It is important that an offshore vendor have personnel with a strong understanding of English and American culture in key positions to keep miscommunication to a minimum. Both contribute to rising costs. Milestone Missteps Raise Costs. Here' s an overview of the things to watch out for during the product development cycle. . Wasted time and missteps at any point of the product development cycle could result in creeping costs and missing the delivery date.
Strategic or crisis decision - making? - does your engineering department have the current resources to enable it to develop innovative new products or is it desperately rushing products out the door? Ideally, the decision to use outsourcing should be made as part of a company' s strategic vision to create a new business paradigm of increased innovation and productivity, while reducing costs. Is integrating licensed third - party or M& A technologies into existing products taxing existing resources? Too many companies wait until the water is rising before they call in extra help and then have to settle for the first plumber who will show up - not the best or the one most qualified. . When you have to call a plumber immediately because the pipe burst and the basement is flooding, be prepared to pay extra. Pick cost - effective outsourcing projects.
First, take a careful look at what projects your teams are tasked with and your current processes and priorities. - although management may recognize the potential cost savings through offshore outsourcing, not all developments projects make good candidates. Then: Focus your internal team on the innovative, core competency work that challenges them. Delegate projects that can be completed in a shorter time frame or that are non - critical as pilots to help you evaluate an outsourcer' s work. Group related projects or work that requires continuity to reduce the necessary ramp - up time and cost that the outsourcer will bill for. Commodity technology products are good candidates to be outsourced, although they may have special requirements. Outsourcers: One size does not fit all. If the projects require quick, and authoritative controls, direct, the outsourcer will need to draw from the company' s internal processes to ensure the work will still be controlled properly offshore. . Time and money are often spent evaluating and interviewing vendors that are not qualified to perform the specialized requirements of R& D embedded technology.
Would you ask your primary care physician to perform your heart transplant? - asking some hard questions up front can make the vendor selection process less costly. does the vendor have embedded systems expertise? The development skills needed for a typical IT department project and those for a R& D department that works with embedded systems are not the same. R& D product development is end market - driven and focuses on quality, feature sets, time to market, and cost of production. Question if the outsourcer has expertise in embedded Linux, digital signal processors( DSP) , FPGA, communication stack, ASIC, or mobile platforms and applications. An IT outsourcer' s expertise typically is with internal customer satisfaction and may not meet your expectations. Does the vendor apply U.
For example, some companies discovered they had to pay a" people premium" because the vendor used the service model commonly used to service Japanese and Korean markets. - s. project management practices? This common model calls for the Japanese or Korean designers to first complete the architectural frameworks, with all components and interfaces precisely defined. The companies had to put extra resources on the pre - sourcing process, and integration, project management, thus increasing costs and resources. Does the vendor have sufficient intellectual property safeguards in place? The company in China then implemented the individual components, which are then integrated into the system by the Japanese or Korean team. If something happens to your intellectual property, the cost can be astronomical.
For example, does the vendor have a bag check policy to ensure no copying devices enter or leave? - investigate what security measures protect the outside and inside premises. Development teams should work in separate areas with restricted access, with each client' s data stored on secure servers accessed only by authorized personnel and network traffic contained on a dedicated Ethernet network( LAN) . For transaction - type services, the vendor should provide a standard contract that is straightforward and risk free so your project can get started quickly. Not only should employees be thoroughly screened, but the business culture itself should revere and accept only the highest ethical standards. Does the vendor listen to your needs and respond with service contracts to meet them? For long - term programs, a contract tailored to your requirements is necesary.
Is there an option to transfer ownership at project completion, if you desire? . - some points to consider: is the arrangement flexible, with a reasonable exit clause? Hand - off Cost Headaches. If the project transition isn' t handled efficiently, costs escalate. There are costs associated with separating outsourced pieces from an organization. Some of the major points to consider and plan for include: Freeze and preserve projects before separating the pieces. Define the interface points to the segregated pieces. Designate someone to interface with the outsourcer. Define the process that feeds the outsourcing company with work requests and feedback( or else the offshore team sits idle) Transfer of technology( which can take time and patience) Identify internal resources and processes affected by the outsource change. Realign people and teams. Address potential employee dissatisfaction and objections. Reposition the business to use outsourcing as a business transformation agent. .
The offshore development process still requires ongoing monitoring of results and deliveries, as do daily, which incur costs, weekly, and face, and monthly reports - to - face meetings, and any emergency, cross team visits meetings. - product development cycle costs. To ensure inevitable costs don' t get out of hand, consider points like these: Do project management methodologies conform to best practices in the U. Is the reporting easy to understand? S. ? Does the vendor provide quantitative measurement to gauge the quality of service at any time during the development cycle? A 500 page document that no one reads is of no value. Is there full documentation on design, defects, implementation, performance, and operation instruction, installation?
Cryptic comments are a potential source of problems. How is QA testing conducted? - are source files compact and optimized codes documented clearly? Does it include proper benchmarking? Reap the Full Benefits of Offshore Outsourcing: Choose the Best Embedded Systems Vendor. At acceptance testing, you don' t want to discover the project has" quick and dirty code. " Bugs and rework costs add up quickly. There are many outsourcing vendors competing in the marketplace today.
To ensure that your company realizes the greatest return on an R& D outsourcing investment, it is critical that due diligence includes the specific requirements of delivering software and hardware specifically for the embedded systems environment. - however, the technology requirement of delivering embedded system products is a challenge most outsourcers cannot meet. While offshore engineering wages of$ 25 versus$ 90 per hour in the U. Many companies do not realize until too late that success realized through lower costs and greater productivity and efficiency depends on more than low hourly wages and technically competent personnel. S. are a persuasive bargain, wages are just a part of the equation. The majority of contributions to the cost of outsourcing are predictable.
To choose the outsourcing vendor that will best align with a company' s business goals, enterprises must weigh all of the costs of the total product development project and then make an informed decision. - some of them are readily apparent, while some are not. The Long Circle Advantage: Intelligent Collaboration and Cost Control. With our on - shore/ off - shore business model, our U. At Long Circle, we focus on embedded and distributed product development. S. team works closely with our U. The advantage?
S. clients on project definition and management, while our China Engineering Center of Excellence carries out the project. - our clients realize a significant cost advantage through offshore development, while retaining the benefits of collaboration, and control with, communication the development team. We want to become your partner. As a customer - centric company, Long Circle goes beyond satisfying basic service needs. We leverage our expertise to help streamline your business process and we organize and energize our people around this goal. By combining our customers' domain expertise with our engineering service excellence, the result is a whole that is greater than the parts.
We pride ourselves on our ability to scale up and down quickly, our low cost structure, our broad technical skill sets, and our total embrace of change. - about the author. Prior to founding Long Circle, Hong was the president and founder of MacaoDude, a consulting firm that counts among its clients Motorola, and various high, Nortel technology companies in the Boston 128 area. Hayden Hong, the founder and CEO of Long Circle, has over a decade of outsourcing and consulting experience. In 2005, Hong merged the two companies to provide U. His background includes managing U. S. companies with low - risk, convenient access to China' s engineering talent, and emerging markets, manufacturing industry.
S. - China offshore R& D projects for GE, as well as management positions at Broad Reach Communications, a GE partner. - to learn more about long circle, visit http: //www. longcircle. com. Hong received a MSEE degree from Purdue University and a BSEE degree from Northeastern University, graduated magna cum laude.
