Is It Time To Outsource? Tell-tale Signs

Insight

Everybody’s doing it. Industry leaders like General Electric and Microsoft — as well as the start up companies that are looking forward to challenging them — are outsourcing offshore. After all, every company’s goal is a lean, agile research and development department that brings innovative products to market rapidly and profitably. As a business plan, outsourcing enables companies to leverage lower labor costs, including wages and health care, and focus on core competencies. Nevertheless, a “they’re doing it so I will, too” decision to outsource is not a good enough reason. Outsourcing can be a powerful, profitable strategy. However, one of the challenges of outsourcing is identifying when outsourcing embedded product research and development projects will deliver the greatest return on your investment.

Long Circle recommends that you heed these tell-tale signs that let you know: It’s time to put outsourcing to work for your company.

Too many projects stuck in the pipeline?

Is your R&D organization under pressure because your sales team is promising your customers products that are stuck in your development pipeline? Leading companies keep innovative products flowing to market. If you’ve got too many projects languishing and you’re facing some of these obstacles, it‘s time to expand your pipeline and your profitability by outsourcing.

• High-value, full-scale development work lags due to lack of resources
• Not generating raw ideas for new products; innovation suffering
• Too busy handling operations; losing focus on your core business
• When you have got to be the first into the market to gain the edge
• A mission-critical project needs your team’s time and energy
• When only 10 out of 20 projects slated for the year get the head count
• A backlog of development work is never touched

Put in the dream team

“There are never enough good people” is especially true in the research and development arm of an organization. Do you have a project that calls for specialized skills which aren't available internally? Perhaps budget constraints prevent you from taking on more employees. Or, maybe your R&D production goes in cycles; sometimes you need more people, sometimes less, and you want to avoid downsizing. Outsourcing lets you keep your development team stable and focused.
If you need a dream team but think it’s out of your reach, outsourcing can make it a reality.

Prioritize and delegate

Where are your priorities? Some people would rather play golf on the weekends and let a lawn service or the teenager down the street cut the grass. In product research and development, there are times when it’s more productive and profitable to let the right outsourcing firm handle some of these projects.

• Maintenance-level work that you want to offload
• Too many legacy products out in the field to be maintained
• A one-time project
• Projects of low value
• Non-core work

Dollars and sense

Experts estimate savings realized in wages by outsourcing can be anywhere from 50 to 80 percent. Outsourcing enables your company to reduce costs when any of these scenarios occur:

• Competitor’s price is lower than yours and you can’t drive down your cost
• A new M & A requires additional resources to handle the integration
• Profit margin is diminishing and shows no signs of improving
• Uncertainty regarding capacity expansion
• Potential for downsizing exists

Start ups stalling

Is your business experiencing growing pains? If your company is a startup, you may have the latest and greatest product, but do you have enough time, money, and people resources to deliver your product to the market before your competitors?

When your new business is growing or just leaving the gate, you can’t afford to lag behind the competition. Consequently, some venture capitalists maximize their investment dollars by requiring a startup business to have an outsourcing strategy.

Outsourcing is a cost-effective way to make your product research and development scalable and more competitive.


China strategy

With over 1.3 billion people, China is the most populous country on earth and evolving rapidly. China is now a member of the World Trade Organization (WTO) and the host of the 2008 Summer Olympic Games. Nowadays, “Made in China” means much more than consumer electronics. China is the emerging market of the 21 century and companies that realize how important this market is for their long term business success are scrambling for ways to gain a foothold.

Because of lower wages and a superior talent pool of engineering graduates, research and development outsourcing is a key technology enterprise that is expanding in China. For Fortune 100 companies on down the value chain, offshoring research and development in China is not only a way to increase profit margins, but a way to enter the promising China market and ensure it becomes part of their global strategy.


Conclusion

From pipeline to patents, companies must find ways to speed up their development cycle and get products to market quicker than the competition – or face losing market share.

If your company is facing a time, money, and human resource crunch that’s impacting your embedded product research and development organization, it’s time to take a look at outsourcing.

About the Author

Hayden Hong, the founder and CEO of Long Circle, has over a decade of outsourcing and consulting experience. Prior to founding Long Circle, Hong was the president and founder of MacaoDude, a consulting firm that counts among its clients Motorola, Nortel, and various high technology companies in the Boston 128 area. In 2005, Hong merged the two companies to provide U.S. companies with low-risk, convenient access to China’s engineering talent, manufacturing industry, and emerging markets. His background includes managing U.S.–China offshore R&D projects for GE, as well as management positions at Broad Reach Communications, a GE partner. Hong received a MSEE degree from Purdue University and a BSEE degree from Northeastern University, graduated magna cum laude.

About Long Circle

Long Circle provides outsourced engineering services to companies whose products and services rely on embedded software and hardware technology. Long Circle and the Long Circle China Center of Excellence enables U.S. companies to reduce costs, increase engineering bandwidth, and broaden market reach by providing low-risk, strategic access to China’s engineering talent, manufacturing industry, and emerging markets. To learn more about Long Circle, visit http://www.longcircle.com.