subcontract or keep in-house: the 5 steps to help you decide (business case inside)
DESCRIPTION
CTOs, CIOs, R&D and Engineering professionals alike often struggle with the methodology to adopt when deciding which processes to keep in-house vs. what could (or should) be subcontracted. This short presentation will give you some guidance on the steps to take as well as a real example we have had between a French client and one of our engineering teams in Vietnam. As usual in those Eurosia Insights, we do not pretend answering it all (the presentations are meant to be walked through in less than 30 secs ;)) but give a snapshot and some food for thoughts. For more or if you want to exchange on the topic, feel free to comment below or drop me a line: [email protected] Enjoy the reading! CedricTRANSCRIPT
SUBCONTRACT OR
KEEP IN-‐HOUSE?
THE 5 STEPS TO HELP YOU DECIDE
Eurosia™ Engineering Insight #5
BUSINESS CASE INSIDE
HOW TO DECIDE WHICH R&D FUNCTIONS TO KEEP VS. OUTSOURCE?
“Most executives -ind it tough to distinguish among core processes that they must control, critical processes that they might buy from best-‐in-‐class vendors, and
commodity processes that they can outsource.” Harvard Business Review, “Getting Offshoring Right,” December 2005
STEP #1: ASSESS TASK’S STRATEGIC IMPORTANCE
• Is the task important to your company’s competitive advantage?
• Does the task make your business unique?
STEP #2: IDENTIFY CONTRIBUTION TO OPERATIONAL PERFORMANCE • How important is the task to your company’s day-‐to-‐day operations? • How does its performance affect overall operations?
High FORM A STRATEGIC ALLIANCE KEEP IN-‐HOUSE
Low ELIMINATE SUBCONTRACT / OUTSOURCE
Low High
STEP 2: CONTRIBUTION TO OPERATIONAL PERFORMANCE
STEP 1: STRATEGIC IMPORTANCE
TIP: USE A SIMPLE DECISION MATRIX
STEP #3: ASSESS RISKS AND REWARDS
“The most prominent risk is the risk of losing intellectual capital – both hard intellectual property and know-‐how.” Booz & Company, Baker & McKenzie
“White Paper on Engineering Design Services Outsourcing,” September 2008
STEP #4: EVALUATE TRANSFERABILITY
“Processes that need extensive and real-‐time interactions with company, its engineers or other parts of the company’s organization must be weeded out
since these processes are not good candidates for outsourcing.” Booz & Company, Baker & McKenzie
STEP #5: ANALYZE MATURITY
“More often than not, outsourcing of an immature process leads to disappointing results.” Booz & Company, Baker & McKenzie
TIP: EVALUATE PROCESS RISK AND MATURITY LEVEL (STEP 3 & STEP 5)
ILLUSTRATION: ENGINEERING FUNCTIONS TYPICALLY OUTSOURCED
ü CAD drawing ü Process sheets ü Competitive benchmarking ü Technical documentation and translations
ü Engineering change management ü Homologation & regulatory affairs
ü Conversions (Catia V4 to V5) ü Database management
These “…are important for successful operational performance, but are not
strategically important. Such tasks could safely be outsourced. They're simply not worth spending in-‐house time managing.”
Booz & Company, Baker & McKenzie
CASE: SOLIDWORKS DRAFTING FOR HEXAGON METROLOGY (FRANCE-‐VIETNAM) Industries: Precision Measuring Technologies Pro]ile: With 12,000 employees worldwide, Hexagon is a leading global provider of design, measurement and visualization technologies in the mechanical and industrial engineering sector. Hexagon’s brands include: Leica Geosystems, Intergraph, Leitz, Romer… Location: Stockholm, Sweden Business Challenge: Hexagon (Romer division) required the fast delivery of 2D CAD drawings from their 3D models, at an affordable price for new components of industrial microscopes. How Eurosia Helped: One of our dedicated team in Ho Chi Minh City (Vietnam) of Solidworks drafters delivered the 2Ds enabling the client to complete the projetc on time and on an aggressive budget.
E U R O P E A N S E R V I C E . A S I A N P R I C E
TM
IN CONCLUSION, keep in-‐house tasks that demonstrate: -‐ High strategic importance -‐ High contribution to operational performance
-‐ Low process maturity -‐ High implementation risk
Subcontract tasks that correspond to: -‐ Low strategic importance -‐ Medium to high contribution to operational performance
-‐ Good process maturity -‐ Limited implementation risk
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This will be addressed in our next Eurosia™ Engineering Insight:
KEY CRITERIA TO SUCCESSFULLY SELECT A PARTNER IN ASIA
