To Outsource or Not to Outsource—That's the Question

By

Barry Braunstein

September 6, 2013

Companies sometimes resort to outsourcing as a last-choice path, citing a host of reasons from loss of control of IP, to higher costs, and a host of other reasons. Having worked with firms that do development in-house in addition to my experience with engineering services firms, I believe the answer is “it depends”. 

What to look for

A competent, experienced services firm has seen and worked on hundreds of products, in a wide range of industries and applications. That broad range of experience provides a foundation for generating concepts that are “outside the box” that can help solve particularly challenging design issues. I’ve sat in on many brainstorming sessions at our firm where we bring in a number of our senior engineers and directors to focus on a particular issue. The results are amazing in terms of the creativity and expertise that are brought to the table. The results of the brainstorming sessions working with the client and the ensuing upfront engineering analysis and simulations generate the concepts required to develop working prototypes.

Services firms also bring specific expertise in areas that may not be as familiar to clients. Take for example a client that has been building products using sheet metal who now wants to incorporate plastic. This new product direction requires a whole different skill set and experience level for development. The development team needs to address issues associated with plastics design, as well as new suppliers for both prototyping and manufacturing. Trying to learn to design with new materials in the middle of a new project can increase risk significantly if you haven’t been there/done that.

What to demand

Services firms that offer fixed price contracts are incentivized to get the job done quickly, on time (or earlier), within budget, and generally have rigorous processes to insure that schedules are met, and that risks are mitigated. This means that costs are known and, to a degree, capped vs. runaway costs due to the engineering schedule that continually slips.

With respect to IP, many services firms retain no ownership in the designs they generate for clients—the clients own 100% of what is developed. But each client benefits from the knowledge/experience gained by the services firm for each engagement. 

Most engagements I’ve been involved with utilize an outside firm as a member of the development team on a project—the right firm works alongside engineers at a client company to jointly develop a product. Companies that do so take a hard look at what is their real core competency—be it software, electronics, their own services, ecosystem, etc., and then bring in experts in those areas which are not core to fill in the gaps. These core competencies can change over time and from project to project—the key is identifying them in advance, and bringing in the experts for the other areas as early as possible in the program.

Once you’ve decided to seek help from the outside, you’re now faced with the task of trying to figure out how to select a firm, and then once selected, how do you establish a good process/working relationship to insure mutual success—we’ll cover those topics in a future blog post.

What are your thoughts? 

What are your thoughts/experiences around outsourcing? What works and what hasn’t worked, and why?

About the author

Barry is responsible for Acorn’s sales and business development activities in the eastern United States.