The five commandments of outsourcing

Over the years, the meaning of the term ¡§outsourcing¡¨ has undergone a sea-change. What started off as the shifting of manufacturing goods to countries providing cheap labor during the Industrial Revolution has taken on a new connotation in today¡¦s scenario. Outsourcing has driven today¡¦s management gurus to retrofit strategies for growth, finance and market demand. Outsourcing reduces burden from the mainstream execution and allows companies to focus on the right issues with the right priorities. High-tech sector has a risk involved in project/products when it is being executed in-house or outsourced. This risk factor becomes more tangible when outsourced. This article attempts to shed light on five discrepancies associated with outsourcing in the electronics design services sector. The article is based on results from actual outsourcing ventures. It will provide a thorough understanding on the pros and cons of outsourcing to those planning to outsource or have failed in outsourcing.

1. Outsource for quality, not for ¡¥labor arbitrage¡¦

Generally, outsourcing/multi-sourcing is implemented to accrue the financial benefit of buying a comparable service and exploiting the difference in pricing. This may hold true as long as the engagement is for customer support tasks (call centers and BPO). In case of electronics design services like chip/ASIC design and verification or product realization services, there are two more dimensions to consider before taking the leap: technology and time-to-market

Nowadays, outsourcing companies have specialized in niche skills thus making them an attractive avenue to invest in for your business. The quality of work is generally superior and turnaround times are shrinking.

2. Reap profits by monitoring people and processes, not tasks and results

Most outsourcing manager¡¦s accord high importance to tasks/objectives defined and results derived. However, one needs to understand that one is dealing with people and processes from different parts of the world. Be it domestic help or daycare or banking, all these outsourced tasks are challenging as they deal with people.

In order to ensure that the outsourced projects produce the right results, choose the right people for the right job. Trust the work force and constantly monitor the processes being followed. A good process addresses all flaws introduced through human error. Alternately, people compensate for process¡¦s ¡§passiveness¡¨.

3. Maintain fair communication habits from beginning

The world lacks ¡§perfect communicators¡¨. Imperfect communications are fatal in outsourcing business wherein most of the work is dictated and remotely monitored. When faced with a communication problem, adopt a fair, two-sided approach. Both the customer and vendor companies may be responsible in a communication breakdown. It makes sense to discuss the problem and look for bilateral solutions rather than waste time and productivity by prolonging the confusions.

A solution to communication:

Step 1: Identify the right people in the hierarchy and only communicate with them. Avoid talking to people not concerned with the engagement. Cultural and social diversity strongly influence communication styles and etiquettes and may create differences between engaging parties across the globe. In order to avoid mistrust, both parties must try adapting and generating a rapport. If you have done step 1, 90 percent of your problems are solved.

Step 2: Always use right documentation flow and templates to convey important subjects like goals, expectation, measurements, etc. Liberally use tables, charts, data analysis tools to proliferate these messages, for instance, capturing minutes of the meeting with task name, task owner and timelines of task completion.

4. Exploit and employ technology (VPN, infrastructure and security)

Technology is the nerve of outsourcing. It is the channel of communication and data transfer. A reliable, speedy and secure technology framework is inevitable for successful project execution. Vendor companies must go the extra mile in ensuring a strong and advanced art communication infrastructure. Virtual private networks (VPN) must be adopted for ensuring data security. Below table lists the technology approach suggestions based on ongoing projects.

5. Focus on deliverables

Outsourcing is primarily done to:

„X Save time

„X Save cost

„X Augment resources

„X Adopt advanced technology faster

An outsourcer ideally aims at increasing his management/task bandwidth by outsourcing. That said, it makes sense to focus on expectation and results rather than managing daily tasks or working styles of the vendor. Doing micro-level management from a remote distance is not called for. A solution to mange remotely is to appoint a program manager at the remote site and convey one¡¦s expectations to this point contact.

In summary, working in ¡§flat¡¨ world may be exciting, but it requires the right approach. One may yield rich benefits and focus on core competencies by outsourcing, keeping in mind above mentioned factors.

About the author

Nilesh Ranpura is the project manager in the chip/ASIC division of eInfochips. He has 10+ years of experience in VLSI design cycle, methodology and verification in the areas of bus interfaces and networking devices. He has participated on various projects for verification IP architecture definition and complete product development. He can be reached at nilesh.ranpura@einfochips.com.

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Table 1