7 challenges you will face when buying engineering services abroad (and how you can manage them)
DESCRIPTION
CTOs, R&D, Engineering managers and alike face 7 main Challenges when sub-contracting to partners in low-cost countries. Our second Eurosia Engineering Insight gives an overview of these challenges as well as first solution(s) Engineering and R&D executives can take to manage those challenges and get the most of their outsourcing efforts in detail engineering, drafting, modeling, CAD, CAM, CAE... 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 to CTOs, R&D Directors and Managers, especially the ones of small to mid-sized companies. Do you want to share your own experience? Feel free to do it here on Slideshare, by email ([email protected]) or on www.eurosia.eu/blog.TRANSCRIPT
7 CHALLENGES YOU WILL FACE WHEN BUYING
ENGINEERING SERVICES ABROAD
(and how You can manage them)
Eurosia™ Engineering Insight #2
CHALLENGE #1: UNKNOWN ENVIRONMENT
Eurosia™ Engineering Insight #2
You believe far-‐away Asia is unstable?
So, what do you think of France…
… Belgium …
… the Netherlands …
… or even Germany?
SOLUTION: wherever you go, Iind a partner with the countries coverage and knowledge you lack
CHALLENGE #2: UNMET EXPECTATIONS
Eurosia™ Engineering Insight #2
• Invalid assumptions
• Unarticulated expectations
• Incomplete and ill though out speciIication and contract
• Loss of control
• Inadequate service
• Out-‐of-‐scope charges
• Constant renegotiations and disputes • Full or partial termination
Source: Cullen, Seddon and Willcocks (2005)
SOLUTION: invest time to communicate and align with your partner upfront and along the way
CHALLENGE #3: LOW QUALITY
PROCESSES
MEASURES
PEOPLE
TOOLS
Use quantitative metrics (Key Performance Indicators) to measure the quality of the output delivered by your partner.
Formalize your processes and tasks. Document them so they can become the base of your requirements and RFP and can be communicated to your partner. This is usually a difIicult task for small and mid-‐sized companies. Solutions exist.
Get to know the people you work with. Ensure that your team has the opportunity to get to know their counterparts at the partner’s location(s); this will increase engagement and performance on both sides.
Use monitoring and management software, and other tools to keep track of your and your partner’s progress
QUALITY
Enable and encourage (even though it means investing) continuous employee development & trainings both in Europe and abroad .
Source: Eurosia™ team experience; Aron, R., Singh, J. (2005); “Getting Offshoring Right” (Harvard Business Review)
SOLUTION: deIine your requirements & standards well, then measure, reIine, and keep controlling
CHALLENGE #4: INTELLECTUAL PROPERTY (IP)
Eurosia™ Engineering Insight #2
….and refer to our speciIic upcoming Eurosia™ Engineering Insight: “WHICH ACTIVITIES TO OUTSOURCE, WHICH ONES TO KEEP INTERNALLY”
SOLUTION: keep your core Research & Development internally in Europe…
CHALLENGE #5: FEELING OF LOSING CONTROL
SOLUTION: shift from doing & controlling tasks to measuring & controlling partner’s output
… and keep a plan B in your back pocket to keep some smart pressure on your partner
CHALLENGE #6: HIDDEN COSTS
Eurosia™ Engineering Insight #2
Low Hourly Rates
Travel Costs
Risk Management Cost
Productivity Losses (at beginning)
Cost of Transition
Cost of Management Overhead
There are hidden costs to be aware of and account for…
… still, 90% of outsourcing initiatives are deemed highly efIicient at reducing operating costs
Source: HfS Research 2013, n= 399 Buy-‐side Enterprises
CHALLENGE #7: RESISTANCE TO CHANGE
Eurosia™ Engineering Insight #2
Guess who is the only person who likes change…
… a wet baby
Resistance to change from team members is one of the greatest challenges you may face…
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This topic will be addressed in our next Eurosia™ Engineering Insight:
SUBCONTRACTING ENGINEERING SERVICES: HOW DO SUCCESSFUL MANAGERS DO?