Offsourcing Your Employees: Transferring Engineers to the Existing Service Providers for Better Integration
October 9, 2009 by Bierce & Kenerson, P.C.
Just when your manufacturing company management thought your engineering employees were ready to deliver key technologies for launching new products, you discover that they need access to even more resources than you can afford. So what do you do? You “offsource” your employees.
Offsourcing.
Offsourcing (a term we invented) refers to the restructuring of a supply chain where one company relies on its supplier for functions that were previously performed in-house. What makes “offsourcing” so powerful is that the supply chain is tightened by the improved functioning of the employees in the new environment.
Offsourcing vs. Outsourcing.
Offsourcing differs from outsourcing because the service provider/supplier already has a supplier-customer relationship with the customer, and the transaction merely shifts a business function up the supply chain for increased efficiencies and economies of scale. Indeed, effectively designed, the “customer” can ensure that its capital investment in its employees can be applied to resolve problems, and create value, for the customer.
Offsourcing vs. Assembly Insourcing.
Offsourcing takes the “buy vs. build” decision to a new level.
Example.
High-end cell phones perform many functions that require careful integration of different technologies. Increasingly, such sophisticated phones are being used as computers, Internet access devices, pagers, software operating systems and e-mail devices.
In February 2002, Alcatel S.A announced its decision to transfer its cellphone hardware engineers to STMicroelectronics NV, one of its semiconductor suppliers. Such offsourcing allows Alcatel to concentrate on software, styling and customer interaction.
Benefits of Offsourcing.
By concentrating the right minds in the right environment, offsourcing is believed to cut cellphone makers’ research and development costs. It also frees the customer Alcatel to be closer to its customers, focusing on aligning the new product features with the customers’ emerging needs and desires. Also, it allows the cellphone maker to buy more finished components and to assemble them into a proprietary product.
Risks of Offsourcing.
In making the decision to “offsource” a department, the company should carefully study the competitive impact. If its hardware engineers are difficult to replace, then the transfer could make them available to service Alcatel’s competitors. This risk can be managed with effective planning techniques.