Insight

Everybody’s doing it. Industry leaders like General Electric and Microsoft — as well as the start up companies that are looking forward to challenging them — are outsourcing offshore. After all, every company’s goal is a lean, agile research and development department that brings innovative products to market rapidly and profitably. As a business plan, outsourcing enables companies to leverage lower labor costs, including wages and health care, and focus on core competencies. Nevertheless, a “they’re doing it so I will, too” decision to outsource is not a good enough reason. Outsourcing can be a powerful, profitable strategy. However, one of the challenges of outsourcing is identifying when outsourcing embedded product research and development projects will deliver the greatest return on your investment.

Long Circle recommends that you heed these tell-tale signs that let you know: It’s time to put outsourcing to work for your company.

Too many projects stuck in the pipeline?

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Insight

Intellectual property security breaches are making headline news with alarming frequency and creating headaches for consumers, businesses, governments and institutions everywhere. The specter of identity and intellectual property theft hangs over everyone’s head, brought home by incidents like the following:

► Two 200-MB files containing incomplete portions of the source code for Windows 2000 and Windows NT operating systems were stolen and posted to the Internet. An individual downloaded the code and offered it for sale. An undercover FBI agent bought the code and the seller was indicted under the U.S. Economic Espionage Act. 1 ► The over $20 billion video game industry shook when news came out about the hacking of the computer network and Internet-leaking of the source code at Valve Software, the maker of the mega-popular Half-Life 2, a first-person shooter (FPS) video game. The financial ramifications of source code already licensed to developers, but now available for free on black-market sites, is something no executive wants to encounter. 2

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Insight

The reality of business is that companies must do more with less to stay competitive and continually search out new ways to improve products and time-to-market to lead their markets. Top companies have long found it makes good business sense to outsource a business function — from making parts to delivering payroll — to wherever it can be done the best. With the Telecommunications Act of 1996 came the wave of fiber-optic cable and a new capability that truly enabled the IT departments of U.S. companies to plug into offshore outsourcing firms and take advantage of lower wages and cost efficiencies.

Many of these same companies have R&D departments developing embedded software and hardware and now the CTOs want to leverage offshore vendors to not only reap the same benefits of lower wages and expanded productivity, but bring better products to market sooner. Although the potential benefits are there, companies must consider two things before offshoring embedded R&D technology. First, the requirements of an R&D department that does embedded technology development for the marketplace and those of an IT department that serves employees are not the same. Second, a country’s human capital may be good quality for IT projects, but may not be the best choice to meet the higher skill levels required for R&D embedded technology.

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Insight

Trade exchange between different cultures and countries has long yielded rich rewards for those who recognize the potential.

After all, as far back as the 1st century BC, merchants and caravans followed the Silk Road – the overland trade route from northern China to the Western World – and brought precious silks, tea and other resources from China to the rest of the world. Not only did linking different countries and cultures prove profitable, but new and greater products and ideas flowed between the countries.

The Silk Road of the 21st century is technology driven. This trade exchange, built on fiber-optic cable, sprang from the Telecommunications Act of 1996. Now, it is the R&D departments of companies from the United States and other countries that benefit from the resources and opportunity found in China.

Today’s China, the fastest growing country in the world, offers the: • Biggest engineering talent pool • Biggest emerging market • World’s number one manufacturing industry

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Insight

Is outsourcing the new Holy Grail for R&D organizations? The IT departments in the enterprise went first and discovered lower costs and improved efficiencies by outsourcing call centers and back office projects offshore. Now the R&D development department in the same enterprise wants to follow the same outsourcing route and realize comparable results. It’s true that outsourcing can yield significant benefits. However, as many early adopters of outsourcing learned, there are some important signs a smart company takes note of before venturing into outsourcing. Long Circle recommends keeping the following points in mind to take you to your goals.

Outsourcing is a process that must be managed

If a company assumes that outsourcing means that they can toss their R&D projects over the fence (or in the case of offshore outsourcing, across the ocean) and extraordinary results will follow, they’re about to have a learning experience. Outsourcing is a process and processes must be managed to reap the best results.

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The Hidden Costs of Outsourcing: Beware and Be Wise

Insight

Every day, more organizations are eagerly embracing the concept of offshore outsourcing to lower costs, increase efficiency and productivity, and enable employees to focus on the innovative, core endeavors that drive business forward.

IT departments have been early adaptors of outsourcing projects and services. Now manufacturers, original equipment manufacturers (OEM), original design manufacturers (ODM), independent software vendors (ISV), system integrators (SI), and value-added resellers (VAR) whose products rely on embedded software and hardware across countless industries are exploring the benefits of offshore outsourcing to stretch their R&D dollars.

After all, lower wages and higher productivity is a winning concept that should result in significant cost savings and improve a company’s bottom line. Unfortunately, outsourcing projects don’t always work that way. And at the end of a project, no CTO of a company wants to total up the

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