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INTRODUCTION
INTRODUCTION
Survey Demographics
17% 4% 43% 16% 22% 60% 52% 30% 9% 9%
13% 22%
Industrial Machinery Equipment Manufacturers Oil & Gas Equipment Manufacturers Consumer Electronics Rotating Equipment Manufacturers
Director/Head/ VPEngineering Director/Head Product Development and R & D Engineering Manager Others
OUTSOURCING STATISTICS
Outsourcing Statistics
It was observed that companies in the North American region were outsourcing more compared to the European companies. It was also observed that a larger percentage of mid-sized engineering companies (>$200 mn in revenue) were outsourcing engineering services and setting up captives engineering centers in emerging economies. Another interesting observation was about 30% of the companies surveyed ran their own engineering centers in emerging economies, but also outsourced engineering services to third party engineering service providers as a de-risking strategy and to build a global delivery model. A large percentage of these captive engineering centers were setup as engineering centers to support their manufacturing bases in emerging economies.
50%
50%
DRIVERS TO OUTSOURCE
Reasons for outsourcing
Flexible arrangement to handle sudden spikes of work Availability of skills 4.13
3.77
3.14
2.65
Contrary to popular belief, the primary driver for outsourcing does not seem to be cost. While companies do want to take advantage of outsourcing at a lower cost, the priority is to maintain flexibility and outsource noncore tasks and augment engineering skills to get products faster, better and cheaper to the market place. Some respondents even mentioned that there are some services that they outsource at a premium since this model allows them the flexibility to convert fixed costs into variable costs. The biggest deterrent to outsourcing seems to be worries with respect to IP concerns. The companies that have chosen to outsourcing have dealt this by choosing the right partners and selectively outsourcing non-core activities. In some cases, if the work content was very critical, the companies chose to take advantage of a global delivery model and executed it onsite, rather than offshoring it.
23%
23%
54%
India
China
Others
30%
10%
60%
CONCLUSION
Based on the survey analysis, it is clear that Engineering Services Outsourcing is a practice that is fast catching up with manufacturers. Almost all manufacturers are faced with typical engineering challenges of reducing budgets and pressures of faster, better and cheaper product development. With the availability of advanced communication technologies, global delivery of services has been made much easier, which is evident from the continuous growth of outsourcing of services from the manufacturing industry. Most small and mid-market manufacturing companies are also talking about outsourcing and it is no longer a service accessible only by the large companies. While outsourcing presents a huge opportunity beyond doubt, it also comes with its share of challenges such as IP security and communication. The more established service providers have clearly defined processes and systems to handle these and that is what manufacturing companies are looking for. The expectation is that the service providers will lead them into a smooth outsourcing relationship through a process based approach. Most manufacturers acknowledge that their outsourcing relationships have been successful because they believed that outsourcing is a long-term strategy for their organizations and have taken the right steps to ensure that these relationships grow and prosper. The following are some criteria that stand out for evaluating suitable engineering outsourcing service providers among others. 1. Availability of customizable engagement models with scalability to offer flexibility to manage sudden spikes 2. Availability of a global delivery model for better communication and ease of operation 3. Access to large pool of appropriate skills 4. A process driven approach to outsourcing 5. The ability to drive SLA based engagements
About BWIR Barry-Wehmiller International Resources (BWIR) is part of the consulting platform of the $ 1.2 billion Barry-Wehmiller Companies, Inc., a market leader in packaging, paper and paperconverting capital equipment manufacturing, headquartered in St. Louis, Missouri with global operations. BWIR brings the best of both worlds - the dependability of a global billion dollar company with the benefits of distributed operations. BWIR has been recognized as a pioneer in outsourcing with a distributed global network of talent and resources. ISO 9001:2008 certified, BWIR has validated systems and processes in place to deliver superior services to our customers.
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