Outsourcing Engineering Services – Pros and Cons

The outsourcing of engineering services has become more prevalent over the last decade than ever before, and this appears to be true across a wide swath of engineering and manufacturing organizations.  One of the key rationales behind this trend has been the perceived cost savings to be had by outsourcing rather than by maintaining an in-house staff.

Some surveys point to the more frequent use of outsourcing in the United States than in European countries, although this trend is showing signs of changing, with European countries picking up on the favorable aspects of outsourcing.  Generally speaking, the firms and organizations that are most likely to outsource are mid-sized engineering and manufacturing companies. This stands to reason, as mid-sized firms usually feel more pressure to be priced competitively and more efficiently than either very large or very small companies do. This is because larger companies already have efficiencies of size built-in that help with global competition, while smaller companies are usually competing on a more regional basis, with other similarly priced and similarly run small businesses.

Pros of Outsourcing Engineering Services

Interestingly, it is often the case that the primary driver for outsourcing does not cost. While it is true that outsourcing generally has the advantage of being lower cost than an in-house staff performing the same tasks, the much bigger advantage is the ability to maintain flexibility through the outsourcing of non-core tasks as well as by augmenting engineering skills to get products to market faster, better and more cheaply. Additionally, outsourcing enables firms to transform some of the fixed costs associated with in-house staff to the variable costs associated with temporary or seasonal staff.

Cons of Outsourcing Engineering Services

In general, the biggest concerns with outsourcing seem to be with respect to communication, privacy, and trade secrets, and what is sometimes perceived by management as a “lack of oversight and control.” The companies that have carefully chosen both their outsourcing partners and the activities that have been outsourced have

While many companies may be willing to work with off-shore companies, when the work content is critical, many U.S. based companies prefer a U.S.-based partner, with one reason for this preference being cited as the proximity of the outsource to the manufacturing base, and the other being the required use of a U.S. based firm for any parts or items that may be used in military or other sensitive manufacturing operations. There are more reported positive outcomes than those who have gone with a “lowest price” outsourcing strategy, although the availability of the required skill set remains the primary reason for choosing a particular partner.

Conclusions

No matter how you look at it, in today’s business economy, outsourcing is often considered a viable option to doing work in-house. For instance, when you have limited time, money, or personnel resources to get the job done, outsourcing makes sense.  Or, when an engineering project detracts from the focus of your core business.  Another time for outsourcing is when you have a critical project that needs specialized skills that aren’t available within your organization. Finally, when you need to be the first and best in the market in order to gain a competitive edge, go for it with the help of outsourcing.

Remember that with technology changing as quickly as it does today, and with ever more persistent eyes on the bottom line, your small or medium-sized business may reap big benefits by outsourcing some, or even all of your engineering requirements. This is because, generally speaking, outsourcing firms that specialize in engineering services have the latest technology as well as a knowledgeable staff who can do the job quickly, efficiently, and cost-effectively.

Outsourcing non-core tasks such as CAD conversion, CAD scanning, or CAD drafting that are not central to your corporate mission, enables you to keep your focus on the money-making aspects of your organization. Outsourcing can often give you a technical and functional edge on the competition, without capital, IT, or personal investment.  Outsourcing often allows for faster work completion, lower cost, and a better-managed company. Many experts recommend outsourcing as a requirement for successful companies in today’s business environment.

Finally, we recommend project-based engagement models. This enables your company to derive the benefit of a long-term relationship and knowledge retention because the engineering outsources company can establish a dedicated team that will be assigned to your project for the duration of the project. This enables better accountability to maximize output. Generally, these arrangements will be billed based on hours allocated for task completion.

It appears that Engineering Services Outsourcing is a practice that is here to stay as manufacturers continue to face global engineering challenges, including tight budgets and requirements for faster, better, more cost-effective product development. Look for these criteria in your next engineering outsource partner:

1. Customizable and scalable engagement agreements;
2. Global delivery model
3. Access to experienced personnel with the skills you need
4. Satisfied customer referrals.