Edge Trends September 25, 2006, Sorrento Mesa.
Edge Trends presented a panel discussion on off-shoring, a nuts and bolts discussion. The panelists are listed at the end of the article.
What are the pressures that drive a company to outsource?
• Cost reduction
• Availability of expertise;
• Proximity to new customers;
• Strategic alliances (even with competitors) in emerging markets;
• Avoidance of environmental regulations;
• Ability to create a new market;
• Simply just can’t find engineers in the states is a common observation of all the panelists.
• Calloway Golf views offshoring as an essential speed to market issue and offshoring is a great advantage for speed to market—tooling seems to have a great advantage in offshore usage.
How do you pick a country to offshore into?
• Looking for a location where investment can be sustained (political stability, regulation transparency)
• Host country government incentives;
• Synergies with other expertises/companies in the host country;
What are the non technology elements in choosing an offshore country?
• Familiarity with local laws, customs;
• Know the local government tax structure (not just the national government’s)
• Choose local experts because they are critical to success far beyond the national experts.
What about protecting IP and complying to ITAR (International Traffic in Arms Regulations)?
• ITAR is complex and difficult to comply;
• The markets where the technology rapidly changes, piracy protections are difficult, but where long term sustaining is important, then you need much caution in what is outsourced.
• China recently has taken strong civil and criminal steps because they want the foreign investment.
What pre-integration step should you take before making the offshore move?
• The home company needs to be invested and responsible for the offshore company’s success.
• Regular in-person visits are important just to understand the day to day problems;
• Travel for the offshore company’s individuals is not easy—visas driving, etc. Be sensitive to each individuals situation;
• Transition the design and manufacturing at the appropriate level—don’t dump a complex design on a new foreign engineers; treat them as if they are your own staff;
• Buffer your inventory so the offshore can have slips with no major effects to the main company;
• The offshore company’s success measure has to be very clearly defined;
• Set expectations for the offshore company at the same level as the home country’s.
• You must structure your communications so that engineers and key people in the home company are readily available for regular sessions with the remote company.
How far do you integrate the offshore remote company into the home company processes (ECO, dispute resolution, MRP)?
• Hierarchical cultures seem to take a long time to learn;
• Disputes: set up architectural vs. sustaining vs. other functions at different locations;
• ECO management is one of the toughest tasks—you may need to limit the frequency of ECOs.
How is the offshore product maintained/sustained?
• Ensure the home country has ownership of all the processes.
How do you force help onto a non performing offshore company?
• You must engage them “in-person”;
• You may need an appropriate team to extract your property (hardware and intellectual).
What are your thoughts on the future of offshoring?
• The choice is ours as to what we want to be—good at offshoring here in the US or other country to be better at it;
• China, India, Vietnam, Mexico, Eastern Europe, and Russia will be the largest growth of host countries;
• Engineering will decrease (in the US) because student involvement in engineering is decreasing and because foreign students who are educated in the US will return to their foreign home;
• Offshoring will become equal engineering at some cost;
• Offshoring gives opportunity to have customers & talent everywhere and anytime.
• Cost of development engineering really isn’t a savings by going offshore. The costs after setting up home company processes and shadow functions raises the cost to near home country costs. The biggest advantage is availability of engineering talent to apply to a job, speed of development, and access to a new market.

Panelists:
Bob Boeller
Bob Boeller is director of R&D for the San Diego division of Hewlett Packard and was a director in manufacturing at HP for 5 years prior to that. In these capacities, he has transitioned selected manufacturing operations to Singapore and Mexico, and is currently involved in design outsourcing in China, Taiwan, Singapore, and India. Dr. Boeller is a UCSD EPSE graduate.
Ron Chaffee
Mr. Chaffee is currently President of NTrada Design. Prior to that, he was VP Engineering for Conexant’s Broadband Media Products Business Unit. At Conexant, Mr. Chaffee was responsible for managing 7 design centers (3 US / 2 China / 1 UK / 1 Israel) whose work encompassed systems & IC design, hardware & software development, and product & test engineering. He also had indirect responsibility for 3 Indian design centers as well. Mr. Chaffee is a UCSD LAMP and EPSE graduate.
Jeff Crosby
Mr. Crosby is currently President and CEO of Ethertronics, an antenna developer for the wireless industries which has offshore design centers located in the US, China, Korea, and Taiwan. The company also outsources certain aspects of manufacturing in Asia. Prior to Ethertronics, Mr Crosby was the Senior VP and GM of Conexant’s Broadband and Media Products Business Unit, working with several design centers located around the world.
Urban Jangren
Mr. Jangren is Vice President of San Diego Design Center Operations for QThink. Prior to joining QThink, he held various technical and senior management positions at Intel Corporation, Cadence Design Systems, Unisys Corporation and Ericsson. Mr. Jangren has extensive experience managing product development teams for the communications, networking, and multimedia markets. Mr. Jangren is a UCSD LAMP graduate.
Bryan Lindsey
Mr. Lindsey is a Program Technical Manager at Goodrich Aerostructures. In this capacity he has considerable experience dealing with major component subcontracting for both domestic and international suppliers, specifically with day to day management of the international subcontractors and their current operations. Mr. Lindsey is a UCSD EPSE graduate.
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