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Industry Imperatives
May 2001


Integrated Outsourcing: A Positive Sign For Challenging Times


A double-edged sword of shrinking venture capital and profit-minded downsizing faces many product-development managers. Headlines abound of large-scale layoffs and the implication is a loss of knowledge workers in some critical aspects of our business. To compound their pressures, managers must scramble to beat their competitors to market with powerful new solutions despite their streamlined operations. While they are left with less human capital, they've held onto a vision of where they want their company to make its play -- and they've seen no reduction in their revenue targets.

What's a visionary, but resource-strapped, product-development manager to do? Leverage your alliances and partnerships! Hold on to what makes your business unique, but let go of functions that others may perform more efficiently. Redirect your own people and investment onto higher-value activities that create smarter products, higher customer satisfaction, and achieve business objectives. Focus on one or two core competencies and outsource everything else. Tap outside expertise to accelerate product development, manufacture the solution and manage the inevitable changes in technology for the life of the application. This emerging phenomenon -- fusing knowledge, experience, and technology in a single partner with a long-term, vested interest -- is "integrated outsourcing."

The cycle of layoffs two decades ago severely reduced companies' manufacturing capacity. As the economy rebounded, companies still needed someone to "build boards and boxes." Many evaluated their value propositions and core competencies and chose contract manufacturing to fill the gap. In the new economy, the current cycle of layoffs will focus not only on manufacturing, but it will also reduce companies' bevy of knowledge workers. The result is a similar need for contract manufacturing. But this time, partners provide engineering and design capabilities. That is, a need for fully integrated outsourcing will develop further.

The critical requirement for knowledge workers is not in doubt -- witness the 80,000-plus high-tech worker (H1-B) visas this country awards each year (and the industry's attempts to increase the limit on those visas). Companies are willing to expend the resources to find, hire, and process skilled foreign professionals because their knowledge is supremely critical to the success of the organization.

Smart managers can acquire access to the knowledge they need, while still getting to the market quickly through integrated outsourcing. Identifying a business partner truly capable of delivering on the promise of a speedy time to market can be a daunting task. Conversely, selecting the wrong partner could cost you more in time, money, and resources than just going at it alone. The characteristics you should look for in a world-class technology and services partner include a diverse technology portfolio, global reach, world-class manufacturing and research facilities, and the commitment and support of dedicated management.

Total integrated outsourcing is not merely contract manufacturing or product delivery. To add true value, an integration partner must have the ability to assist with product design, testing, agency certification, and even lifecycle management. Beyond engineering skills, a true partner should also be able to provide the high-quality technology building blocks or components that you will need to turn your good idea into a complete solution. Not only do you want a partner who can build the technologies and tools you need, you want one with standard technical assets already in hand. Since every integration engagement is unique, a "perfect fit" calls for an outsourcing partner with a full suite of product and service offerings. They should have enough purchasing power to procure those pieces at costs that will ensure a competitive market price for the end product.

A partner with maximum leverage will actually design and produce many, if not most, of the vital components of your solution -- offering much greater control over variables like cost, quality, and product lifecycles. As a result, they are far less likely to be surprised by unexpected technical difficulties during the design, build, and test stages of the program. This type of partner has ownership over much more of the solution and can ensure interoperability and timely delivery.

Too many partners and relying on the ease of "open" systems is another area where some companies falter. If several different partners are selected, each could be on a separate schedule and could prioritize your project differently. You may be left holding a partial solution, waiting for some partners to deliver while others have already done so. Who has the responsibility to fully integrate, test, and manage multiple technologies? Open systems are guideposts, not a fixed path to interoperability.

If looking for the simple building block that your solution needs and your core competency includes the balance, then "catalog engineering" is a good bet. If you need multiple building blocks or assistance in other engineering, program management, or manufacturing expertise, then catalog engineering can cost your program a bundle. You should turn instead to a partner in integrated outsourcing.

Equipment spending in the international telecommunications market is expected to sustain robust, double-digit growth through 2004, this according to the Telecommunication Industry Association's (TIA) MultiMedia Telecommunications Market Review and Forecast. Telecommunications is a global market. Any company that competes in such a market will of necessity be a global company. The ability to project a global presence is one of the most valuable services a total solution integrator can provide. In fact, many small telecommunications companies are simply research and development entities. The integrated outsourcing can become the outsourced mechanism for product fulfillment on a global scale. Only a partner with worldwide office, manufacturing, integration, and support facilities is equipped to carry out this role.

Any company considering the total integrated outsourcing model will need a partner with world-class facilities and quality standards. Integration and manufacturing facilities must meet or exceed all international certification standards such as ISO. The facility should have well documented procedures and controls for all of its manufacturing processes. Operators should be certified to work on specific products. Each operation in the manufacturing process should also be certified. The performance of individual operators and operations should be continuously monitored, tracked, and analyzed for continuous improvement.

It's almost impossible to overstate the critical importance of a total engagement in the success or failure of a program. Such a project should never be undertaken without the demonstrated endorsement, commitment, and support of the integration partner's management team at all levels.

The engagement customer should expect and demand a direct first-hand relationship with the potential partner's management team. Further, there should be a well-defined and specific process for problem resolution and management escalation in place from the outset.

The successful track from drawing board concept to market reality is almost all about solving problems, overcoming obstacles, and getting it right the first time. That's why integrated outsourcing. in concept, makes so much sense. Selecting the right partner can give you a "virtual division" with cradle-to-grave accountability for product development, production, and lifecycle management.

To gain access to potential partners, one must take advantage of the networking and alliance development promotion programs available through various industry associations, such as the TIA. As reliance on the Internet forces networks and enterprises alike to restructure to enable new business capabilities for their customers, these associations focus on building market awareness and helping members partner to shorten product development and product sales cycles. No one goes it alone these days. Partnering with companies for product development or for marketing and sales enables you to "get there first with the most." In this very volatile market, we all have the imperative to do just that.

Fred Yentz is vice president & general manager, Enterprise Systems Division, for RadiSys Corp. Fred is a member of the TIA board of directors and chairman of the association's Global Enterprise Market Development Council. He recently received TIA's Carter Award to recognize his outstanding service in the public interest in the field of telecommunications. Please visit the TIA Web site at www.tiaonline.org.

RadiSys designs and manufactures building blocks enabling next-generation Internet and communications systems. As the leading independent provider to OEMs, RadiSys delivers a time-to-market advantage in a tight "virtual division" relationship with its customers. 

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