EEs carp: OUTSOURCE THIS!

It's a story being played out at engineering departments throughout the electronics industry. Like it or not, more and more engineers are being forced to come to grips with outsourcing, which has become the new religion of executive managers. Of the more than 2,000 engineers who responded to EE Times' 2005 State of the Engineer Survey, 29 percent said outsourcing has caused their responsibilities to change.

Even if your job has not been directly affected by outsourcing, there's a good chance that your company has an outsource partner. Nearly half of survey respondents-46 percent-said their company has sent electronics design work offshore in the past year. Most of the work being sent overseas is manufacturing-related, according to 39 percent of the respondents. But software and hardware design are not far behind, coming in at 33 percent and 29 percent, respectively.

Many said they had gotten used to the idea that more design is moving offshore but were quick to point out its faults. Others saw it as a major threat to the industry and the technical prowess of the United States. A few were openly hostile toward outsourcing. And there was a small minority who welcomed it, particularly those working at smaller companies with limited resources.

Design switches
Nortel Networks is one of those companies that has embraced outsourcing. Indeed, one reason the company can stay in the Ethernet-switching game is the help it gets from third-party design houses. Its latest 8600 routing switch serves as an example. The company had to find a way to design seven ASICs in just three years. Instead of hiring a small army of ASIC engineers, the company contracted portions of the job to Silicon Logic Engineering Inc. (Eau Claire, Wis.).

"We're not constantly designing ASICs, and we're likely to do derivatives and ASICs for multiple designs. A large staff of engineers would not make sense because we can't keep them busy," said Richard Lacerte, director of hardware engineering for Nortel Networks' Ethernet-switching business.

Although outsourcing has worked well for Nortel Networks, others complained of possible drawbacks. One of the top complaints came from engineers in charge of managing outsourced projects. Rather than developing algorithms or doing circuit design, they're spending most of their time making late-night calls, checking the work of others and dealing with loads of paperwork.

"Essentially, I am reduced to a technician," complained one engineer. "My job is ever more about troubleshooting and repair of failures than about design and innovation. I worry that my design skills are not being utilized, and, as a result, I will become technically obsolete."

"My job is changing from design to 'spec and check,' " said another.

Many who have assumed this caretaker role don't like the work that they're seeing, either. Outside engineers often don't have the experience or the incentive to do the job right, they say, leaving the homeland engineers to clean up their mess.

This is putting upper managers into a bind. They're not prepared to turn their back on outsourcing, so they're telling their more experienced engineers to act as mentors to the offshore design team. To some engineers, this is like being asked to sharpen the blade of the axe that will soon lop off your head.

"I now have to train someone else to do my job and check their work when it is done. They get the credit for doing the job and all I get is more hours worked on nights and weekends to make sure the outsourced work is done correctly," said one respondent.

This is not just the griping of a few disgruntled engineers. Poor workmanship is such a concern that 65 percent of respondents said quality-assurance steps must be taken to make sure outsourced work is up to snuff.

There are certain telltale signs that might help companies avoid getting burned when work is outsourced. One of the most important to watch for is whether the design team can keep its people. In India, one of the biggest hot spots for outsourcing, the turnover rate is getting worse as engineering companies there compete against one another to attract the best talent, some engineers report.

"Turnover in India has been ridiculous, and the cost goes up all the time as well," said one respondent. "You may pay less, but you get what you pay for. Give me an experienced person any day."

Another indicator is how the design company responds to a bid. If a statement of work comes in too quickly, it's a sign that it wasn't well thought out. So much is riding on the accuracy of the statement of work that it can't be treated so casually, Nortel's Lacerte said.

"The statement of work should have specific details and milestone dates that make sense," he said. "You shouldn't get large changes in milestone dates. If there are any issues, I like to find out ahead of time about the risk and not after the fact. And we shouldn't get hit up with sudden large change requests for extra money beyond what they initially thought."

Some benefits, too

But let's face it. There's a reason outsourcing has taken hold in the electronics industry. When done right, it can help companies operate more efficiently. Engineers who are used to operating in a single, cohesive unit may chafe at this, but it can be a blessing for smaller companies and those who risk being drowned by development costs. Moreover, there are competent design houses operating domestically and abroad, some engineers said.

Outsourcing "will let our company actually survive. Our Indian design center is doing good work, and we need them to succeed or we will all lose our jobs," said one engineer.

The bottom line is that outsourcing is a survival technique, but it's coming at a huge cost to the profession. Engineers know this. About three-quarters of respondents said the net effect of outsourcing was to reduce development costs, production costs or head count. Less than 20 percent thought that it was to save time, improve time-to-market or reduce risk.

So, upper managers who've jumped on the outsourcing bandwagon, take heed. Your engineers are trying to tell you something. Something they'd rather not say out loud for fear of not being seen as a team player: This outsourcing business is not working as well as you thought. Quality is suffering. Development cycles are often getting longer, not shorter. Some of the money you thought you'd save is being shifted toward fixing bugs that could have been avoided had you done it all in-house. Your team's morale is sinking fast. Some say your industry might follow.

One thing is clear: Managers who hire an outsourcing outfit without carefully scrutinizing the quality of its work might find that the cost in time, money and the goodwill of their engineers is much higher than expected.

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