View from the top: Intelligent outsourcing

Faced with increasing commercial pressures, cutbacks and dire skills shortages, the engineering sector is experiencing a period of great change. Because of this, a number of companies are looking to service providers to bridge the 'capacity to create' gap. However, as Richard Welford, president of TATA Technologies Europe, points out, what often happens is that outsourcing companies simply resort to on-site staff augmentation to address a shortfall in capacity. "Even those organisations that have taken the step into offshore sourcing are often only creating a 'distanced-based staff augmentation model'," Welford explains, "and as a result the incremental management effort erodes much of the labour arbitrage cost saving benefit." At TATA Technologies, the core focus is on intelligent outsourcing, or iSOURCING as the company calls it. "What we do is deconstruct the traditional approaches to satisfying demand, and re-assemble the component parts of the problem into a model that focuses on the right outcomes, not realisation of a target headcount," says Welford. TATA Technologies has developed a number of methodologies to help companies understand what they can and cannot outsource. Its methods look at a number of influencing criteria, including geographical dependency, process-to-process dependency, business criticality and the level of experience required to undertake certain tasks. "We have consistently found that approximately 80% of an engineer's time is actually spent on non-engineering tasks that, while imperative, don't need to be carried out by them," Welford noted. "Engineers are expensive people, so this simply isn't sustainable." Having made visible the 'candidates' for outsourcing, considering what is also core and non-core to the client's business, TATA Technologies then applies a number of potential outsourcing models to help clients architect an outsourcing strategy, and a roadmap to achieve it. "We use tried and tested allocation logic to manage the realisation of the required outcomes through a globally distributed model," says Welford, "addressing an outcome through the use of the best resources from around the world, and utilising lower cost resources in a realistic manner that compliments the essential local component of the solution." Typically, TATA Technologies says it can facilitate cost savings of around 40%. Its advantage over other outsourcing companies, according to Welford, is that engineering is at the core of its business, whereas many others, especially offshore providers, have grown from IT roots. "What we've learnt over the past 25 years is not just how to outsource," he states, "but the process of product development itself. Because we understand this, we feel we can bring value to our clients through proven competence and business advice from a perspective of real world experience." The iSOURCING service TATA Technologies offers is open to businesses of any size across the company's core industries of automotive, aerospace and industrial machinery. Its clients include large OEMs like Jaguar Land Rover, as well as well know names in the supply chains of those OEMs, such as Messier-Bugatti-Dowty. "It's important to note that we're not suggesting our clients are approaching product development incorrectly today," says Welford. "We are merely being pragmatic to the fact that continuous improvement is essential to remaining competitive, and that the traditional approaches to resourcing product development activities are no longer sustainable." Welford points to the skills shortage currently plaguing industry. "If recent studies are to be believed, manufacturing and product development companies are facing a significant shortage in engineering skills, which could represent a gap as large as 73% by 2020," he states. "Unless organisations challenge their current delivery paradigms, the cost of engineering will go up, while the resource market will be failing to satisfy demand." Welford describes this problem as 'unsustainable and on-going', but believes TATA Technologies' iSOURCING technique offers a valuable, viable solution. "Architectured well, an effective outsourcing strategy will address the macro needs, rather than the point solutions, and each components of that strategy will be synergistic with the others," he concludes. "The potential of our iSOURCING approach is as broad as the topic of product development itself, and the results are actually quite staggering."