When it comes to completing an engineering or design project, it can be difficult to decide on the best and most efficient approach to take. The decision to offshore, outsource or insource should be determined on a project-by-project basis and the resources available to your team. Below, we take a look at each route and discuss advantages and disadvantages of offshoring, outsourcing or insourcing.
Offshoring is defined as moving your engineering work overseas or far away from your headquarters. Depending on the project, offshoring may have different pros and cons.
Pros: There are a few situations in which offshoring are a great option. The biggest draw to offshoring is cost. Labor rates in many foreign countries, take India and China for example, are much lower than in the United States. If cost is the driving factor, offshoring is ideal for repetitive work that doesn’t require skilled workers. However, you may also find yourself in a situation where you are in need of an engineer that is highly specialized. If you cannot accomplish this task using local resources, offshoring could be a viable option.
In another scenario, if your firm has a target market that is overseas, it could be valuable to obtain local knowledge and understanding through offshoring. For example, if a firm decides to sell its products in the UK, it would be beneficial to hire engineers and designers that are local to the area.
Cons: Offshoring does not come without challenges. Although labor costs will likely be lower, culture plays a huge role in the decision to offshore. Often times, the country you choose to offshore to will speak a different language, have different business customs and be in a different time zone. This can be a challenge when it comes to communicating ideas back and forth between your firms. With engineering and design in particular, hands-on contact with the project might be crucial. When offshoring your engineering services, your firm should consider arranging face-to-face visits beforehand in order to successfully communicate your expectations with your provider.
Outsourcing is typically defined as moving your engineering work to a service provider that is closer to your firm’s headquarters. In a past blog, we outlined the pros and cons of outsourcing your engineering services. Here are some of the common advantages and disadvantages associated with contracting projects out-of-house.
Pros: Outsourcing is a great option for companies that have a temporary engineering project, need to balance the work load or don’t have the resources to fulfill special engineering needs. The two types of firms that usually benefit most from outsourcing their engineering services are firms that don’t need in-house engineers and firms that need help finishing a project but simply don’t have the resources.
Outsourcing is a valuable way to lower overhead costs, gain access to the best resources and increase your firm’s flexibility. Plus, engineering service providers typically have the ability to implement projects efficiently and can provide a quicker turnaround. Outsourcing is a great option for firms that cannot justify hiring their own team of engineers or who need more resources at their disposal.
Cons: Similarly to offshoring, depending on who you outsource with, you may face challenges with lack of communication, lack of trust and lack of quality control. To avoid these cons, be sure to ask the right questions and do your homework before outsourcing engineering services.
Insourcing is defined as having an employed and full-time team of employees that are responsible for completing a firm’s engineering and design projects.
Pros: With an in-house engineering team, companies can work closely with employees and oversee their projects. Having an in-house team also allows for continuity and easy access to facilities and team members.
Cons: However, hiring an engineering team can be hard to justify for firms with limited engineering needs because there are many costs associated and hiring employees is a much more permanent solution. Insourcing is most suitable for companies whose core competencies rely on engineering projects.
The offshoring, outsourcing or insourcing engineering services decision differs from company to company. Larger firms that are heavily reliant on engineering projects can benefit from creating an in-house team. Small and medium sized companies typically choose to offshore or outsource. Offshoring can be a very cost efficient way to complete projects and can give you access to international knowledge, but culture barriers and physical distance can be a big challenge. Outsourcing can be the best of both worlds—giving your firm the ability to communicate face to face if necessary while providing access to the most sophisticated technologies and specialists at a lower overhead cost.
To figure out if outsourcing your engineering services is right for you, contact TriMech Services.