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The awful truth about outsourcing electronics design overseas

By Jon Eggins - Director and Operations Manager at Genesys Electronics Design

Let me state up front that I have a vested interest in presenting an argument that is dismissive of undertaking an offshore development in Asia: the company that I work for does onshore development for mostly Australian-based companies. In my view, the decline in the local development capability is of great concern.

But my argument here is not based on such emotive reasoning.

The jury is firmly in on the performance of outsourced development in Asia and the sub-continent: the instances where it pays off seem to be far outweighed by the experiences of disaster, disappointment and failure to deliver.

On the face of it, the equation looks mighty attractive: low resource rates, speedy delivery, big promises, a ‘can-do-anything’ attitude and management delegation to somebody else. That’s enough to make any bean-counter salivate. Unfortunately, more often than not, the economy is false in the extreme.

I need to state very clearly that westerners by no means have a monopoly on engineering talent – far from it. In recent memory, I have counted three truly world-class sub-continent engineers among my development team, and have worked alongside many other highly capable quality Indian and Asian engineers.

The issue is one of quantity, scalability and abstraction

The issue here is not a matter of individual quality; it’s a matter of quantity, scalability and abstraction.

The analogy I like to use is that of the Australian Government’s Home Insulation Program, also known as the Pink Batts scheme, of the immediate post-GFC years.

Suddenly, we saw a situation where a large quantity of cash was remotely injected into an industry that was not scalable enough to rise to the sheer numerical demand, and as a result a massive dilution of quality, process and ethics took place. A large under-supply of installation labour saw a big black and white mooing cash cow beckoning for unskilled labour to fill its stomach.

And didn’t the labour come in droves! Existing companies took on unskilled & inexperienced labour and gave insufficient training, to fill the demand. New ventures popped up out of nowhere like mushrooms luring the cash cow and claiming to be anything but the reality: a toadstool.

The results were guaranteed before the scheme was a twinkle in the Government’s eye. It was a recipe for disaster. Under allegations of fraud and with four deaths attributed to the scheme, the program was discontinued within months of being announced.

How does this relate to the current outsourcing environment?

The west’s outsourcing of engineering development to the sub-continent and Asia is a cash cow of proportions that we cannot understand in Australia. The carrot being dangled is simply enormous. Demand has massively outstripped the supply of engineers with the experience needed, and dilution of collective skills is the reality.

The bottom line is that the net productivity that you can expect from such ventures is very low. Plainly, it’s a false economy – for the quality of output often received you would be better to take on the development yourself or outsource it locally.

Website SEO (Search Engine Optimisation) is my personal favourite. It is a microcosm of the wider false economy and has emerged as the most recently calved cow from a mother cash cow.

Google – the mob that we are all trying to convince in text-only form that we should be at the top of their heap – recommends using a trusted and known SEO developer. Google clearly and explicitly cautions against using SEO developers that promise the earth, yet I field daily sales phone calls promising exactly that, perhaps with the moon thrown in as a bonus.

Clearly, the interest is being driven by the dollar value of the opportunity and not technical rights and wrongs, nor the outcome that is best for the client in Google’s eyes.

What is at play here are human survival and aspirational instincts of the world’s rising middle classes – and we can’t blame a fellow human for accepting a challenge at the prospect of furthering themselves when opportunity knocks. However, we need to rethink our approach as a collective and industry when it comes to the pros and cons of overseas outsourcing.

Put simply, engineers don’t “grow on trees” in any region of the world, including Australia, and throwing human resources at a problem is not the way to a solution.

Our Australian engineering development industry is small, like a country town almost, where everyone knows everyone or at least knows the person that knows everyone.

Within my network of peers and colleagues, the evidence is clear on overseas outsourcing. From simple things like website and mobile app developments, to harder core electronics developments, it’s a story of disappointment after disappointment. With all of the big promises, delivery is small, quality low, deadlines not met and management a nightmare.

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