I was going through some old files earlier today and came across a letter to the editor from yours truly that was published in Business Week… on October 16th, 1995.
Regarding your article "Is in-house design on the way out?" (Sept. 25, 1995), many organizations, including mine, are beginning to outsource R&D to outside contractors and consultants. As you pointed out, these secondary sources often have the resources and knowhow required to generate high-quality products in shorter time frames.
Although it’s a short-term benefit, organizations need to weigh this against the potential long-term consequences of having the understanding of important technologies reside outside the controlling and responsible organization. If a product change is needed as a result of a market- or quality-driven situation, the organization must respond, and the outside design resource may not be available.
That was way back at a time when I was temporarily assigned to an R&D organization to help eliminate the "throw it over the wall" mentality that had led to several manufacturing startup disappointments. Since their first foray into domestically-outsourced design, that company has moved to outsourcing more design work overseas, as well as chasing cheap labor manufacturing overseas through contract manufacturers and captured plants. Unfortunately, as they have probably figured out by now, labor is but a tiny fraction of their true costs… and the raw material variability issue I was always fighting has led to tons of rejected material sitting on the high seas. Those quality and supply chain costs were perhaps one reason why that part of the company was spun off a few years later, and then sold again a couple years after that.
When I see what some companies are doing these days it is hard to imagine that they will be around, at least intact, in another ten years. The frustrating thing is that the solution, and salvation, is already known and in practice at many companies.