This blog posting is a bit off the usual track, so please indulge me a bit. In the product engineering outsourcing business risk is everything, yet it is obviously nothing. In order achieve certainty (outcome certainty) around outsourced engineering activities, it is vital to evaluate all risk elements associated with the engineering lifecycle. Most organizations, however, have a myopic focus on just the product development lifecycle, centers of excellence, key people, etc. While all are very important, they are only a part of the overall risk that has to be managed. But what other risks that need to be addressed in this new world of global product engineering?
Let’s briefly look at a few risks in the headlines today. Pandemics like the Swine Flu are a threat to the world economy and could have a bigger impact on product delivery schedules than any other factor faced over the next several months. Program managers plan for a lot of activities that directly effect schedules – normal work hours, vacations, subject matter expertise (SME) availability, pregnancy, etc. However, very few, less than 5%, have direct contingency plans for significant resource losses as a result of H1N1. With an intermittent loss of just 50% of a work force over a 4 week period, engineering production could be delayed for two months or more. Can any company afford such a loss in productivity?
Terrorism comes in many forms and is another obvious risk that needs to be assessed as part of a comprehensive outsourcing strategy. Whether it be international terrorism trying to disrupt a nation’s economic basis or local disgruntled employees taking action against IT assets, each can have a devastating impact on a production schedule. While there is no consistent data on lost opportunity costs, anecdotally indications show that software engineering projects where delayed 2 or more weeks as the result of 911. A single disgruntled knowledgable employee could take out significant IT support structured for engineering production (a type of localized domestic terrorism), resulting in days if not weeks of lost development time. While these kinds of activities seem far fetched, they occur almost everyday to some degree or another. Could you afford such a loss?
The answer is probably no, if you are like most organizations. Because these kinds of risks have a high consequence, albeit at a lower probability of occurrence, they require proactive risk management. Take the Swine Flu example, your organization could provide education (webinars, blogs, etc.) on prevention (e.g., CDC speaker, web links, tracking, travel advice, etc.), reporting (departmental, corporate, partners, vendors), and mitigation (restricting travel, proactive flu shots, etc.). Reducing the risk of product schedule delays do to terrorism, while a bit more complex, can be achieve with a bit of work.
Pandemics, terrorism, financial instability, and geopolitics are areas that impact outcome certainty, so taking a leadership position can have positive consequences to your organization. The message here is that in this world of global engineering outsourcing where outcome certainty drives production, a more comprehensive view of risk that looks outside as well as inside is critical. Something to think about. Thoughts?
Dr Jerry A Smith 