RE: "The engineering rate was one third in India...BUT at a time to market that was 4 months later (about 80% time overrun). This resulted in ...4 month sales loss is a loss of 4 time 1M = $4M. So, net, net, In order to save 600,000 (60% of the typical 1M development cost), you only saved 400,000 and lost 4 million in earnings"
Good post. As a Csco investor, it bugs me if the teams don't understand "each day a product is delayed costs x dollars in revenue." You'd be surprised how many teams don't even know about this hidden cost. It's not a school project that's late, it's lost revenue. But hey, don't worry if they're late, we could always lay off 10% of the company to make up the difference, no worries - yeesh. As you correctly pointed out, it's not always delayed revenue, but lost revenue.
The initial delay costs you described are huge. I think Cisco's management is betting on the teams gaining traction.
The offshore delays at some firms can be rather huge. Some of the Fortune CEOs don't even know about them, because "everything fine" mentality is stronger than it is in the US. Fortune 500 offshore sites will send email telling everyone not to say anything is wrong when the CEO comes, but instead say, "yes Sir, everything is fine." This particular example doesn't refer to Cisco, but I wouldn't be surprised to learn they are experiencing something similar to other Fortune 500s, because it's a function of a country's culture that you have to change. The work cultural differences can be costly. Some people don't know how to tackle that.
Offshoring is great, but I want it to be well thought out and carefully monitored when it's done. And the US teams need to be reserved for the reasons you noted - new innovation and time to market. I'd like management to be accountable for any potential blind thinking.
Regards,
Amy J |
