PLM Promotes Smart Outsourcing with IP Protection

By Robert Brincheck

Companies have pursued cheap production labor since the first glimmers of industrialization some 300 years ago. That pursuit has continued significantly unchanged until about five years ago, when skilled professional work joined unskilled production labor in crossing international borders. Foremost among the skilled tasks were engineering and programming,  which found cheaper pools of talent in China,  India, and EasternEurope. Add the built-in ability for work to continue virtually around the clock, and professional services outsourcing looked like a slam dunk.

  There is one significant difference, however. Outsourcing unskilled production doesn’t require companies to expose much intellectual property (IP) to partners. There was always a risk among manufacturers for piracy, but most contractors lacked the engineering knowledge to duplicate a product. Even if they did, patent laws kept them from selling in the daylight,  further limiting potential damage to the designer.

  Outsourcing design and engineering increases the risk of IP theft exponentially. Identifying and thwarting such theft is much more difficult than stopping someone from simply copying a product after it’s been fully developed. Every product a company makes, even older products, holds valuable intellectual property — ideas, concepts, and processes that contribute to the company’s unique competitive edge. Proving a disputed design’s provenance can be a long, expensive process in countries with strong IP laws —  let alone in those with cheap labor and weak patent protections. In fact, in many developing countries, by the time a claim reaches the courts, the major damage has already been done.

  In today’s competitive market, ignoring offshore engineering and design work can spell disaster. The most promising business model for balancing all these concerns keeps strategic product development in-house and outsources tactical work to low-cost regions. To do this, companies need to be able to apply new tools to bring the risks back into line with outsourcing’s benefits. New collaboration technology built into product lifecycle management (PLM) solutions enables companies to “lock down” intellectual property even as they selectively expose it to partners. The trick, however, is to identify strategic IP.

  The two primary classifications of IP are product-specific IP and a company’s development and production processes. The biggest issue in both is deciding what is truly unique and tied to the company’s fundamental identity. This requires a more nuanced approach to outsourcing.

  PLM can help with that task. Today’s solutions enable companies to create sealed modules for selectively sharing their IP without exposing it too openly. Companies can embed these modules into templates and give the templates to partners who are contracted to perform specific tasks. The modules in the template are sealed “boxes” that give partners enough context for completing their specific task without revealing enough IP for duplicating designs or processes.

  For example, a partner could conceivably reverse engineer the module, but that’s a difficult task for the average outsource partner. Besides, the module model gives the OEM more legal leverage.

  Consider an automotive parts company that wants to cut the cost of developing its sunroof product. Creating the CAD geometry for fitting its sunroofs to various car models adds no value to the job of its advanced engineers and designers who conceptualize the products, so the company considers outsourcing the task. This would enable its in-house staff to concentrate on new product development.

  By using CATIA PLM technology from Dassault Systemes, the car parts company created product templates powered by IP to do things like calculate how wide its sunroofs needed to be for each automobile model without compromising the car’s structural integrity. The company used the templates to capture formerly unorganized institutional knowledge into efficient packages and wound up cutting internal development time for a new design from 20 person days to one. That enabled the company to cost-effectively keep its new product development efforts in house, where they are most secure and, as an added benefit, improved the fidelity and quality of the designs dramatically.

  And at the same time, the company needed to make modifications to its basic product lines to keep them current with new vehicle designs. CATIA is enabling it to outsource these iterations at low risk of IP loss by keeping it locked in the templates. That gives the contractors enough context to complete their tasks of modifying sunroof parts, but not enough for them to learn to duplicate the design without extraordinary effort.

  The PLM-based system, then, gave the sunroof company the mechanism to develop an IP management program that automates many design tasks and enabled it to achieve its objectives of realizing its tactical outsourcing goals — lower cost and greater efficiency — and its strategic goal of protecting its IP.

  No technology or management system is an ironclad guarantee against intellectual property loss. And as long as economics favor globalized design and production, companies will have to risk their IP to take advantage of low-cost professional services. A carefully conceived IP management system secured with a PLM solution can bring those risks back into line and help companies avoid an even surer risk: pricing themselves out of the market.

Bob Brincheck is automotive business unit director at PLM solutions developer Dassault Systemes. Send e-mail about this commentary to [email protected].