Captive outsourcing – a way to move complex products to emerging markets

Abstract

Purpose The purpose of this paper is to examine how companies should off‐shore complex product related tasks to low‐cost countries, without jeopardizing their competitive advantage and intellectual property, while building solid and sustainable business in the sourcing country. Design/methodology/approach The underlying case concerns a multinational, globally operating engineering company delivering complex system products used as part of industrial and social infrastructure, and its entry to off‐shoring and how it has evolved from a green field operation to sizeable value center over the past six years. Findings The case provides support to the fact that companies understanding that building permanent, knowledge‐based and proprietary presence with full product management responsibility in lower labor cost countries will be more responsive in serving customers, cost efficient in maintaining old infrastructure products and in delivering new ones in the future. Further, complex product business companies focusing on long term and knowledge based legacy building in emerging economies will develop, not only more robust global business platform for themselves, but they will also contribute to the sustainable development of the global economy. Originality/value The paper presents unique descriptive data on the overall outsourcing strategy of a global engineering company and how one of its off‐shoring units has evolved over time since its inception.

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