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Gerrit Kubassa, Germany
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How to Estimate Loss of Intellectual Property in Case of Outsourcing
I am working on the analysis of a product which is already being produced... Completely in-house in our company. My task is to draw a model in which effects of outsourcing are visible. I would like to know the effect on IP (intellectual property) as well as cost advantages/disadvantages. The problem is that I do not know any FSC from our contract manufacturers as well as the fixed costs to be allocated to our product. The volume we are going to produce is unclear as well...
How to approach?
Thanks in advance for any feedback/hint/idea.
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Andreas Fischbacher
Partner, Switzerland
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How to Estimate Loss of Intellectual Property in Outsourcing Hi Gerritt, you asking for ideas on how to approach this problem of drawing a model on the effects of loss of IP of outsourcing over cost per unit.
My approach would be to estimate the value per unit of the IP and the amortisation/write-off period. You need to establish a correlation then to the product life in specific markets as well as on the competitive advantage that the specific IP is giving you, and relate this to estimated sales. There, I would have to know more about it to be able to give a more precise statement.
Other effects are on brand awareness, erosion of competitive advantage, etc, as well as quality, tax and other issues of the specific outsourcing location. Differentiate intrinsic and extrinsic knowledge in this context. Would outsourcing really help lowering the cost per unit significantly? How are the IP rights protection regulations in that country in relation to your product? How quick do you need to move to market?
Another thing, what is 'FSC' in this context?
Hope this helps, Andreas.
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Manny Fernandez, JR
Consultant, United States
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How to Make a Decision as to Whether or not to Outsource There are several reasons why someone would consider a make or buy situation. I think it is important to first determine why you are even contemplating a decision like this. So what is the why? Do you not have the manufacturing capacity? Do you not want to continue to invest (equipment, training, personnel, etcetera) in this product category? Think about it. Because your reason will influence your decision to make or buy.
My experience over the last 20 years in make buy has taught me that generally if we are looking at a proprietary product that outsourcing gives your competition the information that they need. Essentially you give away your technology when you contract out. The inventory that you will be required to consider may be much larger than you really want. What is the product life cycle? Is this product going to change substantially over time... short term... long term. Is this product critical to your business. If so then you want to control it if possible. Lots to consider.
Manny.
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Bob Strasser
Canada
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Outsourcing Costs for Computer Programming The model that can work is a divided outsourcing model where parts of the outsourced program are sent to different code writing companies.
This protects your intellectual property enough to maintain your competitive advantage. After that, it is a straight cost to outsource versus cost to build senario. However, anyone who has ever done a long-term contract will understand that all costs cannot be accounted for at startup because computer programming is a process, not a descrete task. In my opinion, I would look at the direct costs on a month by month basis and as long as you protect your IP by dividing up the program writing responsibilities, you should be OK. That's how I do it in my company.
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tan liong choon
Management Consultant, Singapore
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Take a Step Back and Establish Why and what to Outsource Intellectual Property control is a matter of law and various legal terms can be established in the outsourcing contract.
The first question I would ask is why and what to outsourcing? Think commodity versus differentiation.
Is the product a differentiator? Is the components making up the product a commodity? If commodity, consider outsourcing. If differentiator, keep in-house and outsourcing only those sub-process or sub-component that forms the product. This is to ensure your competitive advantage over your competitors. If commodity, outsourcing to maximise economic benefits through market competition and lower cost through market innovation.
If the decision is outsource, the next question to ask is "manage by results" or "manage by resource". That is another topic altogether though closely related.
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adrian hidalgo
Manager, Ecuador
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How to Estimate Loss of Intelectuall Property in Case of Outsourcung Overall in Latin America everything seems everything can be copied, especially brands and ideas. It is difficult to avoid such copying unless you have a high technology in a production step of the article, or laws that monitor things zealously, which in our countries is impossible.
The only way of measuring the outsourcing partnership they are going to have is by keeping copies and multiplying by the price they would have received if they were original to get a sense of loss that is being generated by this concept.
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Y Srinivas rao
Manager, India
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Loss of Intellectual Property in Case of Outsourcing Activity There are other issues like spin off benefits or ingenuity / reverse engineering capability of outsourcee. It is always good to only outsource routine mundane tasks, and never to indulge in technology products. The cost benefit analysis from an accounts angle may prove too costly when it comes to lost opportunities in terms of spin offs.
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Georg Metz, Germany
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Losses of Intellectual Property in case of Outsourcing We have developed a concept and software to estimate such effects via a cash flow analysis.
Please contact me for more information.
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Shipperbottom
CEO, United Kingdom
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Intellectual Property Value, Outsourcing The answer depends on many more factors the you have provided, Gerrit!
By way of extreme illustrative example, the answer will be different if you are talking about outsourcing the making of an ICBM to North Korea or if you are outsourcing manufacture of T-shirts to the Phillipines. And it would take some pretty good software to handle both of those scenarios!
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Norm Nopper
Managing Director/Consultant, Canada
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How to Protect Intellectual Property in Case of Outsourcing I'll state the obvious: the worst case is that you lose control of your intellectual property, severely undermining or even killing your business because you've created your own competitor.
I think Tan from Singapore has the right idea. Look at it as commodity versus differentiation (or core competency). Any components that are “obvious” (or can’t be protected anyway through patent, copyright or other means) are good candidates for outsourcing.
But hold tight to any aspects that could provide your core competency, technology or know-how to a supplier and potential competitor. And don’t rely on legal ip protections. Once your core information is out, it’s out. And legal action is expensive.
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Harry Whitney, United States
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IP Estimation / Valuation I think Tan and Norm have outlined the issues very adequately. The only other issue involving valuation is to add in the declining value of intellectual property over the useful life. You might try a ...
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William Mullins, United States
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Loss of Intellectual Property at Outsourcing If intellectual property is really important to your business, not just one product, then it's what you are developing today for use tomorrow that needs the most support. IP decays faster than you ima...
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Dr zahra gheidar
HR Consultant, Iran
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Valid Measurement Tools for Intellectual Property You spoke about somethings such as, model, effect, visible outsources, intellectual property that all will find measurement's capacity if we find measurement tools....
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Prakob Chaibuntan
Teacher, Thailand
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Loss of Intellectual Property in Outsourcing: a Lesson from the Roman Empire Tan and Norm are right for large avenue to success but before your avenue (outsourcing) is designed, there are lots of curiosities to consider...
Let me give you an example of outsourcing - the Roman...
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Ramesh Chander Khanna, India
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How to Estimate Loss of Intellectual Property in Case of Outsourcing? Whether to continue making inhouse or outsource is a very complex decision; risks will be there.
We should not outsource a product or component if we have invested a lot in R&D and we need to protect...
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Anand H
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Outsourcing: Focus on Possible Disadvantages The very concept of outsourcing indicates a set of time tested advantages for organizations which probably have been modelled, measured and validated in terms of money and time over these years both i...
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amneh masswadi
Financial Consultant, Jordan
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Calculating Intellectual Property Hi Mr. Kubassa: for calculating intellectual property you need the application of this equation.
Intellectual property = Total Assets - Total Liabilities
You must have a balance sheet or cash flow ...
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Leodegardo M. Pruna
Professor, Philippines
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Calculating Intellectual Property Determine how much a product cost by adding all costs from conceptualization to commercialization. This should give you an idea on how much the intellectual property cost would be....
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amneh masswadi
Financial Consultant, Jordan
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How You Can Estimate Loss of Intellectual Property in Cost Dear Gerrit I hope amortization can solve your problem.
Intangible assets give the owner a right or advantage over another company. They include items such as patents, copyrights, trademarks, leases,...
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Dilip Khanal
CEO, Nepal
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Long Term Investment or Short Term Gain on Transaction It all depends upon how IP is valued. Outsourcing may reduce tangible and visible cost, but in house knowledge creates IP value that organization can earn earnings from for a long time.
In a nutshell...
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Bob Strasser
Canada
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Protecting Intellectual Property (in Outsourcing) The first persons that will steal a company's IP are its employees, internal or external.
IP is impossible to protect, even with non-compete agreements. The idea that must be kept in mind is that the...
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Postolov
Professor, Macedonia
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In my Country we Have These Problems... We have a big problem to secure intellectual property in the case of outsourcing. My opinion is that it depends of some factors as organizational culture, law system, punishment system and amount of i...
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Hyder Ibrahim Mohammed
Director, Sudan
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International Accounting Standards 38 and 32 Dear Kubassa, I suggest to get the complete picture take a look at International Accounting Standards 38 and 32. Hope you find what you need....
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Julius Caesar Ssemyalo, Uganda
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How to Estimate Loss of Intellectual Property in case of Outsourcing I conclude that first your model has to identify the core IP/tasks to retain and the mundane ones to let go/outsource, considering Tan and Norm's submissions.
Then you need to consider like Andreas s...
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Anwer M. Baig, Pakistan
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Intangible Values are Hard to Measure, Often Cannot Be Measured with Accuracy If intellectual properties are considered intangible assets like "goodwill" its evaluation may only be based on certain assumptions; as total turnover of the business, profitability, cost of goods sol...
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Kurt Ludikovsky
Consultant, Austria
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Still There and what are we Talking About @Geritt: are you still there. Now answer to any of the questions!
@All: what are we talking here about. Maybe I miss something from the conversation, but gerrit never said that he is talking about so...
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Lanuzo
Professor, Philippines
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How to Calculate Loss of Intellectual Property You could approach it from the basic straight line or declining balance computation with the time-frame of the patent or exclusion of others from exploiting the same.
Thus, the minimum number of econ...
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