Sure, electronics companies have been outsourcing designs for years. And they've been doing it for a variety of reasons that include cutting costs, tapping expertise not available in-house and speeding time-to-market. Whatever the reason, companies plan to outsource more design work in the future even as the level of satisfaction with existing design-outsourcing relationships could stand some improvement. A close look at the design-outsourcing survey conducted by EE Times and Electronics Supply & Manufacturing reveals some of the stress points.

According to the survey, large companies outsource considerably more design work than midtier or small companies; and the larger the company, the lower the satisfaction level. When asked whether design outsourcing has been a net asset or a net liability for their company, nearly one-third of respondents from large companies (sales more than $500 million) said it was a net liability. This compares with 22 percent for midtier companies (sales from $10 million to $500 million) and 13 percent for small companies (sales below $10 million).

Why the difference? For one thing, large companies are more likely to outsource complete system design than other companies: 40 percent compared with an overall average of 29 percent. Second, large companies prefer to work with original design manufacturers (ODMs) and, to a lesser extent, electronics manufacturing services (EMS) providers, while small and midtier companies favor design consultancies. The rules of engagement with ODMs are different than with consultancies.

Going hand in hand with the ODM relationship, large companies are more likely to send their design work overseas, in particular to China and India. While the intent is to take advantage of low-cost labor, large companies surveyed indicated that the most negative outsourcing relationships were in the United States (31 percent), India (25 percent) and China (20 percent). A higher percentage of large companies than average said that managing design outsourcing was "far more difficult than we first imagined."

Managing each of those factors alone requires time and resources to identify and select the design partners, and to build and maintain relationships. Taken together, they present a complex set of challenges. And if those challenges are mismanaged, the result could be failure.

At the top of the list of complaints among large companies is the increase in project risk as a result of outsourcing. Indeed, 35 percent of large companies said poor communication with the third party had a negative impact on the outsourcing decision, compared with 24 percent overall. At the same time, large companies were almost twice as likely to say that the unit cost of the product was negatively affected by the outsourcing decision.

What's the takeaway? Poor communication leads to increased project risk, which results in increased cost. Outsourcing design may be on the rise, but don't underestimate the need to closely manage relationships.

Bruce Rayner is editor in chief of sister publication Electronics Supply & Manufacturing.