The MGS Blog

Wednesday, January 16, 2013

Sourcing Activity Watch

EileenBJan 31, 2012 11:53 AM
Discussion on Foxconn (Apple, Dell, Nokia, Panasonic, HP, Samsung, Sony, Lenovo - a third of the electronics), workers conditions and history of Shenzhen, China.
The Foxconn plant in Shenzhen has 430,000 workers. 31 years ago Shenzhen was a small town. It had little reed huts, little reed walkways between the huts. The men would fish in the late afternoon. Today Shenzhen is a city of 14 million people. It is larger than New York City. Depending on how you count it, it's the third largest city in all of China.
Because 31 years ago, when Deng Xiaoping carved this area off from the rest of China with a big red pen, he said, this will be the special economic zone. And he made a deal with the corporations. He said listen, use our people. Do whatever you want to our people. Just give us a modern China. And the corporations took that deal, and they squeezed and they squeezed. And what they got was the Shenzhen we find today. (link)

Matej SykoraJan 30, 2012 11:32 PM
The story of sourcing in LEGO is quite interesting one. However, it is primarily about manufacturing. About a ten years ago, the company was in serious financial problems because of diversification to areas like clothing. After the change in the direction of the company, the case for outsourcing of its production was made (“95% of all toys are made in China. Why are 95% of all LEGO made outside China?”). Actually, LEGO choose nearshoring to countries like Mexico and Czech Republic. The cooperation failed and LEGO insourced its production through taking over the factories of the outsourcing vendor. (All this has to be understood in the context of the atmosphere of a family business which was closely tight to the home town of Billund in Denmark where many jobs were closed due to the outsourcing arrangement.)
Links to the materials follow:
- 2006: Retrospective about the previous problems - (link)
- 2006: Lego to outsource and cut 1,200 jobs - (link)
- 2008: Denmark's Lego to end Flextronics outsourcing deal - (link)
- 2009: Outsourcing and Off shoring: The LEGO Story – the company presentation - (link)
+ Summarizing document used for class discussions at some university in Canada (link)

(via Peerside) Apple makes it clear that it isn't just labor costs that makes the US uncompetitive. New York Times Article By CHARLES DUHIGG and KEITH BRADSHER, 2012 (link)

Paypal founder backs Blueseed "visa-free entrepreneurship and tech incubator" (link)

10 industries doomed to lower growth or profit, consider a role for outsourcing in each (on slideshare)

Other areas coming under outsourcing spotlight (courtesy of Ray): Iberia outsource short haul to low cost subsidiary ( and pilots' associations wary of cooperative business agreements between AA, BA and Iberia for trans-Atlantic flights (

(from Mark) The lure of the countryside draws sourcing activities out of the cities but keeps them on-shore (

Sizing the outsourcing market (for BPO) in the Philippines via Carole ( Baguio City in the Philippines, Convergys - an American customer service company sets up its 14th office in the country.

(via Carole) Infosys Wants U.S. Acquisitions to access US Govt contracts ( Infosys To Acquire U.S. Outsourcers To Tap Into Government Contracts - Outsourcing Firms become multinational corporations with bases in all countries. (

(from Niall) H1-B visa debates in the US, hooked on importing cheap, high quality, highly educated emigrants. But Congress recognises outsourcing as a necessary part of value added business, conferring competitive advantage. (

Dealing with contracts in an agile way. Not quite global sourcing but sourcing more generally (

Boeing's 'hard lessons'. Delays on dreamliner production a direct result of outsourcing? (source: smartplanet's thinking tech blog

Claims that RPO (Recruitment Process Outsourcing) Market to grow up to 30% in 2011 (source:

(via Carole) Insourcing the outsourced. London Stock Exchange replaces its service provider with a commercially available trading system, by buying the company. "In one fell swoop it got the system and the people and for less money (£18m) than it used to pay Accenture every year (£20m) to support its .Net Tradelect system." (from the Inside Outsourcing blog at Computer Weekly)

Follow-up in LSE systems news: Exchange halted by computer problem (source Friday 25 February 2011

London Underground technology infrastructure, networks, support and operations; prime contractor Capgemini gets extended contract (via the Register)

Large cloud data centre being built by IBM and Chinese partner in Langfang, Hebei province (via The Straits Times)

(via Ray) Egypt moves up as an outsourcing provider destination but what will be the impact of political instability? "We did our research before the unrest began," explains Johan Gott, manager of the A.T. Kearney's Global Services Location Index... (

(from Ray) AT Kearney claims India is still the World's best outsourcing destination (The Times of India

For the history book (and perhaps worth follow-up investigation)...

  • Beijing Real-Time Traffic Information System, China (article at
  • Beijing Mobile chooses system (article at
  • 9 Ways to Avoid Outsourcing Failure from CIO Magazine ( accessed March 2011)
  • (2005) BBC anticipated huge savings (200M) by outsourcing to Siemens Business Services; staff shifts, savings ploughed back into programming etc (