Alectia A/S: Muligheder, Barriere og Løsninger

Abstract

During the last decade, or maybe even a bit longer, the competition among the consulting engineering companies within the building industry in Denmark has become more and more fierce and the fee for consulting engineering services is under pressure. On top of this international construction companies have already made their entry on the Danish scene and presumably it’s only a matter of time before we see the entry of foreign consulting engineering companies on the Danish scene as well. As a response to this pressure on our fee, it is the objective of this project paper to examine to what extent the consulting engineering company ALECTIA A/S has the possibility right away to use offshore outsourcing as a mean to fight the above mentioned decline in the consulting engineering fee. The approach in this project is mainly deductive where the project on the basis of various theories and frameworks explore the consulting engineering company ALECTIA A/S. The method used is primarily based on observations from 15 years of employment in ALECTIA combined with unstructured interviews with various persons in management positions within ALECTIA. The examination take it’s starting point in challenge of offshore outsourcing of services which is characterized by substantial interaction intensity between the service provider and the client. In the first part of the analysis we explore which activities, based on relative low interaction intensity, have the possibility of being offshore outsourced. Following this, the second part of the analysis is giving an estimate of the offshore outsourcing potential seen in an economic perspective. Once the activities, where offshore outsourcing has been estimated a possibility, has been identified, the next area of exploration is then to identify the location of the knowledge necessary to solve these activities, and the challenges in distributing this knowledge to the offshore outsourcing partner. The analysis of which activities ALECTIA potentially can offshore outsource, indicated that these primarily are the activities in the detailed design phase and secondary the technical supervision in the construction phase. Based solely on the savings potential in salaries, under the assumption that the above mentioned activities are offshore outsourced, it is estimated that savings could reach approximately DKK 35.1 mill. However, various additional costs due to the offshore outsourcing operation have to be deducted from the potential savings. These costs include among other things, costs due to geographic-, language- and cultural distance as well as reduced savings potential due to e.g. reduced productivity at the offshore outsourcing location. In the course of carrying out this project however, it has not been possible to find concrete data which in a sound way could support an estimation of these costs. In the light of this, this project paper is not conclusive in question as to the economic savings potential in DKK. In the programming-, conceptual- and basic design phase the analysis showed that substantial amounts of tacit knowledge, necessary to solve this phase is located at the site of the client. Further, we estimate that a fair share of the knowledge necessary for ALECTIA to solve this phase is based on tacit knowledge as well, why it is suggested that this phase is to be solved at or near the site of the client and by ALECTIAs own employees. In the detailed design phase and the actual construction phase however, we find that the knowledge necessary to solve these phases have changed to an explicit type of knowledge that has the possibility to distributed to an offshore outsourcing partner. However it is concluded that the knowledge management system in ALECTIA, as well as the degree to which our services are standardized, at this moment are insufficient to support an offshore outsourcing operation. To optimize the actual flow of knowledge between ALECTIA and an offshore outsourcing partner, this project paper suggest: (1) that motivation of the employees to send and receive knowledge is enhanced by various incentive bonuses, promise of job security and acknowledgement among peers. (2) that the richness of the transmission channels is improved if the employees at both ALECTIA and the offshore outsourcing partner not only have the possibility to work with design and transfer of projects through electronic media, but also have a genuine wish to work like this and is given the necessary training to do this. Furthermore, the richness will be improved if ALECTIA employees are expatriated to the offshore outsourcing partner and if these ALECTIA employees together with the responsible of the offshore outsourcing partner have great experience in the detailed design process, are recognized for the expertise in their respective organizations, have international experience and have great experience in people management. (3) that the absorption capacity is enhanced if the offshore outsourcing partner is selected on the background of thorough research into whether or not the offshore outsourcing partner has the necessary experience in similar project types, constantly evaluation of the offshore outsourcing employees and employment of ALECTIA employees with strong ties to the host country of the offshore outsourcing partner. Overall this project paper concludes, that even though ALECTIA potentially has the possibility to offshore outsource a fair share of their services, they will not be able to do this right away, primarily due to the lack of standardization of their services and the lack of a sufficient knowledge management system.