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Made in the USA, again

October 25, 2011 at 2:50 pm PST

Finally, some good news. Amidst the standard fare of predictions of the inevitable decline and fall of US manufacturing, an interesting and encouraging 2011 report has been authored by the Boston Consulting Group (BCG) called “Made in America, Again.”

According to the report, “Manufacturing is expected to return to America as China’s rising labor costs erase most savings from offshoring.” As US states become cheaper locations to manufacture goods compared to other developed countries, the report suggests that by 2015 manufacturing in some parts of the US will be just as economical as manufacturing in China.

The key reasons listed are: Read More »

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Borderless Networks and Manufacturing

So here we are, in the middle of March Madness. Lots of people that don’t normally follow college basketball, but still a great social environment and an opportunity to get together and pretend we know the teams we all picked in our brackets. Sometimes we pick based on “loyalty” and other times there are other reasons.  We all have various “borders” we deal with every day.

So, bring on Borderless Networks. In the manufacturing area we still tend to think of a “border” between the factory and the business. After all, how can those people in the front office know what we need in the factory, right? Well, that separation gets smaller and smaller every day. Why? Because we’ve blurred the border. Sure, there are appropriate firewalls and security between the various layers. But every day we run into people that tell about needing data from the plant, from the machine, from the supplier, from the sales force, from the channel, from the customer. And sometimes we’re not in the office, we may be at home, at a different supplier, in an airport, at a concert or ball game with our kids.

The point becomes, there is data there and I am not there but I need to make a call and affect my plant productivity or answer a question from my CEO because there is a big opportunity or a major customer disappointment about to happen.

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The Automation Imperative

So what’s with the increased interest in automation lately?  No doubt you’ve noticed there have been more than a few blogs already written on this site and others espousing the importance and value of automation.  (“Meet the Newest Member of Your Data Center Operations Team,” Tere’ Bracco, November 8, 2010 and “Mad Scientist Alert,” Christopher Kennessey, October 27, 2010) What trends lie behind this demand?  Three come to mind:

1)     Disappearing cost-benefit of offshoring

2)     Increasing skills shortage

3)     Growing adoption of virtualization/cloud technologies

And each of these deserves a bit more exploration. Today, I will focus on offshoring and leave the other two for future blogs.

Moving IT operations to low-cost parts of the world has been a very lucrative exercise for the past two decades.  However, the financial benefits that were obvious 10 years ago are mostly gone thanks to increasing salaries in India, China, and other emerging countries combined with rising hassle costs (compliance, regulations, security, communications, language, and management) associated with off-shoring.  Here is a quote from Sramana Mitra who wrote a very well publicized and much debated article in 2008 titled “The death of Indian outsourcing” (http://www.sramanamitra.com/2008/01/22/death-of-indian-outsourcing/).  She writes “Rising wages in the most popular offshore centers (especially Bangalore), are eroding the cost advantage that drove this business to India in the first place. When the practice began, there was a 1:10 cost advantage. Today, this has dropped to 1:3. Over the next 5 years, perhaps, it won’t make sense to send work to India anymore.”  Further complicating the offshoring play is the 20-40% attrition rates seen in many of these low-cost countries.

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Meeting Old Challenges in the New Normal

So it’s more or less official: the recession ended in June 2009. Anyone watching IT departments this year could have told you that. When the economy ramps up, there’s a shift in focus from cost savings and maintenance (back when I was an IT manager, we called it “bunker mode”) to innovation that moves the business forward. And in 2010 we’ve certainly observed that. IT departments are concentrating not only on streamlining operations and lowering costs—an absolute mandate of the recession—but also on innovation that leads to better business operations, greater productivity, and increased revenues—a clarion call of recovery.  Now, this innovation can be in business practice or improved technology—and most likely both—but it almost always begins with IT. Streamlining IT functions, managing assets carefully, and ensuring uninterrupted operations can lower costs, increase reliability, and free resources for research, development, and innovation.

 So it’s back to business as usual running IT departments and data centers in an expanding recovery, right? Wrong.

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