How to Estimate Loss of Intellectual Property in Case of Outsourcing

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Gerrit Kubassa, Germany

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.


Andreas Fischbacher
Partner, Switzerland

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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