Part 2:
The next generation of outsourcing: From output to outcomes

Outsourcing transformed businesses from the 1990s onwards, as the world globalized. It remains valuable as a cost improvement tool. But outsourcing as we know it was designed for a different world. Then, the watchword was ‘specialization’, and one of the unwanted side-effects has been to break businesses into silos.

Today’s businesses are about cross-functional collaboration, and constant innovation in a rapidly changing world. A new outsourcing model is needed: one built for purpose for the 2020s and beyond, using new technologies and thinking.

Engineering Factories do not just shift work packages, they transform how engineering is done. They don’t just execute; they optimize, innovate, and industrialize performance with AI, automation, and cross-industry best practices. This is the next-generation outsourcing model for engineering.

Enter Engineering Factories

Capgemini Engineering is addressing this problem with ‘Engineering Factories’ – a whole new approach to outsourcing.

Each factory is designed around particular engineering domains and business goals, such as producing products at a specific cost or weight; or managing specific operations, such as the supply chain; or delivering specific capabilities, like Validation & Verification (V&V).

The factory is a single entity – or group of entities – that combines skills, assets and frameworks in that domain.

Each benefits from targeted investments in technologies and labs for prototyping, simulation, automation, and increasingly Gen AI – to create hyper-efficient processes that are hard to deploy at in house facilities.

Critically, whilst each factory has a focus, it works across all sectors. That is a radical change from traditional siloed outsourcing. Factory teams interact, allowing cross-fertilization of ideas and insight into new technologies. That changes the outsourcing game - from a team delivering a list of tasks, to a team that is constantly improving to deliver customer goals in the best, most efficient way possible. It's about outcomes, not just outputs.

Service centers that serve multiple industries – instead of being designed around one task – are inherently more innovative and adaptable, since they tap into a broader range of knowledge and technologies.

For example, a computer vision testing system developed for TV user interfaces has proven hugely valuable for automotive infotainment systems. Adapting these testing tools to in-vehicle infotainment proved much more efficient than developing them from scratch. But to actually do that, you first need people in your factory who are talking to other industries and know about the techniques they are using. A testing facility with a wide view of cross-industry testing possibilities can quickly identify if a solution already exists, reducing cost, time and risk.

This factory approach also allows flexibility across teams, which helps control costs. Because these factories perform processes that are complex, but not highly specific to one company, they can move people and teams between projects as needed.

The benefits of Engineering Factories vs traditional outsourcing

That allows us to offset the natural salary inflation impact on client projects, by recomposing team pyramids when needed, drawing on a wide pool of talents from across the engineering factory. It is also a lever to adapt to fluctuating business cycles without a constant cycle of hiring and firing. Of course, we also guarantee the confidentiality of clients’ IP through carefully designed security measures.

The scale of these factories also means they can take a systems-based approach to quality across the board. Often companies rely on training people in quality control for a specific product. That locks them into doing quality control at the specific places where the people and training are set up. But when quality is ingrained into a system – with quality gates, automated controls, and defined standards – even safety-critical components can be quickly moved to a lower cost, better located, or more efficient facility, without risk.

To manage outsourcing to our factories, we have a proven ‘lift and shift’ process. This does not involve

trying to replicate a company's capability elsewhere, but to understand the goals, set KPIs, and design an appropriate setup within our factories that will deliver the best long-term outcomes, not just the outputs.

And, yes, we also do the reverse - if you ever want to take things back in house or spin out the new capability.

In short, these factories allow our clients to outsource complex work packages quickly and efficiently, whilst providing long-term cost control, quality guarantees, and ensuring the work package continually benefits from ongoing technological innovation. In fact, we are so confident it works, that we commit to cost savings – often 30% or more – in the contract.

Capgemini
Engineering Factories

At the time of writing, we operate five engineering factories. They look after wide-ranging engineering products and processes, ranging from cars, to radars, x-ray machines, and planes. They employ over 30,000 engineers, with experience of very demanding engineering. We plan to create 10-12 such factories.

Design-to-X Factory: Helps companies design products to meet specific goals, such as engineering products for weight, cost, or sustainability targets, all whilst ensuring compliance.

Our Factory applies systematic, AI-driven optimization to meet specific design targets. It has delivered projects including battery module optimization, acoustic shields, and structural components to provide lighter, stronger, and more cost-effective designs – with some projects delivering 30% weight reductions.
Supply Chain Management Factory: A fully outsourced supply chain management capability that runs supply chains, delivering end-to-end management, optimizing for cost, quality, delivery, performance, sustainability, and compliance. We cover everything, from setting up and onboarding new suppliers, to managing inventories, real-time optimization, and arranging returns on rejected deliveries. For one customer, we work with their 2,000 suppliers worldwide, and have optimized 37 million shipments for cost and sustainability, saving approximately €4m and 150kt of CO₂.

Our existing factories include:

Product Sustenance and Obsolescence Management Factory: We manage non-differentiated product lines throughout their useful life, allowing companies to focus on their cutting edge, higher-margin activities – not just managing legacy products, but continually enhancing them.

For a medical OEM, we handle production, spares, repairs, software updates, customer support, and supply chain management. This includes ongoing product innovation, leveraging insights from multiple sectors to optimize designs, thanks to the factory’s cross-fertilization of ideas between teams. For example, we made a design change that reduced cost by 35% and extended useful life by up to 20%. In 2024, this factory delivered one million product changes, with most resulting in €0.5-1 savings per unit.

Regulatory, Quality & Compliance Factory: We take the hassle out of ever-evolving global regulatory compliance for industries like pharmaceuticals. We leverage a shared pool of resources, from PhD-level expertise to hands-on shop floor experience, ensuring that products meet reporting and compliance requirements.

The factory’s Regulatory, Quality & Compliance Line handles product compliance, including Periodic Vigilance Reports, Continued Process Verification, Product Quality Reviews/Annual Quality Reviews, and Stability Reports. We handle deviation and corrective and preventative action (CAPA) management, identifying and fixing unexpected changes or non-conformance issues, as well as resolving complaints.

The Commissioning, Qualification & Validation Line handles testing, verification and validation of computer systems (CSV), software (CSA), equipment and processes, and provides compliance-ready documentation for all of the above.

Technical Publications Factory: We simplify the process of creating and updating the technical publications needed by today’s complex products, from user manuals, to technical specifications, operational guides, maintenance procedures, and safety guidelines. Combining expertise with purpose-built Gen AI, we ensure content stays up-to-date, whilst keeping costs and time requirements under control.

Our work for clients in aerospace, defense and MedTech consistently delivers 30%+ cost savings through reduced manual work and optimized resource use, with 97% on-time delivery and stringent SLA compliance.