Originally Published MX November/December 2004

INFORMATION TECHNOLOGIES

Deciding when outsourcing is right—and when it's not—can be a major undertaking for medical technology executives. But using a process that models a company's possible scenarios can help to make even a complex decision simpler.

Rita Medical Systems Inc. (Mountain View, CA) is a medical device manufacturer that builds and markets its own radio-frequency (RF) generators and disposable needles for tissue ablation. Although the company had achieved high profit margins by manufacturing in-house, it was leaving money on the table because its high-cost Silicon Valley facility was operating under low-volume conditions. Volumes were growing, but not fast enough to cover the company's Silicon Valley overhead.

Rita Medical Systems president and CEO Joseph DeVivo.

Eventually, outsourcing became a serious option. Seeking outsourcing partners, the company entertained proposals from several contractors. Proposals received from outsource providers were significantly less expensive than Rita's loaded unit cost.