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REV: AUGUST 23, 2004

JEFFREY T. POLZER
ALISON BERKLEY WAGONFELD

Flextronics: Deciding on a Shop-Floor System for
Producing the Microsoft Xbox
It was March 2001 and Jim McCusker was getting restless during the long flight over to Hungary.
He had just spent a few days visiting Flextronics’ North American operations in Guadalajara, Mexico, and now he was on his way to Flextronics’ central European facilities. He was planning to spend two days there before heading back to his primary office at Flextronics’ U.S. headquarters in San Jose,
California. As the senior account manager for Flextronics’ relationship with Microsoft, McCusker spent much of his time traveling between the two facilities, one in Mexico and one in Hungary, that would be producing the new Xbox video game system for the 2001 holiday season.
When McCusker first took charge of the Microsoft account in November 2000, he quickly realized that Flextronics had committed to an extremely aggressive schedule for producing the Xbox. The two facilities designated to build the product would have to work together very closely to achieve
Microsoft’s goal of a simultaneous North American and European launch. The Microsoft Xbox was
Flextronics’ first truly global project, and McCusker knew that it would be important to standardize certain elements among the Flextronics facilities. In fact, in bidding for the business, Flextronics management had committed to Microsoft that they would use the same shop-floor management system in both facilities so that Microsoft could track all the production statistics more easily.1
McCusker initially thought it would be relatively straightforward to meet Microsoft’s requirement for a single software system in Mexico and Hungary. During the previous year, the head of North
American operations, Mike McNamara, and the vice president of companywide information technology, Mike Webb, had chosen a software program by a California start-up called Datasweep as the new corporate shop-floor system. The facility in Guadalajara, Mexico, now run by McCusker’s former manager, Matt Ryan, was already up and running on the system for use with other products being manufactured in Mexico. Although there were some areas for improvement, the software appeared to be working. McCusker assumed that the Hungarian facility could install the Datasweep software over the next few months, thereby meeting Microsoft’s requirement and laying the groundwork for Flextronics’ global coordination.

1 A shop-floor management system includes hardware and software that tracks production inputs and outputs. More information can be found on page 7.
________________________________________________________________________________________________________________
Associate Professor Jeff Polzer and Alison Berkley Wagonfeld, Director of the HBS California Research Center, prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Some information and data have been modified to enhance the case’s teaching objective.
Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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By January 2001, McCusker realized the situation was more complicated than he had initially anticipated. During his discussions with the central European team, he found them quite resistant to adopting the Datasweep software. Team members were already using a “home-grown” system called Virtual Factory and strongly preferred to continue using the software they had designed inhouse. Humphrey Porter, the head of the central European operations, and his team made it clear that they had no interest in switching and would only do so if it was “mandated” by Flextronics CEO
Michael Marks.
It was now March, and McCusker considered the growing number of discussions and e-mails targeted toward this issue in the past months. He knew that they all had a difficult decision to make.
Both facilities were already manufacturing other products using their own software, and neither was open to switching prior to producing the Xbox. Yet, they could not afford to defy Microsoft’s requirement for a single system. In addition, McCusker was aware that several internal and external parties were watching this project closely to gauge Flextronics’ ability to coordinate a large-scale global project.
The Xbox production start date was drawing nearer, and they needed to make a decision about the system soon. It was critical that McCusker pursue an effective process for reaching this decision, as he would be working closely with the people in Mexico, Hungary, San Jose, and at Microsoft for the foreseeable future. Although they had conducted numerous analyses to try to find an optimal solution, no single alternative had emerged that was convincingly superior to all the people involved.
In the face of this ambiguity, McCusker wondered whether and how to involve the variety of people who were keenly interested in the outcome of this decision. He first had to decide on his trip to
Hungary how to approach Porter. If his discussions with Porter did not resolve the problem,
McCusker would have to consider three general options:
1.

Escalate the decision by going to his boss in San Jose, McNamara, and trying to get him to decide how to resolve this issue.

2.

Convene a group meeting including all the relevant parties and try to get them to agree to a joint decision.

3.

Go to Microsoft and try to persuade them to accept two different shop-floor systems for producing the Xbox in North America and Europe.

McCusker settled back into his seat on the airplane and wondered what he should do in order to reach a decision that was acceptable to all parties involved.

Flextronics Background and Company History
Flextronics was originally founded in 1969 as a family business that provided overflow manufacturing and assembly services to nearby Silicon Valley companies.2 Sold in 1980 to a new management team, the business established a number of automated manufacturing techniques and became known as a contract-manufacturing firm. In 1981, management set up a facility in Singapore, making it one of the first American manufacturers to move offshore. By the mid-1980s, Flextronics had expanded its capabilities to provide design, procurement, and testing services that would complement its manufacturing. The company went public in 1987 and continued to grow until it
2 This section about the history of Flextronics has been adapted from material found on the Flextronics Web site,
. The information was originally published by Robert J. Serata for a book by Sally Richards entitled
Silicon Valley: Sand Dreams and Silicon Orchards (Carlsbad, CA: Heritage Media Corporation, October 2000).

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became caught in the Silicon Valley downturn in the early 1990s. By this time Flextronics had several operations in Asia as well as the United States, and management concluded that the only way to save the company was to shut down the U.S. operations and privatize the company with Singaporean headquarters. Marks became chairman of the “new” Flextronics in 1993 and CEO in January 1994. Later in 1994 he took the company public again and established a strategy to rebuild the company’s U.S. presence.
Marks led an aggressive growth strategy, acquiring 53 operations between 1993 and March 2001.
(See Exhibit 1 for a list of all Flextronics’ acquisitions between March 1994 and March 2001.)
Flextronics also expanded its purchasing and engineering capabilities during this time and grew from
3,000 to 70,000 employees as of December 2000. In the 12 months ended March 2001, Flextronics revenues were $12 billion. (See Exhibit 2 for historical financials.)

Competitors
Flextronics had several large competitors that provided similar outsourcing services to high-tech companies. Collectively, the companies made up an industry called electronic manufacturing services (EMS). Flextronics’ largest competitors were Solectron, Celestica, Jabil, and Sanmina. Most of these companies had more experience than Flextronics in building high-end products such as personal computers. Solectron was the largest of Flextronics’ competitors, with approximately $16 billion in sales in 2000.
The EMS industry was growing rapidly during the late 1990s. According to Marks, “Key drivers of success were low-cost manufacturing, high-quality output, speed of setup and production, and customer relationships.” Marks also noted that it was increasingly important to operate on a global basis. Not only was it important to have facilities in low-cost labor centers, but a company also needed to be able to coordinate among its various facilities.

Locations
By the end of 2000, Flextronics had over 100 facilities in 28 countries. (See Exhibit 3 for a list of all
Flextronics locations.) Although the company was headquartered in Singapore and had a corporate office in San Jose, the majority of the employees worked at one of the manufacturing facilities.
Several of these facilities were combined into “industrial parks”—a concept pioneered by Flextronics in which outside suppliers colocated with Flextronics’ manufacturing facilities on a single, large campus. Positioned in low-cost labor markets, industrial parks were designed to eliminate time delays and transit costs typically associated with manufacturing electronics products.
In 2000, Flextronics had three industrial parks, in Mexico, Hungary, and China.

Guadalajara, Mexico Mike McNamara, who was responsible for North American operations, led the design of the Guadalajara facility in 1996. In selecting the site, McNamara was looking for access to low-cost labor but wanted an educated and motivated workforce. The specific location was selected because of its proximity to good universities, and Guadalajara was regarded as “a nice place to live in Mexico.” Construction on the first building began in May 1997. By September 1997,
Flextronics was already working on communications products for Lucent, even as the building was being completed. By 2000, Flextronics had 1.3 million square feet of space.
Sarvar, Hungary

The Hungarian industrial park was developed by way of a 1997 acquisition of a Philips’ subsidiary called Neutronics. (See Exhibit 4 for a press release about the acquisition.)
Flextronics acquired all three of the Hungarian manufacturing facilities as well as the headquarters
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building 150 miles away in Austria. As part of the transaction, Neutronics’ managing director,
Porter, joined Flextronics as head of central European operations. Flextronics acquired Neutronics in order to add low-cost production capabilities in Europe. According to Porter, “The combination of
Austrian management and Hungarian operations provided a strong platform to serve the needs of the European market.”

Doumen, China Developed as a new project in the late 1990s, the industrial park in China consisted of 10 buildings containing printed circuit board manufacturing and assembly, injection molding, and product assembly. Flextronics management believed that the China industrial park provided the lowest-cost manufacturing opportunity in the world. However, given the distance between the Chinese factories and the large European and U.S. consumer markets, management believed the facility was best suited to projects for which the time schedule was a bit more relaxed than the Xbox timeline.

Corporate Culture, Management, and Organizational Structure
Flextronics CEO Marks prided himself on running an entrepreneurial, nonbureaucratic company.
A graduate of Harvard Business School, Marks did not believe in organizational charts—he thought they stifled creative thinking by “putting a box around people.” He acknowledged that his policy
“could create a bit of chaos,” but he wanted an environment in which “decisions got made by strong individuals wherever they are.” Marks also believed that “most teams have too many people and are unable to make decisions.” He wanted people to be passionate about their jobs and to care about
“getting things done.” He generally hated “process” because it took too long. He commented that he
“found it frustrating to work with companies that needed 20 weeks and 20 people to make each decision.” He advocated an entrepreneurial culture where decentralized decision making was the norm. In fact, Marks perceived the culture of Flextronics as one of its competitive advantages. He believed his company was well-positioned to respond quickly to customer needs, and he wanted his employees to experiment and come up with innovative product and manufacturing solutions.
The company was primarily run by people with responsibility for operations in a particular geographical area. In late 2000, senior leaders at the company included McNamara as president of the
Americas and Porter as president of central Europe. (See Exhibit 5 for selected management bios.)
The company had a few “corporate” executives, including Robert Dykes as CFO and head of the
Systems Group and Mike Webb as vice president of information technology. (If one were to create an organizational chart from late 2000, it would look something like Exhibit 6.) Marks encouraged management to visit the facilities in other countries, and he hosted a three-day event each year to bring together the top 150–200 executives at Flextronics. Despite such events, the rapid growth and geographical dispersion of the company made it challenging for people to build relationships across the company. For example, although Porter and Ryan knew each other prior to the Xbox project, they had only seen each other in person three or four times during 2000. In the absence of meeting face-toface, employees relied on e-mail and phone calls as the primary means of communication.
When a new project began within Flextronics, a project team would come together to address the specific needs of the customer. Although Flextronics had a small department of account managers in late 2000, Marks admitted, “The group was dispersed throughout the organization and, as a whole, it did not have much power.” Nevertheless, the account manager was a critical intermediary between
Flextronics and its customers. Often this manager would be selected from other parts of the organization based on the needs of a particular project. Once engaged in a project, Flextronics’ account managers wielded a considerable amount of influence because they represented the “voice of the customer.”

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In the case of the Microsoft Xbox, McCusker was selected as the account manager for several reasons. First, he had moved to San Jose in 1999 to manage the accounts of the San Jose operations customers and was familiar with how Marks wanted to manage global relationships. Second, he had experience working in Europe and with Porter—he started his Flextronics career in Scotland in 1997 at a company called Altatron that was purchased by Flextronics in 1998. Third, his previous manager, Ryan, was now in charge of the Mexico facility, so McCusker would not need to build that relationship from scratch. In fact, McCusker’s relationship with Ryan was so strong that he believed he needed to proactively show that he was no longer working only for the North American operations. And finally, McCusker was familiar with some of the work that Flextronics had already done for Microsoft.

Customers
Marks pushed his company to be extremely customer focused. Given Flextronics’ critical role in producing its customers’ core products, it was important to have open communication and a clear understanding of how Flextronics and its customers would work together. Companies perceived
Flextronics as a “virtual manufacturer” that could provide design, engineering, manufacturing, and logistics capabilities. According to Marks, “Flextronics lets original equipment manufacturers
[OEMs] focus on new product innovation and concentrate more on their core competencies—such as research and development, sales, marketing, and branding—and less on manufacturing and distribution.” Moreover, Flextronics’ economies of scale allowed it to manufacture products at significantly lower cost, helping the OEMs to save up to 20% of their previous production costs. At the end of 2000, some of the products manufactured by Flextronics included cell phones and pagers for Motorola and Nokia, printers for Hewlett-Packard, and printed circuit board assemblies for Cisco.
Flextronics served most customers from a single geographic location. For example, when building the mouse for Microsoft, Flextronics used its Doumen facility to provide injection molding and assembly services. However, Marks was interested in growing by providing more global services for its customers. He believed that “learning how to build and launch the same product in two markets simultaneously could be a competitive advantage.” As described in a November 2000 analyst report,
“With its global footprint, Flextronics is among the industry leaders in total capacity and is extremely well represented in low-cost geographies in Eastern Europe, Asia and South America with proximity to its major end markets.”3 It was in this context that the Microsoft relationship was particularly important. Winning the Bid to Produce Microsoft’s Xbox
Flextronics started working with Microsoft in the early 1990s, manufacturing the mouse for personal computers. By the mid-1990s, Flextronics was also making about $100 million worth of keyboards and game peripherals (e.g., joysticks) for Microsoft each year. In late 1999, Microsoft invited Flextronics to bid against seven other companies to provide manufacturing services for the
Xbox video game console. The Xbox was Microsoft’s first foray into sophisticated hardware—the product was being designed to play high-end video game programs that could look as real as a movie. By early 2000, Microsoft had established certain project guidelines. They wanted the Xbox to contain a DVD player, Ethernet Port, 733-MHz processor, and a high-end graphics chip. They also

3 Patrick J. Parr, “Electronic Manufacturing Services: Flextronics International Ltd.,” ING Barings.

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wanted it to be no larger than a standard videocassette recorder, sell for under $400, and be on retailers’ shelves by October 2001 for the 2001 holiday season.4
Flextronics set out to bid for this ambitious project by pulling together a bid team including
Marks, McNamara, Dykes, and Jim Sacherman, the CEO of a recently acquired design company called Palo Alto Products. The bid team prepared a quote and met with Microsoft representatives in
Guadalajara in January 2000. Although Flextronics had less experience in personal computer products than most of the other bidders, Microsoft was interested in Flextronics because the two companies had a good manufacturing track record. Flextronics also had design and test skills necessary to develop the product. After a number of follow-up discussions and in-person visits in early 2000, Microsoft selected Flextronics as the Xbox manufacturer. According to Rick Vingerelli,
Microsoft’s director of manufacturing for the Xbox, “We initially thought that Flextronics did not have the design capabilities and experience in systems infrastructure, but they ultimately convinced us that they could offer a credible solution. In fact, we finally awarded them the business after Bob
Dykes showed us Datasweep and committed to installing it in Guadalajara.”
By May 2000, Marks, McNamara, Sacherman, and the Microsoft team decided that the Xbox would be built in both Mexico and Hungary in order to meet the needs of both the North American and European populations in the most cost-effective manner. According to McNamara, “If we had to air-ship the product to the final destination, that could tack on $25–$30 per box and dramatically reduce both companies’ abilities to make any profit.” The Microsoft team was hoping to ship approximately 3 million units of the Xbox (priced at $299 retail) during the first six months.

Ramping Up to Launch the Xbox
The original plan was to start building products simultaneously in Mexico and Hungary in late summer of 2001. By early 2001, Microsoft had selected most of the key components for the Xbox but was still in the process of finalizing how the pieces would fit together in the box. The early Xbox prototypes were built in Flextronics’ San Jose Product Introduction Center, which specialized in building small-volume engineering prototypes. The plan was to finalize the product in San Jose and then ramp up production gradually in Mexico and Hungary over three to four months. During this time, however, it became obvious that chip-level design delays were not going to allow the luxury of this three- to four-month production ramp. With the holiday season approaching, Vingerelli and
McCusker, with consultation from McNamara and Ryan from Flextronics and others at Microsoft, agreed to shift prototype development from San Jose to the Mexican facility, where they would keep creating prototypes until they found the best one to use for retail launch. In the meantime, both the
Mexican and Hungarian facilities would have to gain experience on current prototypes of the Xbox in order to prepare to produce the final version. Both sites would continue to select suppliers, assemble equipment, and hire workers in line with the original plan.
The original production ramp plan was then pushed back to allow time to finalize the design and physically relocate prototype development to Mexico. The revised plan was to start building first in
Mexico with a select group from the Hungarian facility—consisting of key people from engineering, manufacturing, testing, quality assurance, and information technology—participating and feeding information back to the Hungary production team. Then, members of the small Hungarian group in
Mexico would return to their own facility and start building in Hungary three to four weeks later using the same process. As a result of this revised plan, fewer products would be available in Europe in October and November 2001, but this was deemed an acceptable solution to the compressed time
4 Dean Takahashi, Opening the Xbox: Inside Microsoft’s Plan to Unleash an Entertainment Revolution (Prima Publishing, 2002), pp.

149–162.

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schedule. Despite these delays, Microsoft was unwavering in its requirement to ship by the 2001 holiday season.

Putting Together the Xbox Project Team
As the reality of meeting the various requirements started settling in, Flextronics management decided they needed to expand the dedicated team for the project. In November 2000, they had selected McCusker as the project team leader and had authorized him to organize a cross-functional and cross-regional project team. Three people had already been assigned to the project—Roberto
Tongo from San Jose, Josef Kaiser from Hungary, and Alejandro Escoto from Guadalajara. These three managers were meant to coordinate among the facilities and stay in constant communication with McCusker. By early 2001, McCusker had expanded his project team to include a representative of each function (e.g., materials, procurement, engineering, systems infrastructure, testing, quality assurance, and operations) from both Mexico and Hungary. In addition, he had a functional leader in
San Jose who would be communicating with his or her functional counterpart in each factory. For example, Brad Vandehey was assigned to McCusker’s project team in San Jose in order to focus on the information technology issues associated with producing the Xbox. (See Exhibit 7 for an overview of the expanded project team.)
One of McCusker’s biggest concerns was that these two facilities had never worked together in the past, and very few people other than those at the most senior level knew their counterparts at the other facility. In order to help overcome this distance, McCusker encouraged daily discussions among Tongo, Kaiser, and Escoto and weekly conference calls for each of the functional groups. He also planned to travel frequently between the two locations and asked that managers from each facility visit the other at some point in the next few months.

Evaluating the Two Shop-Floor Systems: Datasweep and Virtual Factory
Because McCusker had not been involved in the Xbox bidding process, his first priority was to learn every detail of the bid that Flextronics had presented to win the Xbox business. One of the first things that jumped out at him was that the IT solution described in the bid did not already exist at
Flextronics. As he explained, “At the time of the Microsoft bid, Flextronics was not global with respect to our systems infrastructure. Nevertheless, we committed that we could be global for this particular project. We painted a futuristic vision of what an integrated shop-floor system could do.
But unfortunately, this system was not already in place.” Once he realized this, McCusker set out to determine precisely what Microsoft required for the shop-floor system.
He found that there were a number of basic needs Flextronics would have to meet that were considered part of a “shop-floor system.” First, Microsoft wanted a system that could track the
“ingredients” in each Xbox. For example, Flextronics would need to record the serial number and specific type of each hard drive and DVD player that was put into each box. Second, Flextronics was asked to track the specific assembly line and work shift that created each box. Third, Microsoft wanted to collect quality assurance information throughout the manufacturing process. This included calculating the process yield at various points throughout the line, as well as testing various components of the product as it was being assembled. All of this data would then be archived in case there were quality problems or potential recall issues in the future. As Webb explained, “To meet
Microsoft’s requirements, we would be tracking one piece of data every second.”

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A fourth requirement was that Microsoft wanted the information from all 14 product lines at both facilities to be collected in the same manner and stored on the same system. In fact, Microsoft felt strongly that the same system be used to collect information in both facilities. According to
Vingerelli, “I didn’t care which software was used as the underlying system, as long as it was the identical one in both Mexico and Hungary. We could not afford to have product information variations between the two facilities.” And finally, Microsoft wanted a single access point that provided visibility into all the information “anytime, anywhere.” This meant that Flextronics needed an interface that could be accessible through the Internet and ultimately through mobile devices.

Datasweep in Mexico
In the context of these requirements, McCusker reviewed what was currently being used at
Flextronics. During the previous two years that McCusker had been working out of San Jose, he had become familiar with a shop-floor system that Flextronics had started licensing in 1999 from a startup called Datasweep. Founded in 1998, Datasweep created software specifically designed to help contract manufacturers and provide information to the engineers and technicians who were managing production and operations.
In early 1999 a few managers from one of the smaller facilities in San Jose had heard about
Datasweep and decided to experiment with it. They found that it was superior to anything they had tried and introduced the company to McNamara and Webb, who were both impressed. Webb explained that “prior to coming across Datasweep, Flextronics had tried a number of different software solutions and found that none provided enough versatility.” By late 1999, Flextronics had started using Datasweep in several of its Silicon Valley factories and started working on plans to roll it out to the Guadalajara industrial park in 2000. Within Flextronics, McNamara indicated his preference that Datasweep be the shop-floor system of choice, and outside the company he publicly demonstrated his approval of Datasweep in various news articles. In November 2000 Datasweep had raised $30 million in venture capital from top-tier firms, and the start-up company had received numerous accolades in the press. Datasweep was commended for its scalable architecture based on a
Microsoft software platform.
By the end of 2000, Datasweep was being used in eight factories at Flextronics, and McNamara and Webb planned to introduce it into Flextronics’ biggest production facilities around the world. As
McNamara explained, “The Americas tend to take the lead for 90% of the IT activities at our company.” Under the direction of Ryan, Guadalajara had started using the software on several production lines. It took approximately four weeks to roll out the software, and aside from a few bugs the experience had been positive to date. Simple implementations of this type of software could be in the $100,000 range while complex implementations could cost well over $1 million. McNamara noted, however, that “Datasweep tended to need a great deal of customization, for which more complex implementations had to be done by the professional services team at Datasweep. They charged on an hourly basis, so it could get very expensive.” All the expenses were borne by the factory that used the software, as each region had its own profit and loss responsibilities.

Virtual Factory in Hungary
When McCusker reviewed the situation in January 2001, he believed that Datasweep was the logical choice as a shop-floor system for both facilities. During a visit to Hungary at the end of the month, he suggested they move forward with implementing Datasweep in Hungary. The opposition surprised him. He learned that the Hungarian operations had been using a shop-floor system called
Virtual Factory that they had built themselves in 1999. Originally designed by a few engineers for a
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large medical device customer, Virtual Factory had evolved into the generic system used by the
Flextronics factories in the region. The Hungarian team was pleased with the functionality of Virtual
Factory—it was a simple program and performed the basic tracking needs of the operation. Porter explained, “Although the system was not scalable in its current form, it was inexpensive and effective. We only needed five engineers to maintain the system, and we didn’t have to pay any licensing fees.”
Prior to McCusker’s visit, the Hungarian team had not heard of Datasweep and the North
American team had not heard about Virtual Factory. According to Porter, “This was not entirely surprising given the number of acquisitions that Flextronics had done in the previous few years and the decentralized culture of the company.” As McCusker provided more details about Datasweep, including the costs, the Hungarian team became increasingly resistant to the idea of switching.
Porter believed that “At some level, McCusker encountered the ‘not invented here’ syndrome when talking to our team. But at the same time, we really believed that we had shop-floor software that worked well and saw no reason to switch to a new, unproven system.”
Porter managed a team of seasoned engineers who were proud of their enhancements to Virtual
Factory. They had invested time in customizing the program over the last few years and found it to be particularly well-suited to Flextronics’ needs. In addition, Porter’s team members had many more years of experience than their engineering counterparts in North America, and they believed that their seniority should give them credibility in knowing which solution was best. Porter admitted that his team’s confidence often came across as arrogance, but he attributed some of that to a cultural issue. Nevertheless, interactions about this issue between lower-level engineers on the two teams tended to become contentious. As a result, it seemed unlikely that the Hungarian team would embrace Datasweep.
When McCusker talked with an American representative, Greg Keese, who was temporarily working as a senior sales executive on Porter’s team, he heard the same story. Keese confirmed that the Hungarian team believed Virtual Factory could perform the same basic functions as Datasweep and could be modified to meet the Microsoft requirements. At McCusker’s request, Vandehey (the IT representative from McCusker’s team) did his own analysis and agreed that Virtual Factory did offer similar functionality to that provided by Datasweep.

Decision Alternatives
Once back in San Jose, McCusker reviewed the situation with his team. Initially, it seemed that there was only one option: convincing Hungary to switch to Datasweep. After reviewing Vandehey’s analysis about the comparability of the two systems and after hearing the opposition from Porter,
Keese, and several others from Hungary, he concluded they had to consider two other solutions: replacing Datasweep in Mexico with Virtual Factory or convincing Microsoft to allow the two operations to use different systems. McCusker knew that each option had its own pros and cons.

Datasweep in Mexico and Hungary
Putting Datasweep in both locations would give Flextronics a common system developed by a focused software company. Marks had communicated that he was “philosophically opposed to internally developed projects that were not part of our core business. We are fundamentally a manufacturing company, not a software company.” He liked the idea of using software from a company that was entirely dedicated to building shop-floor systems for companies like Flextronics.

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Moreover, putting Datasweep in Hungary was part of McNamara’s master plan of introducing the software to all large-scale Flextronics factories. The IT team in San Jose believed that Datasweep was an effective, scalable solution that could be used globally. McCusker was also aware that Microsoft had expressed its satisfaction with Datasweep when Flextronics was bidding for the business, and
Microsoft already assumed it would be used in both locations.
At the same time, McCusker was concerned about Hungary’s opposition to Datasweep. He was not that familiar with the management team in Hungary, but he knew they had a reputation for
“digging in their heels.” He was unsure if there was anything he could do to make them want to switch without Porter’s approval. He understood their concern that Datasweep was a more expensive solution and knew that costs could rise quickly if a great deal of product support and customization were required. In addition, this would be Datasweep’s first European implementation, so there might be some unforeseen challenges in adapting the Datasweep software for the Hungarian operations. And finally, given the complexity of the Xbox and the inherent learning curve with any new software, there was a risk that switching from Virtual Factory to Datasweep could destabilize the operation for several crucial weeks. McCusker knew they did not have time to spare.

Virtual Factory in Mexico and Hungary
The Hungarian team proposed an option that the North American team had not even considered—setting up Virtual Factory in Mexico. One of the advantages of this solution was cost, a key competitive advantage in this industry. While Flextronics would need to hire some additional engineers to modify the software, there would be no ongoing license fees to an outside company.
Flextronics would also avoid the inevitable upgrade costs and professional services fees.
The
Hungarian team enjoyed having control over the software and believed that Mexico would enjoy this as well. Rather than having to contact Datasweep and hope it would honor a request for a new feature, the team could make its own changes as needed. As McCusker explained, “The Hungarian team liked that they could design the software to meet their own specifications.” In addition, unlike
Datasweep’s, the software had been used for several years, so most of the bugs had been discovered and fixed.
One of the largest drawbacks of this solution was that Virtual Factory had no credibility outside of
Hungary. The Flextronics executives and IT team had never heard of or seen the software until this situation arose. They had a hard time believing it could work as well as the sophisticated platform being built by Datasweep. Virtual Factory had never been used in any other operation, so it was not clear how well it would transfer to a new location. Unlike Datasweep, it was not designed to be used by multiple licensees. As a result, there was little documentation, and all the knowledge about the system was stored in the heads of a few individuals. And finally, the Mexico team was relatively young and inexperienced and had just learned how to use Datasweep. It was unclear if it could make the transition to new software in an acceptable time frame. This timing was critical because of the decision to build the Xbox first in Mexico—the Guadalajara factory had to be ready to start manufacturing by August.

Datasweep in Mexico and Virtual Factory in Hungary
The third option was allowing each team to continue using the software that it already had in place. This solution created the least amount of disruption for each facility. It also reduced the risk of pushing one of the locations to use a new system during the compressed time frame of this highprofile project.

10

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

403-090

McCusker also saw a number of disadvantages to this solution. Given his role as the primary liaison with Microsoft, he was acutely aware that this option did not meet Microsoft’s requirements for a single software platform. During his daily conversations with Microsoft executives, they were getting anxious about this issue of choosing a system, and they continued to reiterate their insistence on a single system. He had heard from his IT team that there might be a way to pull selected data from each system into a common “portal,” but the data would be collected differently by each facility.
He was concerned that Microsoft was going to start doubting its selection of Flextronics given the company’s lack of progress in demonstrating a solid systems infrastructure platform.
In addition to the Microsoft issue, McCusker was concerned that he was not achieving his charter of finding “global synergies.” McCusker was concerned that the option to let both facilities use their own software set a bad precedent for future global projects. If Xbox-like projects were the future of the company, they needed to figure out a way to standardize among multiple facilities.

Process for Making a Decision
Throughout February, McCusker gathered additional information about each of the options.
Under Vandehey’s supervision, a small IT team from San Jose reviewed the Virtual Factory software in greater detail and concluded what was originally suspected: while the software seemed to have most of the basic functionality of Datasweep, it would need a great deal of modification in order to work at another location. At the same time, another group from San Jose reviewed the pricing of
Datasweep. This group also confirmed what was suspected: it would cost $2 million–$3 million to install Datasweep in Hungary, and there would be ongoing fees for maintenance and upgrades.
When McCusker asked Microsoft if it would share some of the expense, he was told, “No. Based on your bid we had already assumed you had a global system in place. It is Flextronics’ responsibility to make good on your commitment.” McCusker also investigated the “portal” concept and found that it might be possible for several engineers to develop a program to gather similar types of data from both software packages. The data could then be deposited on a separate Web site that Microsoft could access. It was still unclear how much work it would require to do this, and he suspected that
Microsoft would veto this compromise.
Throughout this evaluation process, McCusker stayed in touch with Webb, seeking his input along the way. Webb worked to clarify each of the options. He spent time negotiating pricing with
Datasweep while also reviewing what the portal solution might entail. In addition, Webb personally traveled to Hungary three times in order to gather more information.
By early March, McCusker felt they had all the data but still did not have a decision. He was starting to feel tremendous pressure from Microsoft, as the manufacturing start date was nearing. As
Microsoft’s Vingerelli described it, “I was starting to feel as if Flextronics was putting our launch at risk over this decision. Time was slipping by, and I kept getting questions from others at Microsoft about why this was still unresolved.”
McCusker had just spent a few days down in Mexico, and now he was on his way to Hungary.
His goal was to get this decision resolved soon. While in Mexico, he met with Ryan, his former boss and head of the operation. Ryan continued to believe that Datasweep was the best choice. In fact, given all that was going on down in Mexico, he expressed concern that switching to a new system now could put the whole project at risk. As he was getting on the plane to Europe, McCusker had a sense he would hear the exact same argument from Porter as to why they should use Virtual Factory.
Porter believed that the issue needed to be resolved, as it was getting distracting. He explained, “At the management level, we were trying to get all the facts, but the engineers at both locations were
11

403-090

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

getting increasingly frustrated. I could see that my team was starting to come across as selfopinionated and overconfident, particularly because they were more experienced than their counterparts in Mexico.” Webb reiterated that he had a hard time envisioning the Hungarian team fully supporting the Datasweep solution. McCusker could see that both teams were starting to show their aggravation. He commented, “I was getting concerned about alienating whichever team ‘lost.’ I knew that the teams needed to work together on an ongoing basis to make this project a success, and
I felt a great deal of pressure to keep relations civil.”
Amid these concerns, McCusker was thinking that it might be time to escalate this decision. When he talked with McNamara a few weeks before, he heard that McNamara would prefer Datasweep but
“was not prepared to impose the decision on Hungary.” McNamara elaborated, “If I am going to force a decision, I better be very sure it’s the right one.” Given that McNamara felt uncomfortable imposing a decision, McCusker felt even less comfortable trying to do so. McCusker wondered if he should go back to McNamara and insist that he—or even Marks—decide. One group was bound to be upset with the result—was McCusker the one to decide if it should be Mexico, Hungary, or
Microsoft?
Another alternative was to attempt to convene the key individuals in one place and force a resolution. There had been a number of fiery e-mails and one-on-one conversations—maybe a group session would be more effective. It might be difficult to get everyone in the same room given the travel distances, but perhaps while McCusker was in Hungary he could set up a conference call with
McNamara, Webb, and Ryan along with Porter and someone from his team from Europe. As
McCusker thought about this, he remembered how Porter had described his own team as “selfopinionated and arrogant”—given this predisposition, McCusker wondered whether a group session could be productive.
McCusker also wondered whether Microsoft should be involved in the process of making this decision, and if so, how. He even considered asking Microsoft to decide. The previous week he had gone so far as to broach the subject with Vingerelli but was told, “Flextronics needs to take responsibility for this decision. If Microsoft makes it, we will be blamed if anything should go wrong.” Vingerelli admitted, however, that he had started getting calls from various people at
Flextronics who were lobbying for a certain outcome. Maybe McCusker should talk to Vingerelli again about this.
As the plane traveled across the Atlantic, McCusker decided to put together a plan. He would be seeing Porter the following morning and wanted to be prepared to discuss the issue with him and, in the absence of a resolution, communicate how a decision was going to be made. McCusker pulled his notebook out of the seat pocket in front of him and found a blank sheet of paper. He took a sip of wine, found a pen, and started to write down his thoughts.

12

403-090

Exhibit 1

Flextronics Acquisitions, March 1994–March 2001

Date

Acquisition

Location

Type

3/01

Assets from Motorola

India

OEM Divestiture

2/01

Ojala-Yhtyma Oy

Finland, China

Enclosures

Revenues ($000) Price ($000) Employees
< 25

--

--

PCBA for mobile phones

90

150

--

Enclosures for telecommunications and industrial markets

2/01

Wave Optics Inc.

Santa Clara, CA

Optics

< 25

--

--

1/01

Li Xin Industries

Asia

Plastics

100

69

1,700

1/01

Fico Fiber Optics

Westford, MA

Optics

12/00 Assets from Ericsson

Kumla, Sweden

PCB Fabrication

11/00 JIT Holdings

Asia, Europe

PCBA

9/00

Siemens Italdata

Avellino, Italy

OEM Divestiture

8/00

Photonics Packaging

Beaverton, Oregon

Fiber Optic

Description

< 25
20-30
562
150-200
< 20

--

--

15

300

744

4,500

60

264

--

24

Design/manufacturing for passive optical components
Plastic precision injection molding
Optics manufacturing for modules and passive components
PCB Technology Center
Systems integration (90%) for comm. (46%) and computer (49%)
PCB fabrication (hardware division)
Designs and manufactures active optical components

8/00

Irish Express Cargo

Ireland

Logistics Services

200-250

60

--

8/00

Chatham Technologies

U.S.

Enclosures

650

892

3,000

8/00

Lightning Metal Specialties

Chicago, TX, Ireland Enclosures

200

107

--

High-volume, midrange enclosure company

6/00

CUMEX Electronics

Mexico

PCB Fabrication

--

9

--

Mexico's largest PCB manufacturer

6/00

Ingenuus

U.S.

Design Services

--

--

40

6/00

Uniskor, Ltd.

Israel

PCBA

75

20

500

5/00

Sample Rate Systems

Finland

PCBA

--

7

--

5/00

San Marco Engineering

Italy

Design Services

--

21

--

5/00

Bosch Telecom assets

Denmark

OEM Divestiture

300

98

1,300

4/00

PCB Assembly

Sunnyvale, CA

PCBA

100-200

66

--

4/00

Palo Alto Products

U.S., Asia

Enclosures

150-200

235

1,000

Design services mainly for higher volume, midrange enclosures

4/00

Dii Group

U.S., Asia, Europe

PCBA, PCB Fab.

4,114

7,900

EMS (mostly sys. int. [66%], PCB fab [24%], design/NPI [8%])

4/00

Hewlett-Packard assets (Dii acq.) Greenley, CO

OEM Divestiture

200

--

--

4/00

Ascom (Dii acq.)

OEM Divestiture

150

60

550

3/00

Chatham Technologies

U.S.

Investment

3/00

Cabletron assets

N.H., Ireland

OEM Divestiture

Switzerland

1,340

--

--

--

300

89

1,000

Logistics provider in Ireland
Low-volume, high-end enclosure company

Silicon library of Aspec Technology
PCBA for communication, networking, wireless markets
PCBA
PCBA
Systems assembly for GSM cellphones
PCBA for customers such as Cerent

PCBA for HP storage products
Systems assembly for telecommunications equipment
Custom enclosure company
PCBA and repair services for networking products

2/00

Vastbright

Zhuhai, China

PCB Fabrication

--

18

--

PCB fabrication in China

2/00

Psion

U.K.

Design Services

--

--

--

NPI center

1/00

Ericsson assets

Denmark

OEM Divestiture

--

--

80

1/00

Fujitsu Siemens

Paderborn, Germany OEM Divestiture

300

70

650

21

300

50-100

Two data and telecommunications installation units
PCBA and logistics for server products

11/99 Four companies in NC

Raleigh, NC

Design Serv./PCBA

11/99 Summit Manufacturing

Raleigh, NC

Design Services

--

--

--

Prototyping and cable assembly

11/99 EMC International

Raleigh, NC

Design Services

--

--

--

Testing

11/99 Newport Technology

Raleigh, NC

PCBA

--

--

--

11/99 Circuit Board Assemblers

Raleigh, NC

PCBA

--

--

160

Midvolume PCBA

7/99

Kyrel EMS Oyj

Finland, France

PCBA

230

107

900

EMS provider to Nokia and Alcatel

6/99

Ericsson assets

Visby, Sweden

OEM Divestiture

200-250

39

900

GSM wireless base stations

PCBA

-13-

403-090

Date

Acquisition

Location

Type

5/99

ABB Automation

Vasteras, Sweden

OEM Divestiture

4/99

Advanced Component Labs

Hong Kong

PCB Fabrication

3/99

FICO Plastics, Ltd.

Shenzhen, China

Plastics

10/98 Hewlett-Packard assets

Boebligen, Germany OEM Divestiture

8/98

Greatsino Electronics Technology China

PCB Fabrication

3/98

Conexao Informatica

PCBA

3/98

Altatron

12/97 Energipilot

Sao Paulo, Brazil

Revenues ($000) Price ($000) Employees
100

Description

25

575

Assembly for industrial automation OEM

15

300

PCB fabrication assets in Hong Kong

--

15

--

Plastic injection molding

--

90

--

PCB fabrication assets

--

52

--

25

18

350

34

--

PCBA assets in California

9

--

Cable assemblies

15-20

Fremont, CA

PCBA

30

Stockholm, Sweden

Cable Assemblies

10-12

PCB fabrication and EMS company in China
PCBA assets in Brazil

12/97 DTM Products, Inc.

Boulder, CO

Plastics

10

10

--

10/97 Neutronics

Hungary, Austria

PCBA, Plastics

210

137

3,600

3/97

313

82

930

PCBA for PBX products and DECT wireless base stations

10

5

400

Plastic injection molding

Ericsson Business Networks

Plastic injection molding
PCBA assets and plastic injection molding

Karlskrona, Sweden

OEM Divestiture

12/96 FICO Plastics, Ltd.

China

Plastics

11/96 Fine Line

California

Design Services

--

6

--

PCB layout and prototype capabilities

2/96

Astron Group Ltd.

Hong Kong

PCB Fabrication

25

65

--

Gold-finished PCB fabrication

4/95

Assembly & Automation

U.K.

PCBA

--

4

--

PCBA assets in U.K.

1/95

nCHIP, Inc.

California

PCBA

10

5

--

Design and manufacturing of advanced multichip modules (MCM)

3/94

Relevant Industries

San Jose, CA

PCBA

17

4

--

PCBA assets in California

`
Source:

Adapted from a report by Scott Craig, “FLEXing Its Global Footprint,” Morgan Stanley, June 12, 2002.

-14-

403-090

Exhibit 2

Flextronics Income Statements, FY 1997–2001

Fiscal Year Ended March 31
1999
2000
(In Thousands, Except Per Share Amounts)

1997

Net sales
Cost of sales
Unusual charges

1998

$1,498,332
1,289,567
16,443

$2,577,926
2,246,135
8,869

$3,952,786
3,512,229
77,286

$6,959,122
6,335,242
7,519

$12,109,699
11,127,896
510,495a

192,322
113,308
5,979
4,649
8,398

322,922
169,586
10,487
12,499
21,480

363,271
240,512
29,156
2,000
52,234

616,361
319,952
41,326
3,523
69,912

471,308
430,109
63,541
462,847a
67,115

59,988
16,415

108,870
22,378

39,369
(11,634)

181,648
23,080

(552,304)
(106,285)

$ 158,568

$ (446,019)

$

$

Gross profit
Selling, general and administrative
Goodwill and intangibles amortization
Unusual charges
Interest and other expense, net
Income (loss) before income taxes
Provision for (benefit from) income taxes
Net income (loss)
Diluted earnings (loss) per share
Shares used in computing diluted per share amounts

Source:

-15-

$

43,573

$

86,492

$

51,003

$

0.18

$

0.30

$

0.17

238,770

297,307

329,352

0.42
383,119

2001

(1.01)
441,991

Form 10-K, March 31, 2001.

aIn fiscal 2001, Flextronics recognized unusual pretax charges of $973.3 million. Of this amount, $286.5 million related to the issuance of an equity instrument to Motorola. The remaining $686.8 million includes merger-related expenses of approximately $102.4 million and approximately $584.4 million of costs associated with the closing of several manufacturing facilities. Remaining footnotes relating to
“unusual charges” and “per share amounts” have been omitted.

403-090

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

Exhibit 3

Flextronics Locations

Asia
India
Bangalore

Colorado
Longmont
Niwot

Malaysia
Malaka
Penang
Senai
Shah Alam
Tampoi

Illinois
Elk Grove Village

China
Beijing
Changzhou
Dongguan
Doumen
Gongming
Guangzou
GuanLan
Hong Kong
Nanjing
Qingdao
Sai Hong
Shajing
Shanghai
Shenzhen
Xixiang
Zhuhai
Singapore
Singapore

Thailand
Samutprakarn
The Americas
Brazil
Manaus
Resende
São Paulo
Sorocaba
California
Irvine
San Diego
San Jose
Sunnyvale
Canada
Toronto

16

Mexico
Aguascalientes
Guadalajara
Minnesota
Roseville
New Hampshire
Merrimack
Portsmouth
New Jersey
Oakland
Parsippany
Wayne
North Carolina
Raleigh
Wake Forest
Zebulon
Oregon
Hillsboro

Taiwan
Taipei

Source:

Massachusetts
Westford

Pennsylvania
Hanover

Czech Republic
Brno
Denmark
Aarhus
Copenhagen
Pandrup
England
Birmingham
Bristol
Lutterworth
Slough
Swindon
Warrington
Finland
Haapajärvi
Kannus
Kyröskoski
Oulainen
Sievi
Tampere
France
Grolleau
Laval
Germany
Boeblingen
Paderborn
Hungary
Industrial Park
Tab

Tennessee
Lebanon
Oak Ridge
Memphis

Ireland
Cork
Dublin
Limerick
Shannon
Tullamore

Texas
Austin
Dallas
Garland
Irving
New Braunfels

Israel
Eilat
Migdal Ha-Emek
Tel Aviv

Utah
Salt Lake City
Europe
Austria
Althofen
Kindberg

Flextronics Web site, .

Italy
Avellino
L'Aquila
Milan
Treviso
Uboldo
Udine

The Netherlands
Moerdijk
Ridderkerk
Venray
Roosendaal
Norway
Oslo
Poland
Gdansk
Scotland
Larkhall
Linwood
Newbridge
Slovenia
Ljubjana
Sweden
Karlskrona
Kumla
Linköping
Malmö
Skillingaryd
Stockholm
Vaggeryd
Västerås
Visby
Switzerland
Solothurn

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

Exhibit 4

403-090

Selections from a 1997 Press Release—Flextronics Acquires Neutronics

FLEXTRONICS INTERNATIONAL ANNOUNCES ACQUISITION OF NEUTRONICS, A LEADING EUROPEAN
CONTRACT MANUFACTURER WITH MAJOR OPERATIONS IN HUNGARY.
SAN JOSE, California, October 20, 1997 -- Flextronics International Ltd. (NASDAQ: FLEXF), a global fullservice supplier of innovative design, engineering and electronics manufacturing solutions, today announced the acquisition of Neutronics Electronic Industries Holding AG ("Neutronics"), a European contract manufacturer currently owned by Malaysian businessman Mr. S.L. Hui, subsidiaries of Philips Electronics NV ("Philips") and
Neutronics' management. Neutronics is headquartered in Austria, and has three manufacturing facilities in
Hungary. In addition to electronics assembly, Neutronics offers its own injection molded plastics, which will complement Flextronics’ plastics offerings in China and Mexico.
The combined companies will continue to operate under the Flextronics International Ltd and Neutronics
Electronic Industries Holding AG names and will be a truly global contract manufacturer offering services in
Austria, Hungary, Malaysia, The Peoples' Republic of China, Singapore, Sweden, Mexico, the United Kingdom of
Great Britain, and the United States of America.
Humphrey Porter, Chairman and Chief Executive Officer of Neutronics stated "The combination presents an exciting opportunity for the combined company as a major global contract manufacturer with a presence in
Central Europe, Western Europe, the Americas and Asia. I believe that the combination is an excellent opportunity for our customers, suppliers and employees in what is becoming a rapidly consolidating and competitive global market place. I expect to be spending the next few days discussing the effects of the combined operations with Neutronics' customers and suppliers who will continue to receive the same high levels of service and will now have the opportunity to work with us on a global basis."
Michael Marks, Chief Executive Officer of Flextronics stated "We see a significant benefit for our customers to have manufacturing capability in Hungary and Austria, and have been impressed by Neutronics' operations there. We have a stated objective of adding a campus operation in Central Europe to complement our campuses in Doumen, China and Guadalajara, Mexico. With its industrial park in Sárvár, Hungary, and its well established manufacturing sites in Althofen, Austria and Tab and Zalaegerszeg, Hungary, we expect that Neutronics will become an integral part of our global strategy. In addition, Humphrey Porter and the management team at
Neutronics are outstanding, and will be extremely valuable as Flextronics grows around the world."
The Exchange Agreement provides that Mr. S.L. Hui will be appointed to the board of Flextronics. Mr. Porter will serve on a management committee of Flextronics, responsible for Central European operations.
It is not anticipated that there will be lay-offs or significant restructuring costs associated with this transaction.
The combined company will incur expenses of approximately $4 million during the fiscal quarter ending
December 31, 1997, which are associated with this transaction and the cancelled initial public offering of
Neutronics.
Source:

Flextronics press release archives.

17

403-090

Exhibit 5

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

Selected Management Bios

Michael Marks, Chief Executive Officer—Mr. Marks has been the Company's Chief Executive
Officer since January 1994 and its Chairman of the Board since July 1993. Under his leadership,
Flextronics has shown steady growth from USD$93 million in FY 1993 to USD$13.1 billion in FY 2002.
His visionary approach has been instrumental in transforming the business model of the contract electronics manufacturing industry from serving OEMs on an overflow basis to serving as a primary supplier of Electronics Manufacturing Services. He has been a Director of the Company since
December 1991. Prior to joining Flextronics, Mr. Marks was President and Chief Executive Officer of
Metcal, Inc., a precision heating instrument company. He received a B.A. and M.A. from Oberlin
College and an MBA from Harvard Business School.
Michael McNamara, President of the Americas—Mr. McNamara previously served as President,
Americas Operations from April 1997 to December 2001, and as Vice President, North American
Operations from 1994–1997 before his role as COO. He joined Flextronics through the acquisition of
Relevant Industries, Inc. in March 1994, where he served as President and Chief Executive Officer since May 1993. From May 1992 to May 1993, he was Vice President, Manufacturing Operations at
Anthem Electronics, an electronics distributor. In addition, from April 1987 to May 1992, he was a
Principal of Pittiglio, Rabin, Todd & McGrath, an operations consulting firm. Mr. McNamara received a B.S. from the University of Cincinnati and an MBA from Santa Clara University.
Humphrey Porter, President of Central/Eastern Europe—Mr. Porter has served as President,
Central/Eastern Europe Operations for Flextronics since October 1997. From May 1995 until
Flextronics’ acquisition of Neutronics in 1997, he served as Chief Executive Officer of Neutronics
Electronic Industries A.G. Previously, Mr. Porter held several positions within Philips, including
Industrial Director for the Audio Austria group and Managing Director of the Audio factory in
Penang, Malaysia. He received a B.Sc. (Hons) C. Eng. M.I. Prod.E. degree and studied Production
Engineering at Trent University, Nottingham England.
Mike Webb, Senior Vice President of Information Technology—Prior to joining Flextronics in
1999, Mr. Webb served as the General Manager of the Project Management Group at Symantec
Corporation, and led a management buy-out to form Time Line Solutions Corporation, for which
Mike served as CEO and President for two years. Before Mike’s efforts at Symantec, he spent 15 years with Hewlett-Packard in several domestic and international management positions, including the management of International Marketing and Sales for PC software, bringing multiple awardwinning products to the market. Mike received his B.Sc. degree in Industrial Economics with
Honors from the University of Wales.
Jim McCusker, Senior Director, Global Business Management—Mr. McCusker became the project leader for the Microsoft Xbox project in November 2000. Prior to that position, McCusker was responsible for customer programs at Flextronics, based in San Jose. Before transferring to the U.S. for that position, he was part of the start-up team that established a new manufacturing operation for
Flextronics UK, a subsidiary of Flextronics, in 1997. Prior to joining Flextronics, McCusker was the worldwide sales director at CTS Corporation, a global contract manufacturer. He has also held various test and design engineering positions with Honeywell and worked in the business development group at two UK based printed circuit board companies. McCusker graduated with a
Bachelor of Science degree in electrical and electronic engineering from Bell College of Technology in
Scotland.
Source: Adapted from Flextronics Web site and company interviews.

18

Flextronics: Deciding on a Shop-Floor System for Producing the Microsoft Xbox

Exhibit 6

403-090

Flextronics Organizational Chart (Selected Divisions)

Michael Marks
(Chief Executive Officer)

Other
Divisions

Michael McNamara
(President of the Americas)

Robert Dykes
(Senior Vice President,
Systems and CFO)

Matt Ryan
(General Manager,
Mexico)

Mike Webb
(Vice President,
Information Technology)

Jim McCusker
(XBox Project
Manager)

Humphrey Porter
(President of
Central Europe)

Brad Vandehey

Gregg Keese

Josef Kaiser

(Part of Xbox Project Team)
(Part of Xbox Project Team)

Source:

Casewriter research from company interviews.

19

403-090

Exhibit 7

Jim McCusker’s Xbox Cross-Functional Project Team

Materials

Procurement

San Jose
(Global)

Hungary

Guadalajara,
Mexico

Note:

Each “X” represents an individual member of the team.

Source:

Company information.

Engineering

Information
Technology

Brad
Vandehey

Testing

Quality

Operations

Leader

Robert Tongo
(San Jose)

Josef Kaiser
(Hungary)

Alejandro
Escato
(Mexico)

-20-