NCR Corp.'s decision to move its headquarters near its new factory is about moving the brains closer to the brawn.
NCR said this month that it would resume making its own North American automated teller machines, barely two and a half years into a five-year deal it had to outsource their manufacture to Solectron Corp. of Milpitas, Calif.
"This was not a failed experiment by any stretch of the imagination. In fact, it was very successful — with the exception of, we think we can do it faster, less expensively and better," Bill Nuti, NCR's chairman and chief executive, said in an interview last week.
As NCR prepares to take its ATM manufacturing in-house, it is moving its headquarters from Dayton, Ohio, to Duluth, Ga., near its new factory in Columbus, Ga. Dayton was the company's home for the past 125 years. Nuti said the move will put the creative minds behind its ATM designs near the people who realize them, thus streamlining the development of new designs.
Before it decided to outsource to a Solectron factory in the United States, NCR made its own ATMs in Waterloo, Canada, Nuti said. Moving the work to a Solectron factory in Columbia, S.C., averted the cost of cross-border shipping to U.S. clients, and it also yielded other cost savings, he said. The math changed in October 2007, however, when Flextronics International Ltd. bought Solectron.
"We had a wonderful relationship with Solectron," Nuti said. "We still have a good relationship with Flextronics in other areas, but it was clear to us that what we expected in terms of savings, and we were receiving with Solectron, was probably not going to be the case now that Flextronics acquired Solectron. … Our anticipated savings changed in a fairly dramatic way."
Flextronics did not return a call requesting comment for this story.
Instead of going back to Canada, NCR decided to move its ATM manufacturing to another U.S. site. Flextronics will continue to build kiosks and other hardware that Nuti said is less complex than his ATMs, though in time even their manufacture may be moved to Georgia.
"As always, we remain open to manufacturing other products in Georgia, but our first priority, and I think this is going to be the case for at least the next one to two years, is going to be largely on the full-function ATM SelfServ line with a great deal of focus on Intelligent Deposit," Nuti said.
The Georgia factory is to begin production in the fourth quarter. On Monday, NCR announced a plan to build a manufacturing hub in Brazil, another move to bring formerly outsourced work in-house. NCR also runs its own factories in Budapest, Beijing and Pondicherry, India.
Besides the cost savings anticipated from the Georgia factory, a speed advantage will be created, Nuti said.
"We felt like, given some of the future innovations that were coming that we wanted to lead with, we felt that we could … move more quickly, in terms of time to market," by moving manufacturing near the design staff, he said.
NCR had said last October that it would establish a global "center of excellence" for its worldwide customer services business, creating 916 jobs in Peachtree City, Ga., southwest of Atlanta.
Having all its facilities in the same area — a 150-mile-long corridor along Interstate 85 — also gives NCR the chance to draw on the academic resources of nearby Georgia Tech and Clayton State University for design talent.
Nuti said his company has already begun hiring from this talent pool and has seen interest from more "highly qualified" candidates than he has advertised openings for so far.
"The kinds of products we're going to build there in the future — next-generation ATMs that I think will look different, be more iPod-like, if you will, and will have even greater levels of security and functionality — will be delivered through this new class, if you will, of talent that we're bringing on board," he said.
An iPod-like ATM, Nuti added, does not mean a shiny white ATM that plays music. It is what client banks ask for when they want a machine with more engaging features.
"What they mean when they say, 'I want an iPod-like XYZ,' what they mean is, they like the software interface, multitouch and the ease of use of the platform," he said.
The layout of its design and factory facilities will shave at least 90 days off the process of bringing of these futuristic machines to market, Nuti said. He estimated the industry norm to be three to five years to bring a new product to market, but he predicted that NCR will become able to do it in two to four years.
Nicole Sturgill, the research director for delivery channels at TowerGroup Inc., a Needham, Mass., independent research firm owned by MasterCard Inc., said that the move to the Atlanta area should give NCR its anticipated savings in the cost of shipping ATMs since Atlanta is such a transportation hub.
"Atlanta is … a logical place to put the headquarters and a manufacturing location," she said.
Further, if NCR is looking to improve its ability to innovate and differentiate, working in-house has certain advantages even in a world of pervasive nondisclosure agreements, she said. "There is something to be said for keeping it in the family, keeping it in NCR and knowing that no one outside NCR knows what's going on," she said.
The advantage of nearby universities is not unique to Georgia, however, she said. "The Dayton area has a lot of good universities in the area as well." However, it indicates that NCR would not need to compromise on the quality of the local talent it is hiring. "You're certainly not going to lose anything in the applicant pool" by moving to Georgia, she said.