Management

Editor's Window

1 Oct, 2006 By: Sara Ferris

Outsourcing Outrage: But more companies look outside for help.


Like it or not, outsourcing is an issue that affects us all. Even if your company doesn't currently outsource work, it may well do so in the future. Slightly more than 40% of respondents in this month's Quick Poll report that their companies have outsourced CAD work, with close to 11% sending it overseas (also known as offshoring).

Sara Ferris
Sara Ferris

Manufacturing tends to be the poster child for outsourcing, given the long-standing trend of U.S. manufacturers to move that function abroad to companies with much lower labor costs. Since 1998, an estimated 3.4 million U.S. manufacturing jobs have been lost, and pay for those that remain has declined by 2.7% in the last year alone, according to the Economic Policy Institute.

But outsourcing broadly means enlisting workers outside your company to help complete your projects. Those projects aren't restricted to design and manufacturing. Anything a company does theoretically can be outsourced—customer service, IT support, sales, billing and so forth.

In a recent series of articles (CAD Manager's Newsletter, www.cadalyst.com/CADManagerNewsletter/), Robert Green examined outsourcing as a business practice, and in the process drew complaints from both sides: readers who felt he was promoting the practice and outsourcing companies who thought he was recommending against it. To read some of those readers' comments go to the Cadalyst Dialog Box (www.cadalyst.com/dialogbox/).

Outsourcing clearly isn't good for those currently doing the work, but it's not something we can ignore in hopes that it will go away. I expect pressures on companies to cut costs to continue. Even when business is improving, many firms are reluctant to add permanent staff positions. Instead, outsourcing increases to match the workload.

Part of the problem is that businesses tend to focus on short-term performance. Outsourcing can generate immediate savings in labor costs, while the potential costs to the business may not show up for a while. And sometimes the costs don't fit neatly into a line item—what if your outside contractor misses a deadline and delays your project?

Green's recent series anticipates potential consequences such as those. Companies would do well to carefully consider all costs and risks of outsourcing rather than simply compare direct costs.

Last month we relayed the experiences of SolidWorks with a rogue employee of an India-based contractor, who tried to sell the SolidWorks source code to various competitors (www.cadalyst.com/0905techtrends/). Recently, my local paper reported on the experiences of KIC Group, a truck-part manufacturer whose China-based general manager stole $800,000 and set up a shadow corporation to divert $2.5 million more from KIC's China factory. When KIC tried to sell the factory, employees rioted, but police refused to intervene, calling it a business dispute.

What's interesting is that even after being burned by outsourcing, these two companies remain committed to it. This trend seems difficult, if not impossible, to reverse. I'd be interested to hear your thoughts—send them to editors@cadalyst.com.



SARA FERRIS
Editor-In-Chief
sara.ferris@cadalyst.com


About the Author: Sara Ferris


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