CAD Manager's Newsletter #126

• economic uncertainty


• increasing productivity


• CAD operator/drafter obsolescence


• outsourcing

In the past three editions I explored the first three concerns on the list. If you didn't have a chance to read those, I recommend you do so now (click here for archives) so you'll have a proper context for this issue.

In this issue I'll address the final subject of CAD manager uncertainty, outsourcing. Here goes.

Outsourcing
Questions such as "Will my job just disappear?" and "Will everything be going to China or India?" are frequent topics in e-mails I receive from CAD operators and managers alike. To really address the issue of outsourcing, we have to understand that a number of trends are in play in the international business environment right now. To facilitate the discussion, I'll define these terms here.

Subcontract outsourcing. This type of outsourcing has become much more common over the past 15 years. It's become the normal way for a company to extend its area of expertise without having to hire full-time staff. If an architectural firm needs a structural engineer on occasion, for example, it will outsource the job to another firm rather than retain a staff engineer. Historically the subcontracted entity is relatively local so project teams can meet at job sites and work together without concerns about travel.

Flex-staff outsourcing. This type of outsourcing began in the economic expansion of the mid-1980s with the advent of technical temporary firms that expanded into the new field of CAD operator labor. This type of outsourcing allows companies to staff up and back down without having the liability of insurance, severance packages and employment contracts. Most people in technical environments have either worked with or been a temporary staff member at some point in their careers.

Cost-reduction outsourcing. This is the new type of outsourcing that has workers concerned in high-labor-cost markets such as North America and Western Europe. A company takes a job that is currently performed at its location and sends it to a low-cost provider in a lower-labor-cost market such as China or India. This type of outsourcing has been common in manufacturing for quite a while, but is new for CAD labor, IT professionals and technical support workers.

Conclusions
I'd like to draw a few conclusions about the general trend of job outsourcing in CAD and then extend my conclusions to the newer trend of cost-reduction outsourcing.

Conclusion 1. Outsourcing has been with us for the past 20 years and is pervasive in CAD fields as well as manufacturing. We never really viewed temporary labor or specialized subcontracting as outsourcing, but hindsight shows that it started the trend.

Conclusion 2. Business trends such as difficulty in finding skilled labor, desire to keep overhead low and desire to eliminate high employee benefit costs converged to fuel the outsourcing trend.

Conclusion 3. Outsourcing never really was noticed until it meant jobs leaving your industry or your company, especially when the jobs went to another country. It might seem that outsourcing has been an issue only lately, but in fact it has been with us all along. It simply hasn't garnered much attention until recently.

So if outsourcing is now appearing on the radar screen, we need to assess why cost-reduction outsourcing is becoming an increasingly pervasive trend. I would submit that cost-reduction outsourcing has been facilitated by the following factors:

Internet communication. It's really easy to move electronic files around the globe now, even to countries that were thought of as developing or third-world just a few years ago.

Electronic work product. Because most work we do now results in a computer file rather than a ream of paper, the collision of electronic work product and globally available Internet communications has created a perfect storm of work portability.

Pervasive English-language skills. Global business is conducted largely in English, and most technically trained workers around the globe now speak it. For North American companies, this has made IT and customer support outsourcing possible.

Outsourcing Won't Go Away
For cost-reduction outsourcing to go away, we would need to see a global movement away from using electronic files, no Internet transmission of data and evolution away from English as the global language of commerce. Though we may see an eventual move toward Chinese-language use in business, I don't see any way that we'll stop using software and e-mailing each other the files.

Long story short, there's simply no reason to believe that cost-reduction outsourcing won't continue to be a driving business factor. So which circumstances will favor outsourcing, or discourage it? I offer the following conclusions:

Conclusion 1. In cases where design teams must be able to work together and share specific skills in a fast-paced and coordinated way, cost-reduction outsourcing doesn't make much sense because it is extremely difficult to outsource the design expertise and project familiarity needed to make the design team function. In these cases, having part of the team outsourced would interfere with the group dynamics needed to make the project work.

Conclusion 2. In cases of simple CAD work, such as revising as-built prints, working from simple markups and redrawing/scanning old drawings, you can't argue with cost-reduction outsourcing. If a company can get a job done for $6 per hour using an off-site service provider versus $22 per hour for an on-site employee, it's bound to explore the option.

I continue to believe that only by offering higher-value services that allow your company to be more efficient will you be able to dodge the cost-reduction outsourcing trend. If you don't develop your design skills, but instead try to hang on with minimal CAD skills, you're living on borrowed time.

Wrapping Up
I'd like to encourage your feedback about this topic of outsourcing. Please e-mail me your thoughts at rgreen@greenconsulting.com.

In the next issue of the CAD Manager's Newsletter, I'll report on my trip to COFES (Congress On the Future of Engineering Software) and give you a glimpse of some technology trends that may be coming our way and how they could impact CAD managers. Until next time.