CAD Manager's Newsletter (#159)27 Sep, 2006 By: Robert Green
Outsourcing, Part 4: Looking at the Bigger Picture
Do the advantages of outsourcing outweigh the pitfalls? Doing your research is the only way to find out.
In the previous three issues of CAD Manager's Newsletter (click here for archives), I broadly covered the overall topic of outsourcing. If you haven't had a chance to read the first three installments, I recommend that you do so now because everything I'll touch on in this installment will reference material I've already presented.
I know that outsourcing is a touchy subject, but even I am surprised by the amount of mail that I've received on this topic, how global the responses are and how uniformly negative the tone of that mail is. To close out the topic of outsourcing and adequately respond to all the feedback will require both this and the next newsletter. There is simply too much to say about this very important issue to complete the discussion in this edition. Here goes.
I received several responses along the lines of this one, from a reader in Australia: "The first thing that needs to be realized is that companies offering these services in third-world countries operate using pirated software. The numbers simply do not add up."
While it is true that software piracy is running rampant in many portions of the world, I truly believe that the main cost differential for outsourcing is in the lower labor rates. It remains to be seen whether the large international software companies will aggressively go after the software pirates, but whether they do or not will neither stop nor encourage outsourcing.
It's simply a fact that annual salaries for engineering talent in China are approximately $3,000, and we see rates of $8,000-$10,000 per year in India. With labor rates in this range, a full package of AutoCAD, Inventor or SolidWorks could be amortized over a year and raise labor rates by no more than $1 per hour. And, like it or not, nobody in the United States, Canada or the European Union is willing to work for anything approaching these low labor rates, so the outsourcing continues. But, independent of that concern, we simply can't control the wage levels that people are willing to work for in other countries. No matter what labor rates might be in Canada, the United States or Western Europe, if somebody is willing to work for $3 per hour in another country, there's no law against it -- and really nothing that anyone can do to stop it.
I also received several responses that were along the lines of this one from a reader in Minnesota: "If I see anything else that could destroy my job and industry printed on this Web site, in this magazine, or online, you can remove me from your list of subscribers. Outsourcing will degrade our profession. Shame on you for presenting this topic to the masses."
Let me state, in my own defense, I don't believe that I've been advocating outsourcing. What I've been doing is trying to explain it and show you how to measure it so that you, as a CAD manager, can be educated about what your bosses may be thinking. If anyone thinks I'm trying to eliminate his or her job, please understand that's not my intention at all. I'm simply trying to help you readers understand the market forces that are in play and how they can affect you. Read more >>
Editor's note: Our regular CAD Manager's Q&A takes a break this week. In its place, we hope you find interest in this Q&A from the CAD Manager's Newsletter archives.
Is the CAD manager becoming an endangered species, or does the position have a bright future that I should continue to pursue?
Robert Green replies: This is a great question, and one that more and more people are asking me. I'd answer the question "no" and "yes," respectively. Read more >>
Submit your questions to Robert Green firstname.lastname@example.org.
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