CAD Manager's Newsletter #94 (October 16, 2003)

In the last issue, I wrapped up our risk-benefit analysis of CAD outsourcing by detailing the risk a company undertakes when outsourcing its work or product.

Here's a brief recap:

• longer delivery time frames for products;
• language and communications issues;
• outsourced partners' inability to perform;
• exposing intellectual property, such as patents, to foreign firms;
• unforeseen problems with foreign governments.

To summarize, outsourcing can provide some cost-cutting opportunities by reducing labor costs; however, the process involves so many unpredictable factors that the decision is more an educated guess than a science.

My Response to Readers' Feedback

Some readers took me to task for concentrating on the outsourcing of jobs from North America and Europe to other lower-wage countries, specifically India. I've concentrated on these areas for the following reasons:

• This mode of outsourcing is the most prevalent trend in the CAD market.
• This mode of outsourcing has garnered the most attention from the press.
• This mode of outsourcing is most interesting to my readers who are, for the most part, located in English-speaking western economies.

It is undeniable that India's business community has made a concerted push to provide technology services to western countries. It has done an excellent job of marketing its services. I have personally received half a dozen calls from Indian firms offering CAD outsourcing services in the last three months; all have been courteous, professional, and responsive. In all honesty, Indian firms have succeeded in winning businesses because their society has chosen to pursue aggressive educational programs in computer science, engineering, and English proficiency. As a consequence, the list of businesses that have outsourced to or located in India in recent years reads like a select technology stock index.

While India has received the most attention, it should be noted that similar programs in Ireland and the Philippines have yielded great success in grabbing a share of the global market as well. To sum it all up, there is a growing number of countries outside North America and continental Europe that are ready, willing, and able to provide outsourcing services, so I can't foresee the trend reversing.

Could You Be Outsourced?

So if the trend towards global outsourcing is irreversible, you may well want to know if your job could be outsourced, right? I'm frequently asked that question. But I can't give you a definitive answer; I can only give you a check list of questions you can ask yourself to assess your own situation.

• Does your company already have a major presence (branch office, engineering office, and so on) in a low labor-costs foreign market?
• Has your company already purchased, or is it planning to do so in the near future, a competing foreign firm in a low labor-costs market?
• Does your particular job function support a high volume, repetitive operation (injection molding, casting, textile manufacturing) that could be outsourced?
• Does your particular job function support an environmentally sensitive manufacturing sector (circuit board assembly, degreasing, painting, and so on) that could be outsourced to an area with fewer regulations?

If you answer yes to two of these questions, you should probably consider the possibility of being outsourced. If you answer yes to three, you should be very concerned. If you can answer yes to all, I'm surprised you haven't already been outsourced. I've found these four characteristics to be the most indicative of outsourcing.

The Silver Lining

I realized in 1991, the year I started my business, that I could provide services to companies who couldn't otherwise afford to have a CAD manager. In a strange sort of way I built a business because some companies were willing to "outsource" their CAD management tasks to me as an outside supplier. As the Internet became more the norm and my response time grew faster, I found that I could provide CAD manager services and make a good living doing so.

As time has gone by, I've come to understand that my business has succeeded because I've provided a needed service at a fixed cost to companies that don't necessarily want to pay for my health insurance, taxes, or other expenses. Furthermore, if I don't perform, I don't get paid. My clients only pay me when they need my services, rather than carrying me as overhead.

Here's my question to you: If it seems like outsourcing may displace you from your existing job, why not start your own business providing CAD services to firms that could use the help, but don't need your services full time?

Summing Up

This series on CAD outsourcing has generated some spirited debate and has been an eye opener for me personally. My hope is that by putting yourself in the position of management, you'll better understand when outsourcing is coming your way and how to protect yourself.

In the next issue, I'll answer some reader questions about outsourcing and working via contract rather than full-time employment. If you have any questions you'd like me to address, please email me at rgreen@greenconsulting.com.