Tuesday, March 21, 2006

Outsourcing CAD Offshore: Stop Waiting!

Outsourcing of a service occurs when a client buys a service from a service provider, rather than source it from inside the client’s own organisation.

The primary reason for you to consider offshore CAD outsourcing is economic benefit. The data says this benefit is more or less a sure thing. For instance: "Offshore business process outsourcing (BPO) is expected to reach $3 billion in 2004, a 65 percent increase from 2003 total of $1.3 billion." --- Gartner Inc, Stamford, CT

"Offshore outsourcing is growing 20%-25% per annum, with little evidence of slowing. Indeed, while most enterprises experience initial resistance, most technical issues are readily resolved and geopolitical risk is deemed insignificant after careful evaluation." --- Meta Group, Stamford, CT .

The flood of software development companies outsourcing CAD offshore can be likened to the migration of the wildebeests. They're doing it to survive. Don't be a solitary wildebeest watching stupefied as the others move to lush pastures. Move that tail NOW!

Move it confidently because there is significantly less risk in outsourcing CAD offshore than there is in outsourcing IT development or IT services offshore. My comments on the risks:

Data Security: A major worry for IT clients, since data security measures are often porous in developing countries (to whom much work is outsourced). However, generally speaking, CAD information is less sensitive than credit card databases, employee payroll information, prison muster rolls or a bank's accounting ledgers. Insource highly sensitive CAD; if warranted, fragment what you outsource and farm the pieces out to different service providers (aka ‘outsourcers’).

Cultural Differences: Read this as accents, comprehension of idioms, voice intonations and knowledge of your culture. This issue is of special concern to clients that outsource telephone help desks or other voice services offshore, since the service provider speaks to the client's customers. Fortunately, CAD drawings haven't started talking yet; you only have to bother about whether you and your service provider’s key personnel can understand each another.

Effect on In-House Morale: Outsourcing anywhere will erode trust between you and your workforce. It will also be hard for you to let go of employees who have become good friends. I suggest training them to perform other functions; if not, provide them with comprehensive outplacement services. Service Provider

Reliability: Unlike the factors mentioned above, this one does pose a significant risk. Occasionally an offshore service provider can completely disappear or fall silent; possible reasons are bankruptcy, mass departure of personnel or loss of confidence in completing the task. The good news is that the risk can be reduced to insignificance by careful selection of the service provider.

Your Management Capability: Outsourcing offshore will not work if it is not carefully managed by the client. Not getting this right is one of the major reasons that a lesser portion of all offshore outsourcing programs fail. An expert opinion on this: "This may sound obvious, but probably the biggest stumbling block to offshore outsourcing is that after all the contracts have been signed, companies abdicate responsibility for projects to the outsourcer...' --- Deepak Khandelwal, McKinsey, Worldwide (Minimizing each of the last two risks entails a large volume of information and will be the subject of future articles).

To conclude, there is manageable risk in outsourcing CAD offshore; you should go ahead and make outsourcing CAD one of your objectives. But don't do anything until you have carefully planned how to handle the last two risk factors, for which I will provide comprehensive information... SOON!

For details read here.