The attractions of foreign labour extend beyond the waking giant of India. More and more UK companies are finding more and more ways of using the global labour force to boost performance. Thomas Lane reports on who’s doing what, and how much money they’re saving
If you haven’t got too many sins to atone for already, there is one new year’s resolution you should definitely make. That is to start off-shoring your mundane tasks to specialists in cheaper parts of the world so you can concentrate on the real value-adding stuff. Off-shoring, or outsourcing as it is also called, is rapidly becoming a standard strategy, and companies that ignore it risk being left behind in an increasing globalised world.
The main appeal of off-shoring is that it is cheap – up to one-tenth of the cost of having the work done in the UK. But money isn’t the whole story, as Nick Campbell, a partner at architect CZWG, testifies: “It means we can do the job properly because we can resource it properly. It doesn’t save money for the client but they get a much better service.”
Flexibility is another reason to off-shore. “When you are working on PFI projects of £100m-plus, there is a huge amount of information that has to be turned around under pressure,” says Matt Audinwood, an executive director at architect Nightingale Associates. “Once the work ends, this stops. Managing these peaks and troughs in the workload is difficult in a static office in the UK.”
This way of smoothing workload is especially relevant to small practices, as it means they can tackle bigger, more complex jobs by farming work out. “Off-shoring enables a small practice to do projects for which it doesn’t have all the in-house skills,” says Robin Snell, principal of Snell Associates. “When we have the need for 20 draftspeople it’s a tremendous advantage to off-shore it out, as we wouldn’t want to be an office of 100 people.”
If you are thinking of taking the plunge for the first time in 2006 check out our guide overleaf on how to get started
…Where do off-shoring companies operate?
“Work can be off-shored anywhere there’s a well educated population and a poor economy,” says Mikele Brack, the business development manager of off-shoring specialist Atlas Industries. Atlas off-shores its work to Vietnam but there are plenty of other countries eager to offer services. India is known for its IT and engineering workforce and South Africa is popular with architects and engineers. Other off-shoring destinations include the Philippines, Indonesia, Eastern Europe, South America and China.
What sort of work can be off-shored?
A multitude of tasks. Off-shoring specialists tend to concentrate on skilled work that doesn’t require creative input. This includes turning concepts into CAD drawings, producing visualisations and videos for presentations and turning scheme design information into production drawings. Healthcare projects require the details of every single piece of equipment that goes into a hospital to be checked against the brief and signed off; this job is perfect for off-shoring. Service companies can off-shore helplines and QSs can do the same for software development and bills of quantities .
Which companies are off-shoring?
Small and large companies do it. Off-shoring is popular with consultants including architects, engineers and cost consultants. Contractors off-shore too, for example Laing O’Rourke has a facility in India for churning out production information.
What are the options and how much does each save?
- The direct approach
The cheapest option is go directly to an overseas specialist. Snell Associates used a Chinese video production company to produce a promotional package for a job. Snell says: “I was in China anyway so I could keep an eye on things. We met and talked everything through, then they produced the images and video in 14 days at a fraction of the cost of the UK.” He adds that going to a specialist abroad could be risky without making personal contact first.
- Use an intermediary
There are specialist companies that off-shore work on behalf of clients. Two examples are CADnet, a CAD drafting specialist, and Atlas Industries, which specialises in turning architects’ concepts into worked up production documentation. Both companies have offices in the UK and can liaise with clients face to face. The advantage is these specialists have UK-trained staff overseas so they can ensure that local workers are up to speed with the UK’s Building Regulations. Work is double-checked in the UK before it goes out to the client. This service is inevitably more expensive than going direct; Atlas and CADnet say they charge between half and two-thirds of what it would cost to do it all in Britain.
- Partner with a firm abroad
This approach has worked well for architect CZWG. They partner with a practice in South Africa that helps with production information. “It’s a very involved marriage and a genuine collaboration,” says Nick Campbell a partner at CZWG. “We work with them on a daily basis to ensure everything is co-ordinated.
It wouldn’t work otherwise.” He says the fact there is little time difference between the countries, and that English is a common language, is key to this approach. Architects from both practices work in each other’s offices. According to Campbell, doing work in South Africa is 25% cheaper than doing it in-house.
- Set up your own office
Some larger firms set up offices abroad to cut costs – for example, architect Nightingale Associates opened an office in South Africa 18 months ago. “We’d done some off-shoring through contacts in South Africa. It worked reasonably well but we found work didn’t always come back 100% so we felt having direct control was preferable,” says executive director Matt Audinwood, who set up the South African office. He reckons it saves the firm about 60%.
IT solutions provider Asite has an office in Ahmedabad, in Gujarat, north-west India, with 70 employees. It provides a helpdesk for Asite’s clients and software support and development. “With this approach there are all the management issues such as retaining staff and overheads,” says Gordon Ashworth, interim chief executive. He says Asite carefully researched locations as India’s expanding economy meant there was a huge demand for skilled people in places such as Mumbai and Bangalore. Asite settled on Ahmedabad because it wasn’t an IT hotspot so staff were much cheaper. Ashworth says work done in India costs one-fifth of the same work done in the UK.
What sort of technology is needed?
The average office has all the technology it needs for off-shoring. Cheap telephone calls mean communication is instant and documents are easily emailed. Firms with more permanent relationships with overseas specialists tend to have more sophisticated technology. CZWG swaps information with its South African partner via an internet-based project collaboration tool, and Nightingale Associates’ South African office uses video conferencing and is connected to the UK computer network.
Are time differences a problem?
This really depends on personal preference. Robin Snell of Snell Associates found a big gap was an advantage when producing his presentation video in China. “They would be at work while we were asleep. When we went in the office it would all be there ready which is amazing, it’s real 24-hour working.” On the other hand, the architects with links to South Africa like the fact there is very little time difference because they can work together in real time.
Do workers abroad know about UK regulations?
This is unlikely if you go directly to India or China. However, UK-based off-shoring specialists will train their overseas staff to understand our regulations and check their work. Other countries have a fair understanding of UK regulations and construction methods. For example, South Africa is a popular off-shoring destination because their education and regulatory system is similar to our own.
How do I ensure my in-house team don’t feel threatened by off-shoring?
The skills shortage means this is unlikely. CADnet says its success is largely the result of the shortage of UK-based CAD operators. CZWG’s Campbell thinks off-shoring is a safer option than expanding the home office if firms want to take on bigger projects. “Workers’ jobs would be more threatened if we expanded the firm to 100 people then hit a recession,” he says.
Could more creative work be off-shored?
This could be the next quantum leap for off-shoring because places such as India and China are producing large numbers of skilled people in disciplines shunned by the British. “Ten years ago it was off-shored software-writing, then it was call centres,” says Asite’s Ashworth. “The next stage must be research and development; it’s a third of the cost compared with the UK and the education in India is really top-notch.” He adds large Indian IT off-shoring specialists such as Tata Consultancy Services are set to move into Europe to get closer to their clients and to offer a more sophisticated service. Nightingale Associates’ South African office has been involved in every stage associated with projects, including concept design – although it hasn’t seen a project through from concept to completion.
Given the speed of globalisation it is only a matter of time before UK practices are competing head on with Chinese and Indian consultants. Then off-shoring won’t sound so appealing …