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Moving operations offshore

Dave Evans, president of Trio China in Guan Dong, a Cantonese province in China, is no stranger to working in a foreign country.

As an engineer with RCA, he brought a team to China to set up a manufacturing operation—an effort that was supposed to take six weeks actually took eight months to get the first product offline.

"It became evident that we could not get the product out if we didn't have someone here in China to oversee the manufacturing operations," he says. Today he's started his own company as a liaison for companies that want to set up manufacturing in Asia.

For a company exploring offshore activity, it's important to note a number of ongoing issues, the first of which is the culture.

"As a client hoping to locate a manufacturing facility, I'm looking for the best quality at the best price. But your representative may be looking for a factory that will give him the best cut for bringing the business," he says.

Communication is important, even among those who speak English. It's very important to be incredibly literal in your instructions and expectations. "Chinese engineers and business people are very intelligent, but even if they understand English, they might not interpret it as you expect," he says.

Start with extremely clear plans and a well-defined product. "A lot of companies have a tendency to take a product to 98-percent completion and then try to work out the remaining 2 percent on the line. That won't work unless you can afford to have a team of engineers in country to see it through," he says.

Negotiating the cultural and logistical differences can pay off big time. Evans works with Gibson Labs, a division of Gibson Guitar, and sought quotes for die-cast tooling for an amplifier's aluminum chassis. In America that quote was $1 million. "I was able to bring the designs to China and get it made for $250,000. There's that much difference (75 percent) in cost, especially for items that are labor intensive," he says.

Evans says he's not unsympathetic to American workers who are out of work. "It's a worldwide economy and companies are no longer trapped by boundaries. I don't like to see people struggling and out of work, but from a practical standpoint, the CEO of an American company has to produce the best product for the best price in order to please the shareholders. For many, the answer is to move manufacturing offshore." e

For more information, e-mail Dave Evans at dave@triochina.com.

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Ferguson found a Web developer in India through Elance, a resource for freelance technology service providers. Because she was new to this process, Ferguson says one Indian company offered to do work for free to see if a working relationship was possible. "While I did pay the company for the services in the end, the free offer made it 'risk-free' to try before we actually committed ourselves," she says.

The partnership, for the most part, has been fruitful. "Although I partner with a team of Web developers and designers stateside who work at reasonable rates, many of the start-up companies still couldn't afford a Web site," she says. She keeps design in the United States and sends Web development/HTML to India.

Although there was no language barrier, Ferguson realized that she had to think logically and systematically and write everything in a way that could be understood easily. "I realized fairly quickly that I couldn't have the outsourced developer work directly with the client. I needed to have them work through me," she says.

Today, she works with both stateside companies in Dallas and two companies in India. "When I work with a client who needs a $50,000 Web site, but doesn't have the budget, I outsource the HTML to get the project in on budget," she says.

She's very up-front with companies with whom she deals. "I'm sensitive to the state of the U.S. economy. Marketing budgets are dwindling. I feel strongly that to help our economy, we have to offer viable marketing solutions—no matter what the budget. Ultimately, this will put more people back to work," she says.

Ferguson doesn't have to sacrifice when outsourcing. "They work so fast and work six days a week. They hardly ever make mistakes. I would be fine keeping work here if I could find someone to work that fast," she says.

So far the experience has been a positive one. "Outsourcing is not the magic bullet, but the work ethic I've experienced is that the customer is always right and that if something is wrong, they will stay late to get it done," Ferguson says.

And how much is Ferguson saving her clients by going to offshore Web developers? "We can save anywhere from 25 percent to 75 percent, depending on what a client is accustomed to paying. A Web design that typically costs $10,000 can cost $1,000 in India. Of course we also have to build in time to facilitate the back and forth required."

Perhaps there's a lesson to be learned for stateside companies not involved in outsourcing as well. "I'm impressed with the way these offshore companies have handled business," says Ferguson. "Their philosophy is: 'We want your business, we'll work to get it, we're grateful for the work and we'll get it back to you in two days.' That's what my clients need." e