How Outsourcing to China will "Bring it Home"

Mei (name changed) is a Chinese factory worker who makes toys sold overseas. She works 12 hours except on Saturday when she is permitted to only work six hours. She lives in a small flat with her husband and one child. She was pregnant with a second but the local authorities forced her to have an abortion. For two years she managed raising their living child alone, because her husband was being detained under suspicion of having ties to a certain religion. This is not Hollywood, this is nothing remarkable, this is common people's life.. in mainland China.

The phenomenon of outsourcing to China took on a complete new dimension in the USA, with the sudden success of what some consider the single largest retail scandal in American history - Wal*Mart. According to the PBS documentary STORE WARS: When Wal-Mart Comes to Town:

Made in the U.S.A? Despite a well-publicized "Made in the U.S.A." campaign, 85 percent of the stores' items are made overseas, often in Third World sweatshops. In fact, only after Wal-Mart's "Buy American" ad campaign was in full swing did the company become the country's largest importer of Chinese goods in any industry. By taking its orders abroad, Wal-Mart has forced many U.S. manufacturers out of business.

(note the above recording of Wal-Mart's 1992 television ad "Bring it Home to the USA" was removed from YouTube several weeks after this article was published)

Most Americans never saw past the red-white-and-blue logo of this seemingly phony patriotism. Wal*Mart stock price skyrocketed with its success. Wal*Mart would ultimately get away with "selling the American economy" to Chinese elite on an unprecedented scale. Other retailers - by choice or by necessity - also increased Chinese imports. The Chinese elite came to understand that a great weakness of their western counterparts was the overwhelming self-centeredness of some. And as Wal*Mart showed everyone, you only need some. Convince one to outsource - two more follow. Others resist, but as their own products loose markets to cheaper competition, they too are soon forced to follow suit in a massive avalanche of outsourcing. This flood of new low-cost, low-quality product to store shelves also fostered a new "use up and throw away" mentality in people, which produces more waste and garbage.

But it gets worse. In early 2009 Secretary of State Hillary Clinton signed a collateral agreement in Beijing which grants China the right to claim Eminent Domain of LAND within the USA as security for all the debt this has helped cause. America has now quite literally - and quietly - mortgaged itself to China, and most people living there don't even know. Americans can partly thank their local Wal-Mart - after all - "They Care", as their carts say. All of this for the everyday low price of cheap tube socks and $2 a day paid in sweat shops that nobody else had to look at. So, for those who want to move to China, there is good news. We just keep outsourcing to China, and China will be brought to us.

Outsourcing Disasters Put Consumers at Risk

Outsourcing manufacturing and even development to overseas companies became a fact of life with international agreements and the economic globalization which quickly followed. Foreign export subsidies abroad and lowered import tariffs at home offer a powerful case for simply sourcing what we want from somewhere else. The benefit to consumers are cheaper display prices. However, the products themselves can have hidden costs which total much higher than the display price. Here are just three costs not on the price tag:

Safety: September 2009 saw the latest chapter in a long string of expensive and time-consuming product recalls of items manufactured in China. Just the other day one of our staff found themselves face to face with this reality in their own home, having narrowly avoided possible injury when the powder metal blade retainer for their new, one-day-old imported lawn mower cracked a large chunk off after just ten minutes of operation. This safety-critical part was stamped from powder metal and probably given insufficient oven time to bake - which means there are hundreds - thousands somewhere just like it. Back at the store our colleague watched as the entire model line seemed to have a similar flaw and started immediately getting pulled from the floor. How much could that have cost someone?

Economic: Training overseas personnel has opened the door to a flood of skillful black-market copycats, counterfeiters, patent and trademark pirates who apply inside knowledge to cleverly reproduce almost any product illegally, which becomes expensive and difficult to police. Local jobs and skills are lost overseas forever. Eventually, the local economy finds itself borrowing from China to buy from China.

Human Rights: Those employed overseas in the manufacture of low cost goods for export often discover their original expectations wrong, working in appalling conditions, with no way back out. Middlemen, business brokers and investors receive the entire net profit from the supply-demand relationship.

The real differential in the final consumer's decision is actually not cost, but timing. When presented a choice between "pay now or pay later", MBA 101 states that credit-based consumerism such as what is encouraged in the USA will pick "pay later" - even if it means paying more. Darwinism 101 responds that if cutting out fierce business competition could therefore be timed early, it technically justifies almost any other consequence in quality, ethics or community interest. Darwin knows that consumers will still have opportunity to pay their fare share of it all, just a bit "later".

Uncontrolled serial product outsourcing can be a disaster. Not surprisingly, there is growing understanding about the importance of highly selective outsourcing, supplier evaluation, certification and inspection by qualified local staff and agency, while maintaining tight product control, domestic R&D, and a healthy ratio of credible domestic suppliers and know-how at home.

Chief Architect Software Shafts Resellers as "Thank You"

I have been working in CAD support for over a decade. But it's not often that I read a CAD homepage like these quotes, as of 04.10.2009, from what was once Chief Architect in Australia (original misspelling included):

"Chief Architect Inc's USA short sighted management has made the decision that in an effort to support all Chief Architect users 'more efficiently' (?) they will totally eliminate the middle men.. i.e. their remaining commercial Chief Architect dealers acoss the world, before the end of the year.. and have started the ball rolling by terminating the contracts of Gordon McDermott and his dedicated team at BayCAD in New Zealand.. and of course ourselves here at Chief Australia.

May we however suggest that you read between the lines, and instead of the words 'more efficently' substitute.. 'now we'll be able to have ALL of the income from sales and support internationally.. not just the major portion of it'.

From a personal point of view.. we have spent thirteen years building up this business, and dedicated it almost exclusively to the sale and support of Chief Architect software. It has now just been totally destroyed by Chief Architect Inc with only 60 days notice.. notice initally delivered by email no less! So now we're all unemployed!...

Interestingly, there has been no contact with us at all from Greg Wells, the President of Chief Architect.. not a quick phone call offering a word of thanks, no golden handshake (God forbid).. or even so much a letter of appreciation for our years of hard work in establishing and building Chief Architect's user base here in Australia.. just a single sentence in an email that they sent out to our customers.

So on behalf of our loyal Australian users we'd just like to say..

Thanks for nothing Chief Architect!"

WOW.

I wasn't actually surprised by the story, had already heard it from another former reseller. And although this kind of disloyalty disgusts me, it doesn't necessarily surprise me either. I find the apparent ingratitude from Chief Architect USA somewhat bold. But I would be surprised if a seasoned mid range CAD developer would really be so out of touch and so naive to believe that many will continue paying an Aussie-four-grand for an engineering package that doesn't offer local support. I guess time will tell what they really have in mind...

Free AutoCAD a Hoax

Autodesk recently published an article reading, in part, "In order to get ahead in the workplace, you need to invest in yourself by increasing your knowledge and expanding your skills.. The program offers... Free Software License*"

The timing for this announcement was probably no accident. Autodesk's paying yearly upgrade buyers (unsubscribed) got a big shock just two weeks earlier when Autodesk unveiled plans to triple their upgrade prices. So this quick fix to bury any bad karma was probably planned weeks in advance.

But is the "Free Software License" really free? Actually the license only lasts for thirteen months. Applicants must be able to prove that they are an unemployed design professional, and give reference to their last place and time of employment. Appearantly it is also watermarked "Educational", so it can't legally be used for any kind of commercial work. In other words, this isn't what you were thinking it was. Autodesk is really just expanding their educational program to include recently unemployed users of their software.

Far from "caring about the little guy", Autodesk continues to relentlessly charge high prices to their paying customers, accost people trying to sell AutoCAD on eBay, drag small businesses to court who try to enable high-end functionality in the lower price Autodesk products like AutoCAD LT and kill open interoperability of their file formats.

Sorry, no free AutoCAD.

CAD Designers: Are Your Jobs Still Going Overseas?

Businesses in Beijing and Bangalore believe they have discovered a gold mine. But the same experience for many of their foreign investors has exposed land mines in return. Aside from the obvious local employment concerns, companies often discover outsourcing to be far more expensive than originally estimated. Businesses which were first enticed with seemingly low hourly wages find themselves committed to paying more than they ever bargained for.

As one example United Technologies, an acknowledged leader in developing offshore best practices, was saving just over 20 percent by outsourcing to India in 2003 (and wages are higher there now). That's still substantial savings, to be sure. But it takes years of effort and a huge up-front investment. For many companies, it simply may not be worth it. "Someone working for $10,000 a year in Hyderabad can end up costing an American company four to eight times that amount," says Hank Zupnick, CIO of GE Real Estate.

Google metrics for outsourcing searches have dropped 50% since then. According to the Black Book of Outsourcing, western firms such as CENIT, IBM Global and Infosdys still sell as many PLM outsourcing services to the world as do Indian firms Larsen & Toubro, Siri Technologies and Satyam. This is bad news for a country carrying perhaps the world's largest surplus in manpower. Such regions, through poor management and cultural barriers, are often too slow with creating domestic markets of their own. China faces similar problems.

A backlash trend to outsource to Europe or the USA is actually emerging now. Many investors, once burned, are looking for better long-term partnerships with contractors and suppliers. This is good news for engineering and design companies in the more developed nations. Stay alert. Opportunities exist for skilled designers in developed countries to demonstrate their value added. Suggestions for remaining competitive: keep resources, skills and training certifications updated, invest in innovation and R&D.

If you have a recent experience about your company's design work being outsourced (or not) feel free to post it HERE.

Autodesk Mergers Continue; Buys Algor FEA

When I posted several days ago that economic downturn was a good time to invest in new technology, I didn't exactly have serial corporate takeovers in mind. Despite its fallen share price, Autodesk continues its series of acquisitions with its takeover of Algor. In business since 1974, ALGOR, Inc. is a long-standing provider of finite element analysis software.

It was announced on Tenlinks today that Autodesk is to buy Algor "for approximately $34 million". Similar announcements have been made on Yahoo Biz and Reuters.

According to the announcement in Reuters, "Upon completion of the acquisition, Autodesk's current intent is to integrate ALGOR into its Manufacturing Solutions business unit and to continue developing and selling ALGOR's core product line. Autodesk plans to continue developing the ALGOR products with an open approach, allowing direct data exchange between ALGOR products and multiple computer aided design software offerings."

Algor currently integrates their base static stress FEA "Designcheck" solution with several CAD CAM industry solutions, including Rhino, Cadkey, SolidWorks and Autodesk Mechanical Desktop. Several of Algor's strategic business partners were not anticipating the Autodesk takeover.

Busting Four Myths of 2D and 3D CAD Software Marketing

"Should my business be using 3D CAD software?"
Maybe the better question is "how exactly would using 3D CAD get my job done better?" Let's explore four myths about using CAD today.


Myth: everyone uses CAD already
42% of builders surveyed in 2006 still don't use any CAD program at all according to one survey. Should they be using CAD? Probably, and many are changing over. But statistics like this sometimes help us see through the "don't get left behind" marketing hype and be more realistic about our requirements.


Myth: CAD software is too hard for me to learn
That's only true if you choose the wrong CAD software for your needs. 3D CAD software might be exactly what you need, or exactly what you don't need. A successful CAD migration involves three steps: 1) identify your business requirements 2) identify CAD systems meeting those requirements 3) identify which vendors offer the support you need for the system you choose. When possible, try to buy a CAD system from a vendor that offers direct support for the system you choose. They should also be able to help you identify your requirements before you buy. Your vendor choice alone can make a big difference in the success of your CAD system. To help new CAD users, CADDIT has published a free CAD e-book.


Myth: 3D is always better
If you are working for a customer who wants a 2D drawing, give them a 2D drawing. According to a recent marketing report by the Aberdeen Group, there are several reasons people use 2D CAD in the first place, including demand for increased quality/reliability, shortened product development schedules, accelerating product commoditization and marketspace competition. The main reason that seems to prevent 2D CAD users from migrating to 3D CAD is "The current process using 2D works, no need to make a change (40% of surveyed)".

progeCAD is an example of robust 2D/limited 3D CAD that is helping thousands of businesses meet their mainly-2D design needs successfully. Many surveyors, builders, electricians and engineers have no real need for 3D CAD at this time.


Myth: Everyone is going to use 3D CAD soon
"Most CAD users still work in 2D, while 3D design is rapidly moving to the forefront.." - Business Wire, Nov 14, 1995 article "AccelGraphics announces first entry-level workstation-class 3D graphics accelerator; new board delivers high-performance 3D graphics for price-sensitive MCAD users". More that 10 years later, CAD software marketing is still warning the world about an impending obsolescence of 2D CAD. The reality is that designers have far more freedom of choice than ever before in finding a design package that fits their needs and budget.


The key is knowing the right CAD for the right job at the right price. A certain flexibility to adapt one's self to learning several systems is therefore practical, but we don't need to learn them all. Technology is just a tool that we create to help us get a job done. It should never become a religion that ironically blinds us from seeing a better way of getting that job done. CADDIT has already helped hundreds of companies find the right CAD software. What has surprised many of our customers is that the best system for them is often not the most expensive or complex system we support.

CADDIT is a professional CAD and CAM software consulting company based in Sydney Australia. The full version of this article can be found here.

PTC Pro Engineer company for sale? Yours for $2Bn!

The news is that for only 2.4 billion dollars you can buy Pro E - not just the software but the whole company. They have hired Goldman Sachs to help find a big company with the cash. Why would the Needham, MA USA based PLM company be looking for a buyer after all these years? Less than two years ago, PTC acquired a $230 million credit facility from a bank syndicate for buying other companies themselves. As with many things, timing could be a factor. The news conveniently broke just as PTC is set to announce their largest sales figure ever, one billion dollars for the year making it the largest selling MCAD still based in the USA. PTC also was also awarded the large EADS PLM contract in July. Good news now could mean a good selling price - especially in the face of a looming decline in MCAD sales for the industry in general. And who knows? Maybe PTC CEO C. Richard Harrison really does want to collect the total 15.5million now promised him since July should the company sell.

The proposed sale of PTC follows a wave of major corporate consolidation in the CAD CAM software industry. Autodesk recently bought Moldflow. German company Siemens bought UGS who bought EDS who then owned the Unigraphics brand. Cimatron merged with GibbsCAM. And the list goes on.

Who, if anyone, buys the company could greatly influence the future direction of the Pro Engineer product line, Linux support, etc. There are many reasons for this. SolidWorks and Solid Edge are examples of software with feature limits to prevent those products from directly competing with their owners' flagship products (CATIA and Unigraphics). Some platforms, like SDRC I-DEAS (now "merged" as part of Unigraphics NX) are slowly disappearing completely.

As useful as CAD standards are, they always change. And over time, even the most naive of design engineers understand that their "CAD standard" of today is only standard for as long as the corporate "powers that be" say it is.

Economy: progeCAD users enjoy savings against high price of AutoCAD

Once resorted to only by smaller businesses needing basic DWG CAD compatibility and AutoCAD commands for 2D technical drawing, progeCAD is now making gentle inroads to larger companies. "Great! This (progeCAD) delivers just the right level of features for a fractional price of what one copy of (AutoCAD) LT costs us..." wrote one office in Australia. "I sorted all our guys with progeCAD without capital expenditure" laughed another.

A downturn in the economy and the rising cost of new licenses for corporate brands like AutoCAD and Microstation have some department heads scrambling to find affordable CAD software that still gets support. Still, the new trend of larger companies toward progeCAD surprises some. It was only a few years ago that the program still suffered issues to edit large files (in excess of three megabytes) and snap to points within nested AutoCAD blocks. As progeSOFT continues to improve their flagship product, end users are enjoying the benefits of what many now consider to be their CAD of choice for money.

Schools benefit the most. They get theirs free. When CADDIT first announced the progeSOFT educational program in Australia, it was quiet. Then slowly interest started calling - TAFE, universities, public and private high schools. Now CADDIT.net receives new educational requests on pretty much a weekly basis.

CADDIT is an international partner of progeSOFT, Italy, specializing in the English or German language product sales and support. Users and companies from any country can download free or register progeCAD and choice of support plans directly online. For full corporate progeCAD site license requirements, the best options is to contact CADDIT directly. Current progeCAD 2008 Professional users can expect at least one, if not two more free minor support upgrades this year. These minor upgrades are mostly patches to enhance and sometimes fix existing functions. progeCAD 2009 is still many months away.

Autodesk Escalates War on "Open DWG" File Technology

progeCAD and similar products continue to win user confidence as low cost substitutes for overpriced CAD. And American corporation "Autodesk" is getting mad. Passive resistance to DWG clone technologies has developed into all out war, both in the court room and in the board room.

The Open Design Alliance (ODA) is a nonprofit consortium of CAD companies cooperating in a rare way to clone one of the few major reasons people still pay Autodesk prices - the binary DWG AutoCAD file format. The ODA posts regular updates of their robust DWG and DGN libraries on a website for member use in their own software - software like progeCAD.

When Autodesk itself was invited to join the ODA, the company declined. Gradually Autodesk began a long series of legal attacks on the ODA. On November 13 2006 they officially filed suit for their "Trusted DWG technology" which superficially warns users about opening DWG files that didn't come from their own AUD$6000 CAD system. They are also litigating for ownership of the letters DWG as a trademark belonging to Autodesk. The problem is that the USA trademark office doesn't recognise file extensions as "trademarkable". DWG is really just another file extension like ".doc" or ".txt".

Meanwhile, Autodesk finally realeased their own "RealDWG" toolkit to compete with the ODA, the caveat being that any applicant must meet with Autodesk's approval as a developer that will not compete with any of the Autodesk high-priced product line. It was quite an effective move to begin cherry-picking "realDWG" converts from important ODA contributors, undermining it. ODA gets its funding from its members.

Autodesk has quickly made their next move in this apperantly two-prong gambit to weaken the ODA. Following at the heals of the completed million-dollar Autodesk assimilation of Moldflow, Autodesk has announced a new "cooperation" with their next unlikely target, Bentley Systems(Microstation). At one time, Bentley was a serious AEC market competitor. Then, in February 2008, a key Bentley developer changed sides to Autodesk. Strangley, Bentley Systems has now been approved for use of the Autodesk "RealDWG" toolkit. A press release was posted celebrating this "Advance in AEC Software Interoperability". Now think, would you let your worst enemy watch your house while you were away? The truth is that Autodesk is as unconcerned in promoting real file interoperability as they have ever been. The endgame in this gambit really stood later in Bentley's own reaction, stating that their ODA was "now irrelevant". There is further speculation that Bentley Systems is next in line for Autodesk assimilation.

progeCAD is a product that reads, writes, edits and converts Autodesk DWG format files in a CAD interface very similar to AutoCAD 2002. Some consider it a clone. Recently this product has become very stable and robust so that even large companies are saving thousands by replacing expensive AutoCAD installations with progeCAD.

It is obvious that Autodesk is now at a de facto state of all out war against such products. Should they win, businesses will have no choice but to pay big AutoCAD prices. My gut tells me that Autodesk is scheming something parallel to their 2010 release to finish the ODA for good. Is the world's best hope is that the EU will take the same anti-trust motions against Autodesk as they have against Microsoft? Maybe the ODA needs to move to Europe?

Will Autodesk Moldflow Merger Help Plastic Simulation Software Users?

On June 25 2008 Autodesk, Inc.(Nasdaq: ADSK) completed its acquisition of Moldflow Corporation, partly made possible by means of "Autodesk's existing revolving credit facility with Citibank N.A." What the press release didn't mention was the removal of several directors from the Moldflow board. Not Autodesk's. Of course not. And now I am guessing that "merger" is the psychologically-correct way of saying "takeover"... a way that doesn't make end users want to run away quite so fast. Like the "merger" of Cimmatron and GibbsCAM, right?

Autodesk mentions a "Safe Harbour" statement as part of their press release concerning "the impact of the acquisition on Autodesk's earnings per share, business performance and product offerings; Autodesk's commitments to Moldflow customers; and the impact of the combined product capabilities." One always wonders if and how the working class end user will benefit. On one positive side, it could result in some free version release similar to Maya. No doubt Inventor will enjoy enhanced integration, but will other platform users (i.e. SolidWorks) continue to enjoy the same benefit?

CADDIT Marketing Receives Praise from a Competitor

We don't normally do this. But I had to laugh when I saw the newest content ad from ailing Chinese IntelliCAD vendor, ZWCAD. Maybe because they targeted a market outside Australia, they thought we wouldn't see it here in Sydney?

Some background: CADDIT Asia-Pacific has been successfully raising awareness about a robust, low-cost AutoCAD Clone Software called progeCAD. One of the messages they have been doing this with for several months now is a paid image ad. This is our ad in question:

They say that imitation is the greatest flattery? Well, here is the new ad from Chinese competitor ZWCAD (RM stands for Malaysian Ringgit, btw):

We first saw this ad at http://www.neofame.com.my/store291007/index.php . It looks like movies, software and patents aren't the the only thing the Chinese like to pirate :). Judge for yourself.