International Collaboration 2

[gharli]

My question is, has anyone requested work to be done by consulting engineers in other countries where the currency exchange rate can be successfully hedged to offer more competitive rates locally.

The consulting market in South Africa is currently going through a bit a of lull and I was wondering if it would be a worthwhile endeavor marketing engineering services to other countries? It may be a win-win situation where good quality work is procured for relatively inexpensive rates. The US Dollar to Rand is currently trading at around 1 : 12.

Looking forward to your thoughts, comments and opinions.

_________________
Jones & Wagener

http://www.jaws.co.za

 

[SteelPE]

I am having a hard time with your post.

You are in South Africa and you are trying:

1)Gain an advantage over your competitor by hiring engineers from another company at cheap rates to do projects in South Africa
or
2)Do engineering on projects in other countries (ie United States) because the exchange rate is to your advantage and you can therefore do the work cheaper than someone with offices in the US?

 

[BrianPetersen]

I suspect it is 2)

I wouldn't dispute the possibility that this could be done in some circumstances, BUT, I can see a few difficulties from here, which would act in opposition to a cost advantage.

- Many projects require knowledge of local codes and standards, and many of those projects must be done by a locally licensed engineer. You may have to obtain a license in the location of where you want to do the work - and get very familiar with all the local codes and standards AND how they are locally interpreted.

- Many projects require at least some level of local supervision. The local guy can travel to the job site with minimal cost and delay. You can't. The local guy will be staying at home every day with the wife and kids and dogs. You'll be paying to stay at a hotel.

I've worked at places where mechanical design got subcontracted out because our own design/engineering department "couldn't get it done in time", or was "too expensive" (!) and this didn't even involve subcontracting out to someone in a different country. Every single time, was a disaster. Every. Single. Time. It was NOT worthwhile. It didn't stop management from trying it again, of course, but it was a disaster that time, too.

 

[zdas04]

I did a project in South Africa a couple of years ago. The company was in Johannesburg. I was the lead, in the U.S. The Civil and Electrical were done by a company in London. It looked like the implementation was going to be done out of Dubai before the price of oil collapsed).

There is really nothing unusual about expanding your consulting business out of your home country. I find that (at least in Oil & Gas) that while [too] many companies treat employee engineers as interchangeable cogs, they tend to hire consultants more on merit than on cost.

The exchange rate really doesn't matter much since I find companies all over the world tend to accept invoices either in U.S. dollars or in the local currency. I've talked to a couple of companies outside of the European Union that are [reluctantly] willing to sign a Euro-denominated contract, but they don't like it. I'd be shocked if a company in Paris (for example) would sign a Rand-denominated contract.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[GregLocock]

Yes it can be done, and is done widely in the automotive industry. You are in the same timezone as Europe, which is a big help, but Europe doesn't seem interested in engineering any more.

Of course you will have to get around the closed shop mentalities of the locals, that's always fun.



Cheers

Greg Locock


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[KENAT]

I'd think exchange rate would be a secondary factor, and a variable one in what the customer really would care about which is lower overall cost.

Building your business model primarily on the currently favorable exchange rate seems risky unless it's easy to do & undo.

If you can do equivalent work (including required knowledge of local codes, licensure...), at lower overall cost to customer then that's a value proposition.

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[IRstuff]

I agree with Kenat; the exchange rate is irrelevant. What's important is the cost of the engineering person-hour, which also encompasses the cost of living; salaries, etc. For a while, the US dollar was weak against other currencies, but our overheads and margins are quite high, which are not reflected in the exchange rate. This may be further conflicted by things peculiar to my industry, which is the exportability of intellectual property.

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[gharli]

Thanks for the comments.

I really do believe that the exchange rate can have a significant effect on the decision process of the potential client.

For instance, a senior engineer (15 years experience) in South Africa is probably sitting with a charge out rate of ±R1200-R1500/hr. This equates to ±98USD - 122USD/hr.

In terms of dollar rates, is this note a competitive price? I've no idea of US engineers rates.


_________________
Jones & Wagener

http://www.jaws.co.za

 

[IRstuff]

As a billing rate, it's really not particularly low, and certainly not low enough to deal with remoteness, time, culture, and idiomatic differences.

I think you are mistakenly assuming that your exchange rate is reflected in the labor rate; it's not. Labor rates are primarily tied to cost of living, or external demand. Some less fortunate countries have cheap labor, but that's because there a lack of demand for labor, regardless of the exchange rate. If, on the other hand, some company decides to make a manufacturing plant there, labor rates could shoot up, while exchange rates might remain unchanged. China, for example, forces their exchange rate to be fixed, even though labor rates have tripled in the last 10 years.

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[tstructural]

I'm also in structural and I really believe you would find it difficult to find an architect that would be willing to work with a structural engineer from a country half way around the world. The obvious time difference would be a total turn off. But the even bigger problem would be the local code requirements and also local typical construction methods. Not to mention the legal wrangling if something goes wrong. Some architects choose structural engineers based on price only but the majority choose an engineer based on previous working relationships. As long as you keep your architect happy they most likely won't even be looking to replace you.

It's really hard for a local engineer to get new architectural clients - I really believe it would be almost impossible for an engineer from another country to 'wine and dine'.

And of course I'm a bit put off by your plan to turn engineering into a low bid industry. I'm not taking it personally or anything but aren't you turning a profession into a commodity?