Outsourcing to Vietnam

This article by Andrew Bibby, in a slightly different form, was first published in the Financial Times, 2003

Trieu Nguyen used to teach architecture to university students in Ho Chi Minh city (Saigon), Vietnam. These days his workplace is a modern office block near the city's airport and his days are typically spent checking technical drawings for, say, a new secondary school in the Home Counties or a student accommodation block in south London.

Trieu Nguyen is Technical and Compliance Manager with Atlas Industries, a young company which is intent on persuading the architectural profession in Britain of the benefits of outsourcing work half way round the world. The fifty or so architectural staff working for Atlas at its Vietnam head office work almost entirely for the UK market, producing drawings and 3D computer-generations of buildings under design. These are then transferred to and from British architects electronically, either by email or via a password protected website.

Offshore outsourcing, already a feature of many other industries, is the way forward for architecture as well, at least according to Atlas's CEO Joe Woolf. His firm focuses particularly on the middle stage in building contracts, after the initial design work and before major work begins on site, when large numbers of technical drawings are required. Mr Woolf says that this is the stage where cost overruns are a significant risk and where architects' skills are not particularly profitably employed. "Drawing is not a core competence for architects," he argues.

Why choose Vietnam? Mr Woolf, an expatriate Briton who worked as a manager in the oil industry in Vietnam for over ten years, says that the country is politically and economically stable and, although poor, has invested heavily in educating its population. Almost all Atlas's Vietnamese staff are graduates, mostly with architectural backgrounds. Typical pay at Atlas, according to Mr Woolf, is about $6000 net a year, high by local standards (Vietnam's GDP is about $400 per head), although a fraction of comparable UK salary levels.

Atlas claims that architectural practices can save between a third and a half of the costs normally incurred in the drawings production phase of a contract, which in turn can increase significantly the overall profitability of a contract. Interestingly, however, cost is not necessarily the only motivation for going offshore. Lloyd Stratton, chairman of the 60-strong Architects Co-Partnership practice, prefers to stress the opportunity which outsourcing brings to cope with surges in work load without the need for new permanent staff. "To be honest, I don't see it as being less expensive. The great advantage is the ability to switch resources on when they are needed, and then to switch them off again," he says. His firm first tried out Atlas two years ago for work on a new hangar at Luton Airport and has since used Atlas among other things to produce a walk-through animation video for a new school it is designing. As Mr Stratton points out, this work, had it been done in Britain, would have tied up highly-qualified staff.

Atlas was set up in Vietnam simply because that was where Joe Woolf , whose background is in civil and structural engineering, found himself living. He says that the idea for Atlas came to him after he had begun lecturing at the university and had been impressed by the students' skills and enthusiasm. The embryonic business raised an initial $1m in private equity investment and took on its first employee in 1999. Its annual turnover is now about £2m.

Mr Woolf is honest, however, about the problems which quickly emerged in the original business plan. "We grossly underestimated the flash-to-bang time, in other words the time it takes decision-makers to get both their heads and their hearts around the outsourcing concept," he says. Like other start-ups, the company took time to identify its core business. Mr Woolf says they were distracted into chasing contracts in a wide variety of sectors and in several parts of the world. The firm also initially offered a software development and website production service, a business from which it has now withdrawn. What Mr Woolf now describes as 'obvious business school lessons' were learned the hard way, and in the process a further $1m of investment capital was required.

Mr Woolf now feels confident that, in focusing on the British architecture and structural engineering sector, his company has found its niche. Atlas currently has sixteen UK architecture practices as clients, including both very small and large businesses, and it hopes this year to make an operating profit for the first time.

Its future growth depends, however, on persuading many more architects to look offshore. There are perhaps two obstacles to overcome. The first is the need to encourage a rather conservative profession to change its ways of working methods. Mr Woolf says that firms need to change their work culture to benefit fully from outsourcing.

There is another trickier, and more political, issue. Whilst Mr Woolf claims that no British jobs have been lost to Vietnam because of Atlas - he points in justification to the current shortage of skilled architectural professionals in Britain - some architects are concerned about the risk of bad publicity, particularly where PFI-funded building contracts are involved. As one architect put it, "PFI rightly or wrongly gets a lot of bad press. The idea that PFI work might be done in the Far East makes us get very nervous."