India link: Cadforce has used 'blendshoring' to combine foreign labor and American expertise in architecture.

Architect Cliff Moser had a problem: His firm had just gotten a contract for a major project at the University of California San Diego and needed blueprints transferred onto computer so they could be manipulated.

But there weren't enough people on staff at the Los Angeles office of RTKL Architects to do the work on short notice. And to hire more architects, even on a temporary basis, can cost more than $100 an hour.

So Moser turned to a Marina del Rey company he had used for his home remodel: Cadforce Inc., which specializes in outsourcing computer-aided design work for architecture firms. Cadforce saves its clients money by farming out work to contract employees in India, where the going rate for architects ranges from $6 an hour to $15 an hour.

"We're really all about a labor arbitrage play," said Cadforce President and Chief Executive Robert Vanech.

Offshoring labor-intensive manufacturing work and call centers has been going on for decades, but only in the last five to 10 years has outsourcing of professional work gathered steam. And even now, only a small fraction of this work is done overseas thanks to the spread of e-mail and the Internet.

Indeed, that's how Cadforce got started five years ago.

John Reese, an old colleague of Vanech, saw an opportunity to farm out architectural drafting work for computers to India, using e-mail to send large files back and forth. At the time, drafting personnel in the U.S. were charging about $75 an hour, while those in India could be hired on contract for as little as $6 an hour, a very high wage for India at the time.

Sending this work offshore not only saved money, but because the work could be done overnight given the time zone difference it also saved hours, a strategy also known as "chasing the sun." The firm took off as architecture firms were looking to save money during an economic slowdown. Soon, Vanech joined the firm as president and chief executive.

But a major drawback quickly emerged: accuracy. While the Indian workers could convert drafting instructions to computer-based designs of buildings, there were many mistakes in the process. Some were technical errors, like placing an electrical outlet in place of a bathtub drain. Other mistakes stemmed from cultural differences. For example, the offshore architects were not familiar with common U.S. construction terms such as "two-by-four."

At times, the mistakes were so bad that entire projects needed to be redone, costing unforeseen time and money. "There were a few projects in the early going where we took major losses," Vanech said.

A new approach

To get a handle on this problem, Cadforce hit upon a new approach: "blendshoring," the constant teaming of Indian architects with counterparts in its U.S. office using collaborative Web sites.

While this cut down on the error rate, it did raise costs for Cadforce. Vanech and the firm's other top executives raised $5 million in capital to fund this expansion. But the timing was impeccable.

U.S. construction markets took oft, driven by the real estate boom. Architects were in short supply, while work kept pouring in. Cadforce's revenues jumped from $750,000 in 2005 to a projected $2.2 million this year as it picked up clients in the homebuilding industry, including giants like Centex Homes.

Smaller firms have used Cadforce, too.

"Computer aided design folks are very hard to find right now, and certainly not anywhere near the rate that Cadforce charges," said Robert Liu, owner and president of Acres Group Inc., a small architecture shop in Pasadena that designs residential developments, shopping centers and restaurants. Liu said Cadforce is working on about 15 individual projects for Acres.

Cadforce's goal is to reach $200 million in revenues within the next five years, then to either be sold to a larger company or go public, despite the slowdown in residential real estate. "We're positioned so that when the market slows and architecture firms need to scale back, they can cut their staffs and farm out the work to us at cheaper rates," Vanech said.

However, others in the industry aren't so sure. Offshoring, or "blendshoring" isn't a panacea, they say. Rather, it's a niche that helps some companies cope with periodic work crunches.

"The trend has been for slow growth in this area," said Eric Bobrow, principal with Los Angeles-based Bobrow Consulting Group and chairman of the computer aided design committee for the L.A. chapter of the American Institute of Architects.

Moreover, Bohrow said, in the rapidly advancing world of computer-aided design, the days of farming out simple drafting work may be short-lived. That's because computer programs are becoming ever-more sophisticated as three-dimensional virtual imaging takes hold.

For now, though, that increasing sophistication has played into Cadforce's hands. Firms that offshore work must make sure that the latest technology is used, and that requires a constant learning curve. It's a difficult task but something that Cadforce is making a priority.

"We are placing a huge emphasis on educating our Indian workforce," Vanech said. "That and managing our growth are our biggest challenges."

Cadforce Inc.

Founded: 2001

Core Business: Providing a blend of offshore and domestic computer aided design work to architectural firms

Employees in 2005:18 in U.S.; 35 in India

Employees in 2006:45 in U.S.; 150 in India

Goal: To grow to at least $200 million in revenues within next five years so the company can be sold or go public

Driving Force: The need of domestic architecture firms to farm out labor because of too much work or to cut costs

By HOWARD FINE

Staff Reporter