Applying the outsourcing model within


    Our Hawaii-based civil engineering consulting firm experienced a paradigm shift over the past few years by taking advantage of some of the international business trends described by Thomas Friedman in his bestseller, The World Is Flat. We began with the "sourcing" model, which is the process of contracting with a third party to deliver products or services rather than providing them internally. However, instead of outsourcing, we strengthened the connection between two of our offices and created our own internal "service provider," resulting in increased growth, backlog, and profitability.

    This transition took place because our company was facing several challenges, the most significant being recruitment and retention of qualified employees. In Hawaii, the recruiting climate is extremely competitive for both graduating and newly arrived engineers. Combined with an improved economy and successful marketing efforts, we faced an employee shortage.

    Another challenge was developing the skill set of our staff. Show me a great engineer and probably his or her marketing ability is lacking and vice versa. For us, the challenge was how to train our staff to focus on both the technical and business aspects of executing projects without compromising either.

    Also contributing to the paradigm shift to the outsourcing model was the fact that the firm was facing staff turnover and reduced profit margins. By way of background, in 1972 the firm opened an office in Manila, Philippines, to do international and U.S.-funded projects. By 2004, a skeletal crew of six remained, with few local projects to support itself. The Honolulu office had a staff of 20 doing subdivision design, utility plans, and other challenging civil projects. Firm leaders decided that we needed to cut costs yet maintain high quality work, and the best solution was to better utilize our Manila office as an internal service provider.

    To make this model work for us, we learned many essential lessons, including the following:

    Management support is critical. We continually reinforced that the concept was a win-win situation, treated both offices concerns equally, and assured everyone of job security during the process. From the beginning, principal-level management involvement and wholehearted employee cooperation were essential to execute this operational change.

    Communication, not technology, is the challenge. In the beginning, we thought it was not technologically feasible to share an office 5,000 miles away. We learned that the technology is available and that personal communication and cultural awareness should be emphasized through training.

    Investments in interconnectivity tools will more than pay for themselves. A customized document management/transfer system, voice-over-Internet-protocol that makes international calls "local," e-mail, video-conferencing, and instant messaging all enhance productivity.

    Hire the best. We hired the best and brightest engineers we could find in Manila. We pay above-market salaries, yet these employees cost the firm about 30 percent of comparable U.S. staff.

    Training is critical. Standards and procedures are adopted and applied uniformly by all technical staff; and training is provided both within and between offices.

    While not solely applicable to implementing the outsourcing model, we also learned to explore and revitalize every possible resource when times are tough. Ironically, I endorsed closing our Manila office when its profitability was in question, and now I am its biggest proponent.

    Best of all, our new business model resulted in unexpected dividends. Much more than cost savings, we gained capacity and employee morale. Our Honolulu engineers appreciate that they develop management and marketing skills faster. Seasoned staff do fewer repetitive tasks, and junior staff learn at an accelerated rate. Word spread, and we launched a new division called Lyon Tech Solutions to serve as an Offshore Development Center for architects, programmers, and civil engineers serving other U.S. firms. Embarking on this new course was definitely the right decision for our firm.

    Lyon Associates, Inc.
    Headquarters: Honolulu, Hawaii
    Number of branch offices: 4
    Total number of employees: 80
    Year firm was established: 1961 (Re-established as an independent firm: 1996)
    Total billings for last fiscal year: approximately $5 million


    Frank James "Jim" Lyon, P.E., is vice president of Lyon Associates Inc. He oversees the Honolulu, Hawaii, corporate office and travels frequently to the firms branch and project offices in Asia. He is also responsible for the creation and development of the Lyon Tech Solutions division. He can be reached via e-mail at