Is Frugality Fashionable?

Be industrious and frugal, and you will be rich.

-Benjamin Franklin (1706-1790)

 

Major economic headwinds continue to hammer individuals and businesses, making them increasingly value-focused. Now the national media has christened this shift “A New Frugality”. Tom Pedreno, writing for Market Beat in the Los Angeles Times makes the case for “a new national frugality," while Anne D'Innocenzio, AP Business Writer writing in USA Today has declared that “It's Cool to Be Frugal.” 

 

Wikipedia defines frugality as “the practice of acquiring goods and services in a restrained manner...” and goes on to say “Frugality can also be thought of as a philosophy in which one does not trust, or is deeply wary of ‘expert’ knowledge, often from commercial markets or corporate cultures, claiming to know what is in the best economic and material interests of the individual.”

 

The last two generations of Americans who've been on a non-stop spending spree saw frugality as old-fashioned, uptight or uncool. But the state of the economy has many former spenders changing their attitudes. Changes in attitudes beget changes in behavior, and America’s behavior is clearly changing in the face of rising fuel prices, a stagnant housing market and rising levels of unemployment. One clear indicator of this is that Americans are beginning to reduce their debt exposure - as seen in the savings rate, which rose from 0.3 percent to 2.6 percent in the last three months, the third steepest quarterly increase since the Second World War.

 

But will the frugal behavior of individuals also translate into business frugality?

 

Manufacturing companies have been overpaying for CAD software for years. The relationship of big CAD companies to their customers is like a “Stockholm Syndrome” between a kidnapper and their victim. Customers are so dependent on their CAD suppliers that they believe anything that is good for the kidnapper, i.e. CAD supplier, must also be good for them. Their CAD seats are literally held hostage through corporate-wide purchase agreements, restrictive licenses, and proprietary (even encrypted) data structures. They gladly pay the $5-$10K price per seat prices and $1-$2K annual maintenance fees rather than risk the uncertainty that comes with liberation.

 

I’ll never forget the meeting I had with a VP of Engineering for a major Canadian aerospace company. The meeting went very well and the VP was enthusiastic about Alibre’s offerings. He told me he wanted to introduce me to his VP of Development who would conduct the company’s evaluation. Imagine my surprise when this VP handed me a business card which was titled “CATIA CAD Manager.” Alibre was now to be held hostage by the same company that had kidnapped the VP of Engineering.

 

It is time for CAD users and buyers to step up and take control of this hostage situation. Just because your company “can afford” to buy you a seat of Solidworks, Pro/E, or CATIA, doesn’t mean you should stand idly by while your company wastes its precious financial resources. Ask yourself, if this were your money, if you were making the purchase decision yourself, would you be willing to spend thousands of dollars more than absolutely necessary for CAD software?

 

Sure it feels good to have “high-end” expensive CAD software dedicated to your use, but this guilty pleasure comes at a cost to your company, your fellow employees, and eventually yourself. Resources wasted on expensive CAD software could otherwise be applied to critical company priorities, perhaps enabling additional investments in marketing, sales, and professional staff to help your company grow faster than your competitors. Some of the money saved could even end up in your own pocket as increased salary or health benefits, and if you were recognized as the champion of this cost-saving measure, a nice bonus or possibly even a promotion could come your way.

 

Does it make sense to spend $5K-$10K per seat for CAD software, when the PC to run it on only costs $500 - $1000? Something is seriously out of kilter here. For most companies, these prices are simply not justified, especially when companies like Alibre, Google, and others are providing CAD software that is inexpensive and even free for some applications. Some of you might be saying “what a crock,” but how many of you have actually taken the time to try another CAD product, one that is not owned by your company and assigned to you for business use only?

 

It's about time that those free-spending engineering, design, and drafting departments start changing their attitudes and make it cool to be frugal with CAD. Using company resources wisely doesn't always mean making big sacrifices. Instead, seize the opportunity to find resourceful ways to get the job done for less. Doing so with initiative and enthusiasm makes you look smart, and your employer will be grateful for that during these challenging economic times.

 

Something to think about.

 

Paul Grayson

Comments

[Jeff Waters]

Hmmmm. I like a strong opinion. Appreciate your strong opinion here, but not sure I'm seeing CAD as a huge company expense in the grand scheme of things.

Let's take your worst case scenario ($10k purchase + $2k/year annual maintenance) for an Engineering team made up of 10 Engineers.

You have 10x$10k = $100k 1 time initial cost + $20k/year maintenance. That's for a software tool that is mission critical to the Engineering side of the biz. Doesn't sound like a lot compared to overall burn rate of a company that size... nor does it seem like a lot compared to overall profits for such a company. If it is, I'd say that company has bigger problems to worry about.

[Paul Grayson]

Hi Jeff,

Thanks for your response. Frugality is marked by an attitude, it is not the just the amount or the magnitude, but the avoidance of waste that matters. A $100K here, a $100K there and pretty soon you are talking about real money. Software costs in general are less than hardware costs, as computing costs have declined so have software costs, except in the CAD market. A toilet seat is mission critical too, but that doesn’t mean you should pay $10,000 for it.

Paul

[Martin Custer]

Like most things the issue is relative to the individual case. For a company with tens or even hundreds of seats it may not be as big an issue but irregardless an 80% savings is an 80% savings even if it only amounts to a half percent fo your burn rate.

For tiny companies like mine (1 seat)that 80% savings amounted to the difference of spending 35% of my start up budget on CAD or less than 5%.

As long as the tool fully meets the need (and it certainly does for me) why would any competetent manager spend 80% more than is neccessary. I would expect any employee with spending authority in my company to excersise at least some level of CBA before spending a dime of our money. The bigger the purchase the higher the level of scrutiny. That is assuming they intend to keep working in my shop.

[Dan Cowley]

Way to go, Paul!

Your first message at the helm to consumers at your front door, "Alibre helps you as you strive to be frugal!"

At the same time, back door, you are handing out tricky treats to your dedicated customer base, namely a 35% price increase. The price of your annual maintenance agreement for Design Expert will go up from $295 to $399 (if you are a late shopper.)

Hmmmmm! What say? As my daddy used to say, "Practice what you preach!" I hope you can demonstrate frugality today within Alibre, so we don't see run away price increases. Good luck in your new job!

[Paul Grayson]

Hi Dan,

Thanks for the comments. Even with the 35% price increase for Expert maintenance Alibre still represents BY FAR the best value in the CAD industry. At $399 Alibre Design Expert maintenance is about 25-30% of what you would pay for maintenance on Solidworks or Inventor.

We are walking the talk and our money is where our mouth is.

Paul

[TC]

Nice Article but some manufactures are forced in to what cad/cam system they have to choose from based on who they do work for. So it really does not matter in our situation as we were required to have a particular software to do business. As far as I am concerned this is the only reason the software we have is on the market. If people were not forced into getting these particular cad/cam systems by the "big guys" there is no doubt some of these cad/cam companies would be out of business. But at the same time as I look at what used to be "affordable" cad/cam systems they are increasingly getting to be unafordable as time goes on and they realize what they too can get away with. I guess I understand the meaning of making a dollar but why charge 5 dollars just because company A can pay it. If you can keep the cost to a dollar then companies a through z will buy and you will end up making more money in the long run. I think Solidworks started out this way but is ending up like all the rest of the Big Guys.