Butler International President and CEO Edward Kopko and Senior VP Jim Beckley recently spoke with Airline Procurement about the company's global expansion, engineering staffing experience and outsourcing activities. (Edited for clarity and length.)
AP: Can you please provide a glimpse of Butler's business activities and engineering expertise in the aviation industry?
Kopko: We are involved in the design and engineering of basically anything that flies. We provide significant support for parts, components and other features of aircraft to many of the leading manufacturers and suppliers. Some of our bigger clients include Boeing, Airbus, Lockheed, United Technologies and Northrop Grumman. We are involved in both commercial and government programs. We do some design work and modification on airplanes as well. We also get into the aftermarket and do work for other service providers. We're growing as a company. We have about 4,000 employees and accrue about $350 million in sales. We have people stationed all over the world. In some cases they're working in a client's venue or on behalf of a client. We have sites in the US and India and we're about to open a facility in Moscow.
AP: The global shortage of aerospace engineers has been a pressing concern. How is Butler trying to help?
Kopko: The engineering workforce in the aircraft industry is getting old and retiring and there haven't been enough young people coming into the industry over the past 15-20 years to have the supply of engineering talent as readily available for companies. Many engineers say they consider this one of the biggest growth times for aerospace engineering work that they've seen in their lifetime. There's a lot of design work on all kinds of different fronts going on, but there is a shortage of talent and we face big challenges in getting the right workers. Butler is trying to help solve some of these types of problems by locating talent across the globe. Airbus and Boeing are looking at engineering talent needs that are quite substantial. The question is where are we going to find it and how are we going to get it? How are we going to be able to accomplish it in the time-cycles that we'd like? They're saying 'I want it fixed yesterday.' They want to move their products through their development cycle as quickly as possible. But most of these design programs have a finite life to them. It doesn't always make sense to go hire a few extra thousand engineers for a three-year heavy work period and then have nothing else for them to do until the next big design phase comes down the path years later.
AP: How is Butler positioning itself in the global marketplace?
Beckley: Butler has been in business for over 50 years. Our experience in the domestic marketplace makes us a top-tier player in the aircraft market and our continued success will require us to translate this to other regions worldwide. We position ourselves as 'The Better Offshore Solution.' We will use strong domestic domain expertise at the front end in dealing with the customer and will manage the offshore resources, taking responsibility for knowledge transfer and the offshore interface, which often saves the client from sending a team of their people offshore for extended periods of time. The shortage of skilled aircraft personnel in the US is forcing all companies to find alternate ways to get the work done. This global model has been working quite well for the last five years and Butler has already become very well positioned with offices in India and partners in Canada and Russia.
AP: What do you think are the biggest drivers and challenges of the engineering outsourcing industry today?
Beckley: Competency and cost are two of the biggest drivers in engineering outsourcing. The overall demographics of an aging domestic workforce in the aircraft industry combined with projections of strong growth for the next several years provide a challenge for many of our customers. They also have challenges in a multinational environment complying with ITAR regulations and meeting the demands of foreign governments for offset requirements and technology transfer. Finding suitable foreign nationals along with the knowledge transfer necessary to successfully build offshore centers are challenges that all of us in the outsourcing industry are facing. Once the knowledge transfer does take place, retention becomes another challenge facing all of us in a consistently more competitive environment.
AP: Where is the middle ground between back-channel investment and long-term partnerships?
Beckley: Unless you see the size of your offshore development center being a consistent 200 or more person group, you should use partners to accomplish your offshore tasks. If you anticipate the need being bigger than 200, you may want to consider starting with an offshore partner, unless you have had significant offshore experience to validate the viability of your ability to transfer the tasks that you are looking to outsource. Another way to enter into the offshore market would be to enter into a build/operate/transfer arrangement with an offshore supplier who will build the group and competencies and over time transfer the ownership back to you. Butler has its own offshore center for smaller or peak needs for our customers. We also entertain a BOT opportunity with strategic partners.
AP:How efficient do you think the aviation supply chain is today?
Kopko: There's no question that the design, construction and ultimate delivery of an aircraft in any spot of the world has become more global and more complex. But I think we're seeing that the collaboration aspect is a lot easier than it was 50 years ago. So it enables other things that before were unfeasible. Markets are driven by supply and demand. I can help create and build teams. I can bring some people from out of country into country and develop them so we have a better chance at building more competencies in some of these other venues that aren't as strong from a legacy standpoint. I think the overriding message is that the world is going global and getting more and more sophisticated. The markets are also developing that way. You look at some of the market reports of, say, a Boeing or an Airbus that project where they think they're going to be selling aircraft and you'll see that most of those markets are not in North America.
AP:What are some of Butler's latest initiatives and technologies?
Beckley: The newest innovation is inflight Internet. Our technicians are installing antennas on the lower side of commercial aircraft that can pick up a ground-based station to provide full-access Internet to passengers while they are on transcontinental flights. We also have technicians providing the latest in structural assembly for a business jet that involves what is called friction stir welding. This process provides a much stronger and lighter frame and does not use rivets.
AP: In what areas do you think Butler needs to improve the most?
Beckley: We are playing in a large marketplace, while among those that do know us, Butler has a good reputation--with over 90% customer satisfaction and a 67% best-in-class provider rating among our customer base. But branding will be important as we grow. We are not a household name and we need to make sure that we are a well-recognized brand to the decision-makers in the industries that we focus on. We are also looking at expanding into multiple countries and there will be challenges in having the right people leading our entry into those markets. Strengthening the next level of management can take us to a bigger frontier.
AP: What is the company's overall growth and management strategy as well as its vision moving forward?
Beckley: Our overall growth strategy is to be focused on our primary industry verticals, aircraft and aerospace, communications, consumer products, federal defense and manufacturing. We have structured the company to focus on and grow in these vertical markets. Our vision continues to be our desire to be the number one client rated company in the industry.
We will continue to be customer-centric, positioning ourselves to expand our footprint inside the customers where we have a long-term relationship and there is still plenty of room for growth. Our customers often know us for what we have done for them without understanding all we can do for them. We need to make sure that we advance that message. Our customers often help us come up with the next service offering that we can leverage from a need that they had.