I came across an article in one of my newsfeeds today about keeping jobs here in the United States instead of sending them overseas.
The point is, we can put people to work if we can avoid targeting the absolute maximum high profit margin as a business goal. I’ll quote liberally from an article that came out in BusinessWeek, and here’s the link to the full article. Look for this trend to accelerate.
A handful of fast-growing information technology firms in remote areas of the U.S. are positioning themselves as more convenient, cost-effective alternatives.
At Cayuse Technologies, currently a 200-employee tech outsourcing firm, owned by the Confederated Tribes of the Umatilla Indian Reservation in northeast Oregon, they had $7.7 million in sales last year; seven times what they had been in 2007, their first full year of operation. They expect to hire an additional 75 workers, says Marc Benoist, the company’s general manager. “We still have capacity here at our facility, so we have plenty of room for growth,” he says.
I’d call that some good news.
Cayuse is one of a handful of fast-growing information technology companies in remote areas of the U.S. that are positioning themselves as alternatives to offshore outsourcing. On an hourly basis, these “rural outsourcers” cost anywhere from
10 percent to 150 percent more to use than rivals overseas. After factoring in additional costs such as oversight and quality control of the offshore work, however, rates are comparable, says Mary Lacity, a professor at the University of Missouri in St. Louis who studies outsourcing. And the rates of the rural outsourcers are better than their domestic counterparts in big cities because the towns and small cities where they operate have lower living costs. “Their value proposition is, ‘We cost less than the East and West Coast, and we’re easier to deal with than India,'” says Lacity.
According to industry estimates, there are currently about 20 such companies now. Get this: “A lot of it is being driven by dissatisfaction with India and challenges with visas,” says John Beesley, director of business development at 100-employee
CrossUSA. Other companies, including Saturn Systems, Rural Sourcing, and Onshore Technology Services, are reporting double- and triple-digit revenue growth in the past few years. Last year, IT research firm Gartner (IT) said in a report that while the companies make up a sliver of the market, they are an “attractive alternative” to offshore outsourcers because of language and other cultural benefits. It’s also easier for them to comply with U.S. data privacy regulations, the report said.
Rural outsourcers won’t replace the offshorers. But they should be considered, especially with this sobering statistic: India has outsourcing revenue of about $50 billion, and that’s expected to triple by 2020, according to a 2009 report by Nasscom, India’s software services trade group, and consultant McKinsey.
You want to fix our economy? Here’s a great place to start. At least it has the interest of our nation’s lawmakers. Also working to our advantage is the economic pressures on the offshore companies. Workers in China and India are pressing for higher wages to enable better living conditions. You only have to read about life in these two countries (especially with the hue and cry around the Commonwealth Games in India) to understand that this should happen.
Of course the big challenge will be to train enough workers quickly to make this happen. But we’re an intelligent people and together we CAN make this happen. We need people with the guts to put together a startup in a depressed area.
The critics contend that Rural Outsourcing will remain a niche, because of training costs and lack of a workforce. Randy Willis, an Accenture (IT) senior executive who conceived of and hatched Cayuse Technologies, agrees the biggest challenge is creating and maintaining a large enough skilled workforce. “To meet the cost structure, you pretty much have to build the skills from scratch,” he says. “The good news is we can supplement with lower-skilled work while we’re growing the deeper skills.”
Don’t forget, some 60 million people in the USA are in rural areas. Much as everyone would like to think that all life resides in cities, one-quarter of our population is rural. And that’s an opportunity for capitalism, and people, to work.