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Onshore Outsourcing: Made In AmericaOnshore Outsourcing: Made In America

Startup Rural Sourcing has an alternative to offshoring: outsource IT work to smaller U.S. cities. The pitch? It's still cheap and helps American workers.

Paul McDougall

May 6, 2005

5 Min Read

Rural Sourcing will have plenty of competition, and some of that will come from the very firms to which the company wants to establish itself as an alternative. A number of Indian service providers are establishing or expanding operations in the United States. Part of the reason is that not all of their potential customers want to move work offshore. Additionally, many Indian companies are expanding their offerings to include strategic work that requires an on-site presence.

TCS will hire 1,000 in the U.S. this year, says Arup Gupta, president of TCS North America

TCS will hire 1,000 in the U.S. this year, says Arup Gupta, president of TCS North America.

Tata Consultancy Services in Mumbai, India, recently opened a training facility in Buffalo, N.Y. Company officials say the city's proximity to a number of top educational institutions and its relatively low costs make it an ideal location. "It's very attractive from a cost basis, and we can recruit from the regional population," says Arup Gupta, president of TCS North America. Once trained, some of the workers will be dispatched to TCS development centers in Missoula, Mont.; Cary, N.C.; and several other smaller communities around the country.

TCS is looking to hire about 1,000 workers in the United States this year. Gupta's concern: Skill shortages mean he might not be able to fill all the positions. "There are only so many individuals that can make the cut," Gupta says. Programmers with experience adapting packaged applications such as Oracle and PeopleSoft for use in specific industries, including manufacturing and retail, are in short supply, not only in the United States but worldwide, Gupta says.

Some U.S. services companies with operations around the globe also are looking at smaller U.S. cities to serve customers that don't want to place IT work offshore but still are looking to avoid the high costs of major urban centers.

In January, Ciber, a Denver company that operates a service center in Bangalore, India, launched its Cibersites program, under which it plans to open six application-development centers in midsize U.S. cities. "Our clients are under cost pressures, but not all of them want to send work offshore," Boehm says.

A number of potential customers are concerned about security and intellectual-property protection in an offshore environment, Boehm says. "They also don't want to deal with midnight calls to an offshore project leader," he says.

Cibersites has opened development centers in Tampa, Fla., and Oklahoma City. Each location offers distinct advantages in terms of finding qualified local IT workers, Boehm says. Tampa is home to a number of corporate offices in which software development has been sent offshore, he says. That has left a pool of unemployed or underemployed workers from which Cibersites can draw. The company has attracted workers laid off from Verizon, retail pharmacy Eckerd, and juice maker Tropicana, among others, he notes.

As for Oklahoma City, its proximity to several military bases has proven a plus for Cibersites. It has attracted a number of retired military IT specialists who still want to work. The city also is close to the University of Oklahoma and Oklahoma State University, both of which can provide a steady stream of computer-science graduates.

To date, Cibersites has won a handful of customers, including the federal government and a company Boehm declined to identify that had outsourced work to India but wasn't happy with the results.

Cibersites will open its next location in Kentucky, Alabama, or Nebraska. "They've been relatively aggressive in trying to attract our business," Boehm says. Florida and Oklahoma officials are giving the company payroll-tax rebates in exchange for operating in Tampa and Oklahoma City.

Ultimately, Cibersites plans to open six centers and employ about 1,000 workers in the United States. Beyond having moderately priced labor, all of the centers will use state-of-the-art technology to keep costs down. For instance, all will use voice-over IP telephone systems rather than traditional phone networks and open-source development tools whenever possible, Boehm says. "You can't win just by lowering labor costs. You also have to offer and employ technological innovation," he says.

Other IT entrepreneurs also see opportunity in America's Mayberrys and Hazzard Counties. Saturn Systems Inc. offers application-maintenance and -development services at operations in Duluth, Minn., and Aelara Corp. will deliver IT services from Savannah, Ga. Some big companies also have caught on to the idea of rural "insourcing." For example, medical-supplies distributor McKesson Corp. has moved its primary data center from San Francisco to Dubuque, Iowa.

White is confident that the trend will continue to catch on, and she has big growth plans. "I'm not thinking small; I've been with big companies and I know that scale matters," she says. Ideally, she would like Rural Sourcing to operate multiple "centers of excellence" around the country. She's also considering a foray into business-process outsourcing by opening customer contact centers in small towns. That, however, isn't an immediate priority.

For now, she's focused on the IT market and proving that small towns and big business aren't mutually exclusive. "We don't need a big glass building, and we don't need to be trendy. We're providing good service at a good price, and why wouldn't that catch on?"

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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