Going Rural A U.S. Alternative to Offshoring

Having grown up in Oxford, Arkansas (pop. 192), Kathy White has firsthand experience with the strong work ethic in rural America.

    As chief information officer of Cardinal Health, a $65 billion health care provider in Dublin, Ohio, she decided to take advantage of that pool of untapped talent by setting up a summer internship program so that students at Arkansas State University, White’s alma mater, could work remotely from school.

    “It served a double purpose,” White says. “It provided these students, who were not near any large companies, with a great opportunity, while providing Cardinal Health with hard workers,” she says.

    Thus the concept for White’s next venture was born. Last summer, she launched Rural Sourcing, an information technology outsourcing company. With five locations across Arkansas and North Carolina and 35 employees, the company has more than a dozen clients, including Cardinal Health and toymaker Mattel.

    At a time when major companies are sending thousands of jobs offshore, White believes that there is growing demand for alternatives to offshoring.

    “If a company is just looking for low costs, there are many alternatives offshore,” she says. “But if you take into consideration the total cost of working with different languages, cultures and time zones, this is another option.” Rural Sourcing’s rates range from $38 to $48 per hour, compared with $18 to $30 per hour for companies in India.

    After hearing rumblings from clients that were looking for alternatives to offshoring, Ciber, a Greenwood Village, Colorado-based systems integration provider, launched a new division, called CiberSites, to offer low-cost IT work in the United States. With centers in Tampa, Florida, and Oklahoma City, CiberSites has been in operation since January. It has 60 employees and 11 clients, two of which are Fortune 500 companies. CiberSites charges about $40 per hour.

    While Rural Sourcing’s strategy focuses more on outsourcing to rural America and CiberSites’ locations are in larger cities, both companies focus on providing low-cost alternatives to offshoring.

    Many companies do not want to offshore portions of their businesses because of data security or intellectual property concerns, CiberSites president Tim Boehm says. Two clients joined CiberSites after sending some work offshore and finding that the cost savings were not worth the hassle, he says.

    Large employers in expensive cities like New York and San Francisco have been moving call centers to rural America for years, but now many are considering moving more work there, analysts say.

    “Particularly a lot of companies that are over-invested in India are trying to diversify because they don’t want to be too dependent on one region,” says Stephanie Moore, vice president at Forrester Research.

    More large companies are considering a range of options because offshoring is such a complex process, says Frances Karamouzis, research director at Gartner. Outsourcing labor to towns in rural parts of the country is particularly attractive given that many state governments are giving tax breaks to employers who move jobs there, she says.

    Also, a number of employers are finding that the cultural complexities of working with outsourcers abroad outweigh the cost benefits, she says. “For example, in Asia when you ask someone if they can get something done in a certain timeframe, they say yes, even if the answer is no,” she says. “These contextual differences in communications can cause all sorts of problems.”

    Onshoring is particularly attractive to companies that have brands tied to the U.S., says Peter Balnaves, senior manager in the Los Angeles office of Boston Consulting Group. “These companies are willing to forgo the cost savings because they fear the political exposure associated with offshoring,” he says.

Workforce Management, September 2005, p. 16 —Subscribe Now!