He was pleasantly surprised when he landed a project manager job at Rural America Onshore Sourcing, a Louisville, Ky.-based IT company that provides business process outsourcing services using professionals who telecommute from rural areas.
"Aside from his capabilities, we could hire Derek because -- despite living in 'Middle of Nowhere,' Wisconsin -- he had access to broadband," said Christopher Hytry Derrington, the company's CEO.
Gleim said he's lucky. Although a large section of rural Wisconsin still lacks broadband, he lives in a place that has it. "Broadband is making it possible to do what I want to do, by living where I want to live," he said.
As increasing broadband penetration brings remote and rural regions closer to the world, niche IT services firms, such as Rural America Onshore Sourcing and Xpanxion, are trying to build a sustainable model of rural outsourcing within the United States -- instead of sending IT projects and jobs overseas. Slowly the foundation of this "onshore" outsourcing is being built amid barns and ranches in rural America.
The $7.2 billion broadband push that's funded by this year's economic stimulus bill aims at two broad objectives: bridging the digital divide and job creation. However, a significant and positive side effect of building out broadband in rural districts -- where only 38 percent of citizens can afford broadband subscriptions, according to the Communications Workers of America -- is that rural America could better compete with the world.
"Over the last 15 years or so -- while regions like India, China, the Philippines and Eastern Europe took advantage of IT and back-office services outsourcing -- rural America was sitting back and just watching," said Paul Eurek, CEO and chairman of Xpanxion. "But with the playing field leveling out, access to broadband is suddenly giving rural America the ability and opportunity to compete in the multibillion-dollar IT outsourcing market. All that rural America needs is to grab a small piece of that to start with [in order] to have a huge impact."
Corporation Catch On
Corporate America has rediscovered its backyard too. Faced with the tough economy, U.S. companies increasingly favor onshore outsourcing. According to a recent survey conducted by accounting and consulting firm BDO Seidman, when asked which location they might consider for outsourcing in the future, participating chief financial officers most frequently cited the United States, China, India and the Philippines."It is purely about cost, not because anyone's more patriotic these days," said Don Jones, an international tax partner in Seidman's technology practice. "Maybe it's good news from a U.S. perspective."
Experts say that even though sending operations offshore might offer long-term cost benefits, many cash-strapped companies are deterred by the startup costs of implementing an offshore strategy.
That's partly the reason why the playing field is leveling out. But another big reason is that the global financial turmoil has decreased salary levels significantly, even in the U.S.
"American talents can be hired at a good price these days," said Hytry Derrington of Rural America. "I hire people with different capabilities with five to 15 years of experience for $20 an hour." That's still higher than wages in India, but Hytry Derrington said such rates are cheaper than the overall cost of using India, China or Eastern Europe outsourcing destinations. The hidden costs of communication barriers, travel
expenses and quality control also must be added to the labor costs of foreign-based outsourcing.
Rural America Onshore Sourcing claims its model that employs lower-cost, rural-based professionals helps cut clients' project and labor costs by up to 40 percent, and saves them the trouble of sending projects offshore or using expensive vendors based in larger cities.
Rural broadband penetration is also changing the mindset of the American labor force. "If you go back 10 to 15 years, the major part of the back-office work was done domestically," said Stan Lepeak, managing director of global research for EquaTerra, an IT outsourcing consultancy. "Then it started to move offshore partly due to cost and partly because Americans were not willing to work in low-paying, back-office jobs. But with job losses and shrinking opportunities, there has been a reversal of that attitude lately. Since broadband is enabling people to work where they choose to work -- including from a rural setting -- more willing labor has become available."
Although some say broadband's ability to uplift rural America is undeniable, is it really a panacea for rural economies? After all, rural America's struggle started not with IT jobs moving out, but with the exodus of its manufacturing base. All that broadband can do is open avenues for knowledge workers, skeptics argue.
Hytry Derrington said those who believe broadband's reach is limited are incorrect. "I predict that there is going to be a seismic change in how we work once broadband is rolled out nationwide," he said.
In fact, according to Hytry Derrington, broadband could reverse a 150-year-old phenomenon -- people being forced to leave their homes to find work -- which began during the industrial revolution. "Broadband in every home can change that. People can leave the urban areas and go to the rural areas and build their businesses, [so they can] provide services, make products and compete worldwide from small communities," he said.
"Moreover, America is a nation of entrepreneurs," he added. "When the broadband stimulus plan for the U.S. is rolled out, you will find millions of entrepreneurial Americans opening up new businesses that provide new services and create jobs in every part of the country."
Sidebar: Onshore Outsourcing FAQ
Is outsourcing leveling out for rural America, and how much has the playing field leveled in terms of cost and talent vis-à-vis counties like India and the Philippines?
o The playing field is starting to level out as broadband gets deployed.
o U.S. talent that was previously unavailable now can work online from home.
o The worldwide financial turmoil is making clients more cost-aware.
o The cost differential is leveling. Labor costs, turnover rate and soft costs are increasing overseas.
Why is corporate America increasingly turning toward rural outsourcing? What benefits do they see from this shift?
o Good talent, strong project management and years of experience still win out over cost alone.
o The attractive price in a less risky environment adds to the appeal.
Why would IT outsourcing be an advantage for rural America?
o It pays well and is challenging work. Furthermore, it doesn't require a change in lifestyle, no commute is required and it supports the new green economy. In general it costs 25 percent to 40 percent less to live it a rural community than an urban city.
o There are cultural and language advantages over offshore talent.
What challenges still exist in rural America for it to be competitive with other regions of the world?
o The biggest challenge still is the availability of skills, training, education for the work force, and its scalability.
The other challenge is educating customers that onshoring is an alternative to offshoring. There is a need to get the word out about onshoring and demonstrate to the client that together, process discipline and technology can make it happen.
Photo by JJSchad. CC Attribution-Noncommercial-Share Alike 2.0 Generic
