A new kid on the block promises to give offshore outsourcing a run for its money--by routing technology work to rural America.
Rural Sourcing is a start-up founded and largely funded by Kathy White, former chief information officer for health care giant Cardinal Health. White, also Rural Sourcing's president, has set up two facilities in Arkansas, has another center coming on line in New Mexico in January, and is in talks to open yet another facility in North Carolina.
Rural Sourcing
The company can offer services such as application maintenance and Internet development for roughly 40 percent less than what other domestic tech outsourcers charge, White said. Rural Sourcing's fees are about the same as the overall cost of using an Indian outsourcer, she said--if you consider factors such as communication costs, travel expenses and inconvenience. "We think we're close to their total cost of ownership," White said in an interview Thursday.
The company has about 20 employees today. White hopes that number will grow to 50 to 75 by the middle of next year.
A key to Rural Sourcing's strategy is to work with universities, which can develop technology skills. For example, the company's facility in Magnolia, Ark., is located on the campus of Southern Arkansas University.
Rural Sourcing began pitching its services this summer and can boast of five major customers, including a large telecommunications company, White said. She said the companies haven't given their permission to be named publicly.
But that could change. After all, the concept of keeping technology jobs in the United States and helping often-depressed rural communities at the same time could amount to a public relations coup for a big U.S. corporation.
Rural Sourcing is a kind of crusade for White. She grew up in Oxford, Ark.--population 642.
"I believe in the people of rural America. I'm one of them," she said. "I think we'll shock a lot of people because we're going to be really good and low-cost. And we're going to be bigger than anyone imagines today."
If White is right, it will be good news for American techiesÂ?at least the ones in rural communities and those willing to move there.
GE was one of the early American companies to tap India's outsourcing potential. But the outsourcing unit limited its service to GE and its customers.
That restriction no longer need apply now that General Atlantic Partners and Oak Hill Capital Partners are paying $500 million for a majority ownership position in GE Capital International Services. Should they choose, the new equity owners can now widen the scope of the business to contract with any interested clients that knock on their doors. The beginning of a trend? You better believe it.
Both IBM and HP are big foreign outsourcers and have taken their PR lumps accordingly. But methinks Rollins was stretching the truth when he suggested Dell was following a different path. Fact is that the company has long had factories and support centers in other countries. And for good reason: Dell, which sells direct, wants to make sure it can deliver products to local markets within days of an order's placement. Why not call a spade a spade?
Dell says it's in a separate category because it's not really shipping American jobs overseas. Rather, it's building up local workforces as part of a natural global expansion by the world's leading PC comnpany.
Maybe I'm still in a fog from staying up too late on Election Day but is that not an example of outsourcing? Guess it all depends on what your definition of "is" is.
"Myths and Realities of Globalization," compiled by Lori Kletzer of the economics department at the University of California at Santa Cruz, concludes that the least vulnerable professions are in building maintenance; health-care support; education and libraries; construction and extraction; and transportation.
The positions most likely to get hit by overseas outsourcing? Military services; farm, fish and forestry; computers and mathematics; life, physical and social sciences; legal; and architecture and engineering.
I had been spending a lot of time thinking about the future of offshore outsourcing when one Yuta Tabuse turned up on my personal radar.
For those of you who are not hoops fanatics, Tabuse is a 5-foot-9-inch reserve who plays for the Phoenix Suns. Tabuse also happens to be the first Japanese national to make the roster of a National Basketball Association club.
As a fellow 5-foot-9er, I'm pulling for the diminutive point guard, though it makes no difference whether Tabuse goes down in NBA annals as a bust or as the second coming of Michael Jordan. Either way, his arrival--along with that of other overseas-born players--on the American scene speaks volumes about how economic globalization is fast changing old assumptions about the way things ought to work.
"The way things ought to work"--that's one doozey of an anachronistic phrase. So much so that it should be sandwiched on a garage shelf between a "Happy Days" poster of The Fonz and a Pet Rock. In the friction-free nirvana of the Internet age, such grudging expressions of entitlement are supposed to be tres passe. But don't tell that to an NBA journeymen, or you risk a knuckle sandwich. These folks are nervous and upset.
Nervous because foreign-born players are the new must-have commodity for every aspiring professional basketball club. Upset because so many Serbs and Russians and Turks are popping up all over the league, and that presents a threat to their coveted multimillion-dollar jobs.
This doesn't qualify as a textbook example of offshore outsourcing. (If anything, it's an example of offshore insourcing!) But the raw emotion that explodes when "American" jobs get handed to foreign-born talent is familiar enough. I see it in the outpouring of e-mail I receive each time I write about the export of computer jobs.
Oddly enough, offshoring hardly figured in the presidential election. More folks appeared interested in the outcome of the Red Sox-Yankees playoff series than they wee about the prospect of more software jobs moving to Bangalore, India. Of course, so much of the offshoring debate between the candidates was phony that you could excuse the electorate for not paying attention.
The Bush administration, which promotes itself as being friendly to free-traders, has long followed a fairly protectionist policy. And while John Kerry was keen on winning support from organized labor, he wasn't planning radical changes. To be sure, a Kerry administration would have expanded terms of the Trade Adjustment Assistance program to help workers displaced when their jobs got outsourced overseas--hardly enough to qualify him as the second coming of Leon Trotsky.
However, while the political discussion was informed more by style than by substance, nobody who works in the computer business believes that this controversy has even remotely found a resolution. The underlying structural changes that first forced offshore outsourcing onto the national agenda still exist. The palpable fear and uncertainty you find among rank-and-file employees is worse than before. And true to form, nobody in a position of authority is treating the subject in a serious, systematic way.
Instead, we receive caricatures of positions. Maybe I shouldn't judge the hired help in the nation's capital so harshly. After all, the academic elites are of two minds--as is the technology industry, with senior management and its employees as divided as ever. (Red sweatshirts, blue sweatshirts, anyone?)
So what's the answer? I'm going to reverse the tables this time. What do you think needs to be done? Head to my offshoring blog, and chime in. No screeds, please. I'm going to package together the 25 best answers and send them to the white building at 1600 Pennsylvania Avenue in Washington just before the inaugural ball.
In the mean time, the only sure thing is that the migration of U.S. technology jobs will increase--as will the din. Who knows? By the time this country figures out what it wants to do, Yuta Tabuse might even be a household name.
With John Kerry out of the picture, the Indian consensus is that the prevailing trade winds (political, of course) out of the United States aren't likely to dramatically shift when it comes to overseas outsourcing. Kiran Karnik, president of India's National Association of Software and Service Companies disclosed at a New Dehli press conference on Thursday that some technology firms have been slow to sign or announce deals with local firms in the months leading up to the American presidential elections. The hope is that with the election behind them, that business reluctance to sign up new business will melt away.
"We are glad that President George Bush is back in office as we know his policies," he said. "After his re-election, we would see more announcements by companies on outsourcing."
Another reason: Karnik said software exports to the US from India account for 68 per cent of the nation's entire software exports, which have been growing around a 30 per cent annual clip.
Would John Kerry have done significantly more to protect jobs -- to the point where the government put roadblocks in the way of U.S. corporations seeking to transfer jobs across the ocean? Again, not likely. Kerry paid lip service to shore up support from organized labor but he wasn't going to do anything radical. The presidential campaign debate was defined more by style than substance and the discussion about offshoring was no exception.
Now that the election's been decided, what happens? I'm going to pay attention to how the so-called red states react. If their local economies fail to generate enough new jobs to compensate for positions lost overseas, this will become big news. The wisdom of offshore outsourcing may be received gospel among much of the business elite but it's still a radioactive subject with workers -- many of whom pulled the lever for Bush. Unlike so much of the staged sniping that passed for debate between the two candidates, this is a bread & butter issue that may define the future for thousands of lives.
The local correspondent for Agence France Press quotes Amit Verma, an economist at the Confederation of Indian Industry, saying that Bush's "return to power would be good for India as he is for outsourcing to low-cost countries like India."
Business sentiment on the sub-continent notwithstanding, the votes of Indian Americans remain up for grabs in swing states like Ohio.
Ramesh Kapur, chair of the Indo-American Leadership Council of the Democratic National Committee, told the Times of India the 50,000 Indians who live in Ohio will vote Democratic today.
"There are 50,000 Indians in Ohio and 80 per cent of them are registered and I believe 75 per cent are going to vote for Kerry," he said. "They are fed up with the Iraq war and the double standards on democracy when it comes to Pakistan. They think President Bush is putting the Christian Coalition front and centre, and they don't like (Attorney General John) Ashcroft," said Kapur, who lives in Kerry's home state of Massachusetts.
