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Rural U.S. Seeks Place on IT Map
January 11, 2005
India isn't the only place where you can get good and cheap tech outsourcing services.
Some rural parts of the U.S. offer low-cost services such as software programming and
systems management. Thus, U.S. companies that hire outside companies to do these
chores don't necessarily have to turn to far-flung places.
So says Kathy Brittain White, who in June 2003 founded Rural Sourcing, a Jonesboro,
Ark.-based company that's tapping workers who live in rural areas.
White is no newcomer to information technology (IT) services. She's a former chief
information officer of Cardinal Health and Baxter Healthcare.
She says IT staffers in the rural U.S. can offer quality tech services at roughly half the
cost of their urban counterparts. At the same time, if more U.S. companies tap Rural
Sourcing, fewer jobs will be lost offshore, and some rural areas can get an economic
boost.
White hopes to open up to 50 IT centers in rural areas over the next five years and to
create at least 2,500 IT jobs. She spoke recently with IBD about rural outsourcing.
IBD: Can rural workers in the U.S. provide high-quality IT services?
White: Yes — and it's not a question of where these rural workers live. It's where they go
to school. There are over 1,000 major universities in the U.S. based in non-urban areas.
Most major corporations in America are (already hiring) graduates of these schools for IT
services.
IBD: But why would an IT graduate from one of these schools choose to work in a rural
area rather than a big city?
White: It's an alternative for folks who don't want to move. They may not want to move
to an urban area for family reasons, for example. The quality of the employee (at rural
outsourcing companies) is not in question.
IBD: Are there other reasons college grads would want to stay out in the sticks?
White: One point is that 35% of all Americans live in rural areas and many want to stay
there. In addition, many people want to return to their rural home areas after working in
major metro areas.
IBD: Can you give examples of schools in rural areas that are turning out high-quality IT
specialists?
White: One is Southern Arkansas University in Magnolia. There's also Eastern Carolina
University in Greenville. There are similar universities with strong IT programs that are
recognized as such in most states, including New Mexico, Minnesota, Colorado and
Wyoming.
IBD: Does Rural Sourcing have IT service centers up and running?
White: We have a center in a technology incubator company in Jonesboro, Ark. We also
have facilities in Magnolia and Monticello, Ark. A pilot center opens this month in
Portales, N.M., on the campus of Eastern New Mexico University. A facility in a
technology incubator in Greenville, N.C., will open in May. (Incubators try to help
fledgling companies get started.)
IBD: What skills do rural IT graduates have?
White: The same skills as all IT graduates. All the colleges (in areas she's targeted) have
master's degrees in information systems and computer science. Half of our work force is
experienced IT professionals. They are skilled in many of the technologies required by
business today, ranging from database technologies to Web development tools and major programming languages.
IBD: Can you give an example of one of these professionals?
White: One of our directors spent six years as a director of information and technical and
supply chain logistics for Wal-Mart, (WMT) as well as a CIO for other major companies.
Another was a systems analyst and project manager for (software maker) Axiom
Systems. We have individuals with technical health care systems backgrounds, to name
just a few.
IBD: How much lower are IT wages in the rural U.S. compared with cities?
White: IT salaries in rural U.S. areas can be 35% to 40% less than in large urban centers,
as shown by studies done by Mercer Management Consulting and other consultants.
IBD: How can it be so much less?
White: You have to look at the cost of living index for rural vs. urban areas. The cost of
living in Little Rock, Ark., for instance, is 38% less than the cost of living in San
Francisco. When the cost of living is combined with the salary differential, we're saying
we can provide you with the same high-quality IT services at lower cost, while still
providing (our) employees with the same disposable income.
IBD: Is anyone else providing IT services from rural areas?
White: In small towns across America, there are local IT companies that provide
computing services. Some firms provide back-room operations, like Cobol programming.
I have heard of a couple of American Indian tribes that are providing such services.
IBD: What other benefits are there to outsourcing IT services in U.S. rural areas?
White: You don't have to deal with the hidden costs of outsourcing IT services to foreign
countries like India. You support the American economy. And we provide (job)
opportunities for individuals that are very capable and make excellent workers.
IBD: What are the hidden costs of outsourcing to other countries?
White: I've seen studies showing that 40% of offshore initiatives don't lead to expected
savings for clients. The low IT salaries quoted are one thing, but the overhead and other
costs of setting up in a place like India are another.
A recent study by (offshore adviser) neoIT said wages are approximately 40% of the total
cost of outsourcing.
There can be long waits and legal negotiations with Indian companies before offshore
operations can be set up. In the end, this jacks up the price for clients in unanticipated
ways.
IBD: Is the IT infrastructure in rural areas up to par?
White: Over the last three or four years, a lot of rural governments or entities have spent
a lot of money in laying out IT infrastructure. West Virginia, for example, has built a tech
corridor that's prepared to do knowledge-based work. Minnesota has a similar initiative to
build Internet infrastructure in the state. North Carolina has invested millions to build
technology infrastructure to support and attract technology companies to their nonmetro
areas.
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