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Technology Companies Bring Outsourcing Home
New enterprises set up shop in college towns, creating jobs for students and graduates
March, 2006
Greenville, N.C. A company hoping to stem the tide of technology jobs heading overseas has found a new source of relatively inexpensive educated labor — small college towns.
The company, Rural Sourcing Inc., is working with five colleges in three states to set up office parks where locally hired employees are building computer applications and Web services for its clients. The idea is that jobs, instead of going to India, could go to Indiana.
Although Rural Sourcing is young, small, and has not turned a profit yet, it appears to be
growing fast while gaining national recognition. It is one of several companies setting up
operations in rural areas to cut costs and keep technology jobs in the United States. And colleges in those areas benefit from a nearby employer to provide on-the-job experience for students and graduates in information technology.
Kathy B. White, president of Rural Sourcing and a former professor, says partnerships with colleges that make available a pool of skilled students and graduates are key to its success.
"There are so many different initiatives about rural development, but none of them pull together the university component," Ms. White says. "If there's no pipeline of computer grads, it probably would not work for us."
After the dot-com boom went bust, news reports abounded of American companies shipping technology jobs to India and Pakistan, where the low cost of living allowed skilled labor to be bought cheaply.
But such offshore arrangements do not always work. Cultural and time-zone differences can make communication difficult, straining the business relationship and creating new costs. While the hourly wages employers pay can be low, details that get lost in translation often result in work having to be corrected, negating much of the savings.
Ms. White believes small towns in the United States, where the cost of living is lower than in larger metropolitan areas, can provide an alternative. And by bringing technology jobs to areas where such opportunities have been few and far between, companies can help prevent the brain drain that often occurs when college graduates are forced to go elsewhere to find jobs.
Despite the company's name, the cities where Rural Sourcing has located so far are not rural by some definitions, considering they have little agriculture. Greenville, for example, has a population of more than 60,000, according to the 2000 census, and is growing rapidly. While the company looks for smaller towns to find a low cost of living, the towns must be thriving enough to support an expanding technology business.
An Old Shirt Factory
Ms. White, who grew up in Jonesboro, Ark., worked for 10 years as an associate professor of management-information systems at the University of North Carolina at Greensboro before leaving her tenured job to enter the business world.
She started Rural Sourcing in 2003, forming its first partnership with Arkansas State University, in her hometown. Her company has grown to employ about 50 people in three main offices and two satellites, and has snagged some 20 corporate clients, including such big names as Mattel and Cardinal Health.
One of the offices is located here, housed in an old shirt factory that the county government converted into a corporate technology incubator. Its cubicles are now occupied by about 20 employees — some are still students at nearby East Carolina University and work as interns, others have recently graduated, and others have several years of technology and business experience.
Rural Sourcing is working closely with the College of Business, at East Carolina, which is
located just seven miles from the company's offices. Frederick D. Niswander, dean of the
business school, says computer-science students help Rural Sourcing by providing inexpensive labor, and the company helps the students by giving them practical experience — something often hard to come by in Greenville.
He says many companies shy away from smaller towns like Greenville, assuming they will lack skilled workers. But he says the town has a larger talent pool than some companies might think.
"I'll stack my students against anyone else," Mr. Niswander says. "They have what it takes
between the ears and have what it takes in their hearts to do a good job."
Ravi Paul, assistant professor of management-information systems at East Carolina, agrees. He has taught many of the students who work at Rural Sourcing. Mr. Paul stops by the office on a recent afternoon and makes the rounds to say hello to some of his former students.
"We have some smart students at ECU," Mr. Paul says. "And a lot of them tend to leave because there's nothing here for them."
Varied Opportunities
Ms. White says that because the company is so young and small, employees get ample
opportunity to take on important responsibilities. But that also means every worker has his or her share of the menial tasks, she adds. "I empty the trash, he vacuums," says Ms. White, pointing to James Glenn, manager of operations for the Greenville office. "We need more good, smart people who are willing to do whatever it takes."
William McVey, a graduate student at East Carolina, is an intern at Rural Sourcing's Greenville center. He earned his bachelor's degree in computer science from the university, and he is working on his master's degree.
When he is done, he hopes to stay in Greenville. His family and his fiancée live within a halfhour drive from the office. He likes the people and the area, and he doesn't want to leave.
"It's not too big, it's not too small," he says. "It's just right."
He builds software for the county government here, to help manage its waste. "It's a good
learning environment," Mr. McVey says. "The people are great. They let me explore different things."
Ms. White says she is getting job applications from people all over the country who want to work at the Greenville center. Many are looking for an area with low
crime and a laid-back style of living. "I've never been in a traffic jam here," she says.
Bill Brewster, one of the programmers at the Greenville center, grew up in Michigan and later joined the Marine Corps. He married a woman from Greenville and followed her here after he left the service. He completed his bachelor's degree in computer science at East Carolina University, and says all he wants to do is write computer code. "It's my passion," he says. "I couldn't see doing anything else."
Good Things, Small Packages
Moshe Y. Vardi, a professor of computer science at Rice University, says the idea of outsourcing technology work to small towns in the United States is catching on, but adds that he does not see it as a major trend. Many businesses are still concerned that such areas will lack skilled workers, he says.
"You're not likely to go to a rural area and find a critical mass of skills in technology," Mr. Vardi says. "Where you find a concentration of talent, it tends to be more expensive."
Plus, with so many news reports of technology jobs heading overseas, he says, there has been a noticeable drop in the number of college students majoring in computer science and related fields. The students figure that the jobs are not available, he says, even when they are.
"If there won't be enough people to do the work in this country, then businesses will have to resort to offshoring," Mr. Vardi says. "It's a self-fulfilling prophecy."
This is also not the first time businesses have looked to rural areas to cut expenses, Mr. Vardi says. Many factories have been built in rural areas and small towns, but many of them have closed as cheaper labor was found overseas.
Helen A. Huntley, vice president of research for Gartner Inc., a technology-consulting firm, says technology centers could succeed in rural areas where factories couldn't. Technology tasks are easier to segment than manufacturing operations, she says, meaning part of an operation can go overseas while some of it stays in the United States. That opens up more options for businesses, she says.
She says moving jobs to small-town America brings companies intangible benefits. Some
entities, such as government agencies and companies that work with classified data, have to keep all operations within the nation's borders for security purposes. And outsourcing to rural America provides public-relations value.
"There are companies that have certainly tried to do this," Ms. Huntley says. "And they try to use the patriotism banner."
Another technology company that has taken advantage of the low costs associated with rural areas is CrossUSA. Ross Graba, vice president of business development for the company, says outsourcing business halfway around the world can put trade secrets at risk. Asian countries are notorious for disregarding intellectual-property rights, he says. And with high turnover at some of those companies, he says, businesses are taking a huge security risk.
CrossUSA, which also works with colleges and universities to pick locations with an educated work force and strong Internet connections, has hired many corporate technology experts who were laid off when their jobs were sent overseas, Mr. Graba says. "The vast majority of who we bring in are experienced professionals," he says. "A lot of them have lost their jobs to offshore outsourcing, and they're looking to restart their careers."
More Options for Companies
Tata Consultancy Services, an international company based in Mumbai (formerly Bombay), has operations in 34 countries, including the United States, and some of its offices are located in rural areas.
Michael V. McCabe, director of communications in North America for Tata, says each
company's decision whether to send some of its work overseas varies. "We can provide services for our clients wherever it makes sense," Mr. McCabe says. "It depends on the client's needs, the scope of the project, and, of course, cost comes into play."
Ms. White, president of Rural Sourcing, says many businesses have become dissatisfied with overseas outsourcing, finding that the associated problems quickly became expensive. She says businesses are glad to find American companies filling in. "There are many things that are disappointing with offshoring, and one of them is the price," she says.
Community leaders are usually eager to help bring in new technology jobs.
Wanda E. Yuhas, assistant director of the Pitt County Development Commission, says
Greenville has gone through an agricultural phase, then a manufacturing phase, and now
government officials are trying to nurse a technology phase.
Companies like Rural Sourcing provide good jobs to Greenville residents, she says. And she expects the company to thrive because it is providing a needed service. "It's a symbiotic relationship," Ms. Yuhas says.
Other states, like Mississippi and Alabama, have invited Rural Sourcing to set up shop. Ms.White says she hopes to slowly make the company into a large player in the technology industry. So far, the company has not hired a sales force, relying mostly on word of mouth, conference presentations, and media coverage.
"The lieutenant governor of Arkansas mentioned us in a speech. That's why we're now in
Rockport, Mo.," Ms. White says. "Our goal would be to become the Southwest Airlines of
technology."
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