Rural Outsourcing: Why It’s Better in Des Moines
When it comes to total cost of ownership, outsourcing stateside to Iowa or Arkansas trumps offshoring for some CIOs.
Tue, August 31, 2010
CIO — When Conair CIO Jon Harding needed programmers to develop custom functionality for the mobile ERP software that supports its sales staff in Latin America, he had a number of options, including offshoring and working with an IT service provider on-site.
But the discrete, six-month project seemed a good opportunity to explore another alternative—rural sourcing. “I was interested to see how a relatively low-cost, domestic software-development shop would compare with lower-cost offshore providers,” says Harding.
Developers provided by Rural Sourcing, Inc., (RSI) in Jonesboro, Ark., were twice the price of their offshore counterparts, but one-third the cost of the on-site developers Harding might otherwise use—and he didn’t have to transport them to Conair’s East Windsor, N.J., headquarters. “Conservatively, we saved 65 percent by going with rural outsourcing versus on-site, and we still get quality assurance by having the developer in the same time zone,” Harding says. The result was better than he had experienced offshore. “We definitely avoided the miscommunication issues.”
The “rural” moniker is a misleading shorthand for low-cost, domestic outsourcing—Jonesboro (population 60,000) may not be Manhattan, but it’s hardly Mayberry. The rural-sourcing industry pales in comparison to the size of the offshoring market, but it fills an important niche.
Michael Clark, co-founder and CIO of SafetyWeb, a Denver, Colo.-based company that helps parents monitor their children’s online activity, is a repeat rural-sourcing customer. He currently uses Des Moines, Iowa-based Caleris to help screen content for SafetyWeb and handle inbound sales and customer-support calls.
As a start-up, SafetyWeb needs low-cost, high-quality, extremely flexible outsourcing partners. “Having looked at crowdsourced and offshore solutions in the past, they are too inconsistent to build a business off of,” Clark says. “[Caleris] has been quick to respond and retrain when any issues have come up.” And when trying to sell to or problem solve with a worried parent, having an Iowan on the other end of the line doesn’t hurt. “We need a level-headed agent to be on the phone to help families find the right solution,” says Clark. “The Midwest values come through in every call.”
Paul Fipps, CIO and vice president of business services for Charmer Sunbelt Group, a New York City-based beer, wine and spirits distributor, just signed a two-year contract with RSI for SAP development and maintenance after some moderately successful offshore projects. Fipps figures the total cost of ownership is lower for rural sourcing because there’s less management overhead, fewer language and cultural issues, and reduced travel costs. “Rural sourcing tends to win out, especially if you are starting [a project] with less than 10 [employees],” Fipps says. He also enjoys the hand-holding he’d never get from a large provider—U.S.-based or offshore. “Their senior executive team has been intimately involved even though we are a very small contract.”
For staffing larger-scale projects, rural sourcing may not be the best fit, says SafetyWeb’s Clark. Caleris has just 300 full-time staff with plans to hire 150 more by December. RSI employs 50 workers with plans to double that and open a second location within a year.
But heading to the heartland has paid off. “You learn that the passion for doing things right is higher in rural domestic outsourcers than you will find anywhere else,” Clark says.