Lakota Technologies and American Indian IT Outsourcing

The eagles take flight, and the CEO’s hopes soar with them.

Two, six, a dozen eagles?they’re everywhere in the skies above U.S. Highway 212 in rural Ziebach County, S.D., smack in the middle of the Cheyenne River Sioux Indian Reservation. JD Williams, the plainspoken, denim-clad CEO of Lakota Technologies Inc. (LTI), is giving a windshield tour of the reservation, and he’s absolutely awestruck by the eagles. A Sioux native of the rez, as it’s called, Williams has never in his 45 years seen so many eagles on a single day. “It’s a sign to Indians, you know,” Williams says as one eagle takes flight with a wingspan that could envelope his Chevy Blazer. “When you see an eagle soar like that, it’s a sign of good luck, of prosperity to come.”

To Williams, the eagles represent dreams?not just for LTI, his startup enterprise, but also for his impoverished people. Williams’s dream is to bring the offshore outsourcing model onshore (see “Outsourced in America,” Page 86)?to convince companies to send LTI the same data-entry, call center and document-imaging jobs they’re currently sending overseas to India and the Philippines.

He has a good argument: Overhead costs are low and labor potential is high

on the rez in Eagle Butte, where even those low-level IT services jobs could mean a huge bump in the standard of living. Rates vary by contract and customer, of course, but it’s fair to say that if U.S. companies are paying their IT employees $40 to $80 per hour for baseline IT services, and offshore companies are charging $15 to $30 per hour, then LTI fits somewhere in the middle, offering solid value without the communication and management headaches that come with offshore projects.

But Williams also has a huge challenge: convincing skeptical customers?and even some of his own people?to trust their future in an unproven American Indian-owned venture. It’s a leap of faith, after all, for CIOs who’ve been burned by the failure of seemingly well-heeled ASPs, or even had bad offshore experiences, to suddenly turn over even their noncritical systems to a shoestring-budgeted startup located in one of the nation’s poorest regions. For Williams, LTI is an entrepreneurial challenge. “Can we succeed,” he asks, “and be a dynamic force in people’s lives?”

Life on the Rez

Lord knows the rez needs dynamic change. Isolated in central South Dakota, 90 miles northwest of Pierre, the state capital, on a chunk of prairie about the size of Connecticut, the 9,000-member Cheyenne River Sioux are rich in spirit and tradition, but dirt-poor by any traditional measure. Unemployment ranges from 65 percent to 80 percent. Many residents work for the tribe or the U.S. government (both the Bureau of Indian Affairs and Indian Health Services have offices in Eagle Butte), but commercial jobs are few.

This isn’t the way life used to be. The Cheyenne River Sioux are the same fiercely independent people who in 1876 followed Sitting Bull into battle against Gen. Custer at Little Big Horn. Williams, whose grandmother witnessed Custer’s last stand, still lives in the family homestead built near the town of Faith in 1903.

And for most of the past two decades, Williams has battled what we now call the digital divide. With the goal of creating the most wired rez in the country, the Cheyenne River Sioux Telephone Authority (CRSTA) has steadily invested in state-of-the-art telephone, cable TV, wireless and broadband technologies, including $350,000 in startup costs for LTI. Today the rez is more infrastructurally sound than all of India, the offshore outsourcing capital, where power and telephone services fail regularly.

At the same time, urged by Tribal Chairman Gregg Bourland, the tribe has undertaken an aggressive education campaign to ensure that residents have the necessary computer skills. Providing an opportunity to ply these skills is the backbone of Williams’s vision for LTI and its promise to bring high-tech, high-paying jobs to the Cheyenne River Sioux. Established four years ago in the basement of the CRSTA, LTI puts local residents to work. They offer tactical IT services?data processing, document imaging and call center support?to larger companies looking to get this work done quickly and inexpensively. LTI was inspired by the Turtle Mountain Band of Chippewa Indians in North Dakota. In 1991, that tribe’s data-entry enterprise, Uniband, became the first American Indian reservation to venture into the IT outsourcing space (see “Outsourced in America,” Page 86). When he visited Uniband in 1996, Williams saw the opportunity for his own people. He returned home and convinced the tribal leadership to bankroll an IT services startup. LTI opened its doors in December 1997.

Today, LTI’s staff consists of Williams and roughly 28 employees who do the bulk of the company’s work?data entry, mainly, for a trio of projects contracted from the National Library of Medicine.

Getting the Business

Donald Lindberg, director of the National Library of Medicine in Bethesda, Md., became LTI’s first customer in 1999.

When LTI bid on the contract to make electronic files out of the library’s original 1957 journals, Lindberg knew it was an untried vendor, but he liked the opportunity to keep this data-entry work onshore. It’s key work for the library, which houses roughly 15 million medical documents, with 450,000 new ones added each year. Though initially wary of the untried vendor, he was happy with the results. “Our folks did a lot of checking [when the initial data came back from LTI], and they were totally delighted,” Lindberg says. The work came in within the bounds of its three-month trial period and with greater than 90 percent accuracy. Subsequently, LTI landed two additional library contracts for transcribing medical journals.

One commercial business willing to give LTI a shot is Computer Generated Solutions Inc. (CGSI), a Washington, D.C.-based IT services vendor that recently signed a memorandum of understanding to use LTI as a subcontractor on big outsourcing deals. By partnering with CGSI, LTI gets an easy entry to some of the big vendors’ contracts, and employees get to take advantage of new training opportunities. In summer 2000, CGSI flew 10 LTI employees to Dallas for six weeks of call center training?invaluable skills in the IT services field. In return, CGSI gets access to low-cost labor and the tax breaks and special considerations of partnering with a minority-owned business. John Emelio, a Washington, D.C.-based consultant for the Native American Marketing and Development Corp., which has helped LTI market its wares to federal government agencies, is optimistic that the National Library of Medicine and CGSI contracts are the beginning of boom times for LTI. “If we can knock over a couple [of contracts], it’ll get started and spread,” he says.

Defining the Future

Tribe Chairman Bourland, a Web-savvy leader (essentially the mayor but also the webmaster) who’s long sought a piece of the IT services pie, bitterly recalls the tribe’s first attempt to create technology jobs on the rez. About a decade ago, the Cheyenne River Sioux courted a major credit card company that wanted to build a 250-job data-processing facility in South Dakota. Ultimately, the company rejected Eagle Butte, telling the tribe its labor force lacked sufficient IT skills. “I was furious…at us?that we’d not had the foresight to train people in our own schools,” Bourland recalls.

Today, the reservation’s tiny school system has an ambitious K-12 computer training program, and even the local community college has shifted its emphasis to computer careers.

“After all, we don’t know where the next Microsoft will be developed, but it may be right here in Cheyenne River,” he says.

So far, it’s been a good year for LTI.

Since January, the company secured a new five-year contract to continue transcribing journals for the National Library of Medicine, and Williams reports there are some other strong prospective deals in the works with two other government agencies and a private enterprise. In May, ground broke on a new 10,800-square-foot LTI facility, which is scheduled to open its doors Dec. 1. In two or three years, LTI may employ hundreds.

Williams now spends much of his time traveling to Washington, D.C., spreading the word about LTI and trying to attract business. “There’s a lot of visiting, talking, setting up and nurturing, but someday it will pay off,” he says. “The radishes come first in the spring?they’re the small projects?but the corn always comes in the fall.”

Williams pauses for a moment, recalling the eagles in flight. “There are too many eagles in our lives for anything else [but success] to happen.”