IT Outsourcing Services Offered by American Indians

In Belcourt, N.D., just south of Canada, the Turtle Mountain Band of Chippewa Indians sells data-entry services to the U.S. Department of the Treasury and the Internal Revenue Service.

On the open prairie in Eagle Butte, S.D., the Cheyenne River Sioux digitize old medical journals for the National Library of Medicine.

And in Fort Duchesne, Utah, due east of Provo, the Northern Ute Indian Tribe has partnered with Oracle to sell software and services to federal and commercial clients.

Onshore outsourcing options?that’s what these American Indian tribes are offering (see “Homegrown Talent,” Page 94). It’s the same low-cost and high-value work (we’re talking data processing, imaging and call center support, mainly) that is traditionally found only offshore in such places as India, Ireland and the Philippines. These tribes have emerged as perhaps the only viable onshore alternative for CIOs seeking bargain-basement

IT services. Fortified by sound IT infrastructure and a desire to do the IT grunt work that larger onshore outsourcing vendors overlook, these tribal-owned businesses offer all the advantages of the offshore companies?without the challenge of language barriers, remote management or security-sensitive work that can’t be sent overseas.

They’ve also got a hell of a marketing angle: historically disadvantaged people make good. No fewer than four consulting companies?just as many as there are Indian outsourcing vendors?are out drumming up business for the tribes. They argue that outsourcing to the reservations isn’t just an opportunity to get baseline IT services cheap; it’s a chance to bridge the digital divide, create jobs, build communities and raise aspirations for these American Indians, who were forced onto reservations 100 years ago.

And the pitch is working. Quietly, American Indian outsourcers are scoring significant contracts with federal agencies that are encouraged (but not required) by policy to hire minority-owned companies, and they’re even racking up commercial deals with businesses that see no other onshore option and are swayed by the value proposition and the social arguments. “From a human perspective, it feels good doing something for the Indian reservations,” says Virginia Callahan, senior practice director with Oracle’s federal consulting group, which has served as a mentor and partner to the Northern Ute Tribe’s year-old Uinta River Technology (URT) company.

But the challenge for the tribes is twofold: proving their capabilities in the cutthroat outsourcing marketplace and overcoming people’s preconceptions of what the American Indians can and cannot do.

Offshore/Onshore Pioneers

Bill Lewis, senior international liaison for The LexisNexis Group, the global multimedia provider of news and information, is preparing to bring some work back onshore and into the hands of the American Indian outsourcers. Conversion engineering?transferring information from a variety of print and electronic origins to a standard, Web-based format?is the bulk of the work that the Miamisburg, Ohio-based company outsources. Originally, this work went overseas to India, where the company realized savings of 40 percent to 60 percent because of the lower labor cost. But management of the offshore contracts was made difficult by language and time barriers. Also, because of security restrictions, some of LexisNexis’s legal and government information simply could not be sent offshore, forcing the company to retain that conversion engineering in-house.

Then Lewis learned through business contacts of the new American Indian companies. And the more he learned, the more Lewis liked the option.

Lewis is therefore on the verge of initiating a pilot conversion project with Lakota Technologies Inc. (LTI) in order to evaluate the company’s resources, facilities, quality of work and ability to scale up for increased demand. And so far, Lewis quips, “I have no reservations about [working with] the reservations.”

Nor do some of the customers who’ve already done business with the American Indians. Donald Lindberg, director of the National Library of Medicine in Bethesda, Md., has been outsourcing data-entry work to LTI since 1999?he was the company’s first customer?and he started out as a skeptic. But the work came back well within specs, and Lindberg now has an ongoing deal with LTI to transcribe medical journals from the 1950s.

Tracy Tolbert, vice president of sales and marketing at Affiliated Computer Services (ACS), a Dallas-based IT services company, was one of the first clients of URT, the data-entry and applications services vendor that the Northern Ute Indian Tribe launched earlier this year. ACS, which typically sends much of its data-processing jobs offshore, heard about URT through a contact in the Utah governor’s office. Tolbert says he was attracted by URT’s eager labor force willing to do low-level IT work and the opportunity to keep security-sensitive jobs onshore.

So ACS hired URT as a subcontractor to help complete a major data-processing project for the state of Illinois. And Tolbert says that URT has quickly delivered high-quality work. “We have a great need for a domestic workforce. We can give [URT] as much work as they can do.”

Rebirth of Nations?

The American Indian onshore outsourcing movement began quietly about 10 years ago. The Turtle Mountain Band of Chip-pewa Indians in North Dakota was first. In 1989, the tribe created Uniband, its data-entry enterprise, which in 1991 became certified by the federal Small Business Administration (SBA) as an 8(a), or minority-owned company, allowing it to compete for government contracts that are set aside solely for 8(a) companies. The status helped Uniband land data-entry deals with such federal agencies as the INS, IRS and Department of the Treasury. And those initial deals were so successful ($30 million in contracts in the company’s first five years) that Uniband grew to employ 1,000 people and spawned a telemarketing spinoff, DynaBand. By 1998, Uniband also grew beyond the SBA’s definition of “small business,” so it lost its 8(a) status and today competes successfully for commercial and non-8(a) government contracts.

Uniband’s success sparked a new, entrepreneurial movement within the American Indian nations. JD Williams, CEO of LTI, stumbled upon Uniband in 1996 and quickly saw an opportunity for his own Cheyenne River Sioux people. He convinced the tribal leadership to bankroll an IT services startup, secured 8(a) status and opened LTI’s doors in December 1997. (For more on LTI, see “Homegrown Talent,” Page 94).

Also in 1996, Laducer & Associates, an American Indian-owned business in Mandan, N.D., entered the IT services field as a way of diversifying the company’s offerings. Specializing in data entry, Laducer initially worked as a subcontractor with Uniband, and by 1999 it began securing its own deals with the IRS and other federal agencies. Today, Laducer employs 250 people and occupies two facilities in Mandan and Minot, N.D., which are not on but near Sioux Indian reservations.

The newest American Indian vendor is URT, which is in the process of finalizing scanning and data-processing contracts with the Department of Defense just after gaining 8(a) status earlier this year. The key to URT’s quick success is a partnership with Oracle, which not only has mentored the vendor throughout the startup process but also certified it as an Oracle reseller in the federal government marketplace. Brought together by the Department of Agriculture’s Project Bravo (Building Rural America Venture Opportunities), which matches small startups with big-business mentors, URT and Oracle have a unique, nonmonetary relationship. Oracle offers management expertise, counsel and products to sell, while URT gives the software services giant a good story to tell (big-name company lends helping hand to American Indians). URT hopes to employ as many as 300 people by the end of 2002. “[URT] is the fastest-growing part of the business,” says John Felt, CEO of Ute Tribal Enterprises, which operates seven different businesses, including a grocery store and a finance company.

Each of these American Indian-owned companies has a common goal: to create jobs and wealth on reservations that historically have lacked both. “There are a lot of jobs on the reservation?minimum wage jobs, but there aren’t a lot of living wage jobs,” Felt says. Even a $10-per-hour job?hardly a big salary in the city?could make a huge difference to a tribal member on the reservation.

Each of these companies also has invested wisely in IT infrastructure and training. They’ve either built their own infrastructure systematically (LTI, for example), or leased access to satellite technologies and broadband (URT), and they’ve formed strategic relationships with local community colleges?or even their commercial partners?to train workers in at least entry-level IT skills.

Risks and Rewards

The industry analysts contacted for this article knew nothing of the American Indian outsourcing vendors that have already penetrated the marketplace. That is because the deals American Indians have done have been relatively small, and en masse they’ve caught no one’s attention as a legitimate trend. That’s good news for prospective customers because it means they still have the opportunity to get in on the ground floor of the onshore movement and shape it to meet their needs. But beyond pricing and location, would-be clients also must look at skills and, of course, the vendors’ ability to scale up to handle business growth. To evaluate these potential partners, Frank Casale, founder and CEO of The Outsourcing Institute in Jericho, N.Y., recommends three things: check references from past and current customers, evaluate and investigate the vendors’ reputation, and talk to the vendors’ partners.

In many ways, American Indians are entering the outsourcing marketplace at a good time. There’s plenty of work to be had, and for some CIOs the offshore honeymoon is over; they’re looking for a low-cost and high-quality onshore option. And right now these tribal-owned companies are it.

But at the same time, the domestic outsourcing industry is increasingly competitive. Many of the smaller vendors are being gobbled up. And in this economic slowdown, many of the larger vendors are starting to pay more attention to low-end business that they would have ignored even a year ago. In response, the offshore vendors, which had begun to raise their rates to fuel their own business growth, are starting to roll back their prices and reestablish themselves as the lowest-cost service providers.

So whether the American Indian-owned outsourcers will prove to be anything more than bit players is for the market to decide.

But just claiming a piece of American commerce might be enough.