Bringing IT Back Home: 10 Prime Locations for Onshore Outsourcing

American companies and government agencies are increasingly seeking onshore outsourcing vendors that can provide high-quality application development and infrastructure services at a low cost. Some IT organizations solicit onshore partners to supplement their offshore outsourcing projects, while others look to onshore providers to clean up messes created by offshore vendors or to avoid the complexities and rising costs of offshoring altogether.

To compete with offshore providers on price, onshore vendors set up shop in rural locations or in larger cities with universities, access to Fortune 1000 customers, and in places where the cost of living remains low. Here are 10 prime destinations for onshore outsourcing in the U.S.

Two Rivers, Wisc., a scenic city located on the coast of Lake Michigan, proved an ideal location for Rural America Onshore Outsourcing Inc. to establish a development center. With a population of about 11,000 in a county of 80,000 and proximity to three universities, Two Rivers provides Rural America Onshore Outsourcing with access to technical talent and training and development opportunities for its staff, says CEO Christopher Hytry Derrington. Another selling point? The low cost of living. “In Two Rivers, you can get a starter house for $80,000,” he says.

Advantage Outsourcing makes Wichita, Kan. its home base for a variety of reasons: Several large companies, including Koch Industries, Cessna and Pizza Hut, are headquartered in Wichita (other large aerospace companies, such as Boeing and Learjet, also have operations there), and eight colleges and universities are located within a 100 mile radius of the city. Those factors give Advantage Outsourcing access to prospective customers and to a technical labor force known for its loyalty and Midwestern work ethic, says CEO Skip Womack. The city’s affordable cost of living and hospitable business environment also make it an attractive spot for Advantage Outsourcing.

Onshore outsourcing services provider Systems in Motion chose Ann Arbor over several other “tier two” cities (including Phoenix, Austin and Raleigh-Durham) in part because Michigan’s high unemployment rate (the highest in the U.S. in 2009) ensured that the company would have access to a vast technical talent pool at a lower cost, according to CMO Debashish Sinha. Other factors included the 31 Fortune 1000 companies headquartered in Michigan, the proximity to several large universities, the city’s affordable cost of living and cost of physical infrastructure, and the financial incentives provided by the state.

One of Rural Sourcing Inc.’s three development centers is based in Jonesboro, Ark., the state’s fifth largest city with 67,263 people. (Rural Sourcing’s other development centers are located in Augusta, Ga. and Durham, N.C.) Jonesboro is a perfect example of the kind of “tier three” city where many onshore outsourcing and rural sourcing companies like to locate. Characteristics of tier three cities include location in a county of 50,000 or more people, proximity to a college or university, affordable housing, proximity to potential customers, and availability of financial incentives from state and local governments.

The tiny city of Macon, Mo. (population 5,471) is where Onshore Technology Services calls home. Executives with onshore outsourcing providers say that establishing outposts in rural parts of the U.S., like Macon, where the cost of living and median incomes are low, allows domestic IT services providers to compete on cost—and quality—with offshore locales like India, where wages are increasing by 20 percent per year.

Rural America Onshore Outsourcing identified Athens as a city where it would start a micro-development center (a development center of 15 to 25 people) if a customer in the area hired the company to do application development work, says CEO Christopher Hytry Derrington. (The company does not currently have operations there.) At about an hour’s drive, Athens is also close enough to Ohio’s capital, Columbus, for Rural America Onshore Outsourcing to pick up government work.

Advantage Outsourcing CEO Skip Womack named Great Bend as another hot spot for onshore outsourcing. Located in central Kansas, Great Bend boasts strong industry bases in the manufacturing, farming and oil industries. Fusion BPO Services has a call center in Great Bend. The city and the state of Kansas offer businesses a variety of financial incentives for setting up shop.

Forget about getting out of Dodge. While cowboy culture still permeates this historic city (which, like Deadwood in South Dakota, was known for lawlessness and gun-slinging in the 19th century), it’s now becoming a prime spot for onshore IT outsourcing. Dodge City is another place where Rural America Onshore Outsourcing would build a development center if a customer asked for it, says Derrington.

Tulsa, Okla. is another Midwestern locale on Advantage Outsourcing CEO Skip Womack’s list of popular spots for onshore outsourcing. Indeed, Tulsa is home to several BPO and IT outsourcing companies, including Managed Outsource Solutions, Matrixforce Solutions and eMonarch. These and other outsourcing companies serve a variety of businesses in the aerospace, construction, energy, healthcare, manufacturing, technology and telecommunications industries.

A tier two city for IT outsourcing with a population of 427,872, Omaha is host to several outsourced call center operations, including EMS Inc., Complete Call Solutions, West Interactive and Sitel. Five Fortune 500 companies are headquartered in Omaha, which is another factor that makes the city an attractive location for IT outsourcing. Additionally, Omaha was named the third best city to live, work and play in 2008 by Kiplinger’s Personal Finance.

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