Outsourced ... to America? Rural outsourcing is emerging as a trend for big businesses in America -- but is it something small business can tap into?
If outsourcing some aspects of your small business is on your mind, don't just think of Jaipur, India.
Try Joplin, Missouri, instead. You may end up spending less money, feeling more confident about t…he security of your data, and, should the topic arise, working with someone who thinks a football is elliptical, not round.
The rise of rural outsourcing
As the name implies, rural outsourcing involves setting up facilities in relatively lightly populated areas to provide computer code and IT support. It's a small, but fast-growing, niche that's making inroads in a number of ways -- such as providing an alternative to overseas outsourcing while offering jobs in domestic areas that often have few employment options, particularly for skilled workers or those with college degrees.
Rural outsourcing's growth has been skyrocketing over the past several years. Joseph Rottman is an assistant professor of information systems at the University of Missouri, St. Louis, and co-author of "Offshore Outsourcing of IT Work." He notes, "Demand is through the roof. They're growing as fast as they can find people to sit in the chairs."
The small-biz advantages: Cost, security and efficiency
But little of that demand comes from small business. Monty Hamilton, CEO of Rural Sourcing Inc. -- a 40-person facility in Jonesboro, Arkansas -- estimates that only a quarter of the firm's business comes from smaller companies. He reasons that many small businesses aren't aware of a domestic alternative or have minimal IT requirements.
However, that doesn't mean small business and outsourcing are mutually exclusive. First, the cost of outsourcing services over the short term can prove less expensive than buying pricey software: "We write short-term contracts so they can turn us on and off as they need to. It's a rent-versus-buying sort of reasoning," says Hamilton.
Another potential benefit is the implicit connection between small businesses and modestly sized domestic outsourcers. "There's a natural affiliation, an immediate rapport between two small-business owners," says Hamilton. "And when you use a small [domestic] outsourcer, you can reach a decision-maker right away."
There can also be a greater sense of security. While many small-business owners may be gun-shy about storing computer codes or financial data with an overseas outsourcer, they may be less hesitant with a domestic one.
In addition, rural outsourcers come with a decisive advantage over their urban competitors: Given their lower operating expenses, rural outsourcers can charge far less (as much as 70 percent less) than firms in New York City or Los Angeles. Also, while overseas competitors can beat rural outsourcers' pricing, proximity can prove a powerful lure.
"It's an issue of simplicity -- the ability to call someone with whom you're in the same time zone, or get on a plane," says Hamilton. "I tell people that we're just an extension of your IT; we just happen to be in a different building."
Rural outsourcing as an entrepreneurial venture
From a startup perspective, Hamilton sees opportunities for entrepreneurs interested in getting into the rural outsourcing industry. For one thing, it's still in its infancy -- there are only about 20 rural outsourcers throughout the United States, and many of those operations are rather limited in terms of service.
"We focus on IT," says Hamilton. "There are plenty of things that we are not doing, such as offering call center services and other forms of business processes."
An advantage for entrepreneurs looking to make a social impact is that rural-outsourcing work is more challenging and rewarding for skilled workers than many other local options. According to Shane Mayes, president of Onshore Technology Services, which operates three centers in Missouri, rural outsourcing allows people to move from "no collar to white collar. For our employees, it's literally a life-changing event."
It's by no means a panacea for crippling rural unemployment, if for no other reason than rural outsourcers tend to be very selective employers. And entrepreneurs interested in launching a rural outsourcing firm should be aware of the challenges that may come with hiring and training employees.
Mayes says Onshore has a hire-to-interview ratio of 1-to-8. The hiring process is followed by a rigorous training program lasting upwards of 16 weeks. That, suggests Mayes, answers any concerns from clients about the employees' level of experience. "It's a real boot camp," he says, adding that the company teams newcomers with more experienced personnel to provide a quality fail-safe.
There's also a patriotic, keep-it-in-America undertone, although it doesn't take the form of militant jingoism. "There's a sense that it feels good to keep the work in the United States," says Hamilton. "But that's only so long as the economics make sense."