U.S. firms attempt rural sourcing to tackle crisis

By SiliconIndia   |   Thursday, 19 February 2009, 10:50 Hrs   |    3 Comments
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Bangalore: Perspectives of new administration in U.S. regarding with job allocation to the outsiders coupled with present dead economy climate make small firms in the U.S. to think towards rural sourcing strategy. With a view to reduce the unemployment rate in the country and tackle the backlash in major offshore locations like India, U.S. companies such as Rural America Onshore Sourcing and Xpanxion are adopting this rural sourcing model.

Following the trend, Atlanta-headquartered software firm Xpanxion had shifted its software testing work from Pune to Nebraska, U.S., few years ago. "The decision for us to execute on our cross-sourcing model in a U.S. rural community was based on lower operational costs and a lower cost of living in rural areas of the U.S. as compared to larger metropolitan cities such as Atlanta, Boston, or San Francisco," siad Paul Eurek, founder and CEO of Xpanxion.

As political lobbyists such as Senator Chuck Grassley are leading a campaign against offshore outsourcing by U.S. firms, customers are likely to prefer local providers to outsource smaller projects.

According to Ron Hira, Assistant Professor of public policy at the Rochester Institute of Technology, local providers offer lower costs than traditional U.S. labor markets , potentially less risk than offshore, closer proximity and perhaps quicker and cheaper travel to the customer site than an offshore worker.

While cost advantages of delivering a project from a location such as Corsicana , or Kearney could be almost 20-40 percent cheaper when compared with Los Angeles, Ron Hira argue that rural sourcing will still remain a niche market because not many customers are located in the rural locations. "The wage differentials are simply not compelling enough for rural sourcing to take significant market share," Hira added.

"If you need to be onshore it is more likely because you need to be co-located with the customer and the customers aren't in rural locations," Hira further added. According to the U.S. department of labor, the unemployment rate during December 2008 rose from around 6.8 to7 .2 percent with almost two million workers losing their jobs between September-December.

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