‘onshoring’ Gives ­.s. Companies an Alternative to Offshore Outsourcing

For years, U.S. companies have outsourced operations such as help desks, call centers and application development to offshore service providers in India, the Philippines and other countries. Now there’s an emerging trend toward "onshoring," outsourcing IT functions to companies in the rural United States.

Companies such as Rural Sourcing Inc., CrossUSA and Onshore Technology Services offer IT services to clients, and the market for these services is growing.

"We’ve seen a rise in the use of domestic resources to support outsourcing goals," says Steven Hall, partner and managing director at TPI, a Houston, TX, consulting firm that helps clients develop sourcing strategies.

Hall says there are risks associated with outsourcing (for example, data privacy and protection of intellectual property), and attempts to mitigate these risks have contributed to a rise in domestic outsourcing.

Hall says onshoring engagements tend to be smaller project-based work, or focused on specific competencies such as software testing. "Many of these firms have relationships with state universities for recruiting, so workforce tends to be younger with skills in current development languages," he says.

Onshore outsourcing can generally result in cost savings of 10-to-15 percent compared with in-house work, Hall says. "This provides an economic benefit to these firms, though less than what is typically achievable through an offshore agreement," he says.

Onshoring services will appeal mainly to small companies in the private sector and some utilities and public sector entities, adds Lee Ann Moore, chief marketing office at IT and business process consulting firm Equaterra in Houston.

Rural Sourcing in Jonesboro, AR, which provides such services as application development and maintenance, is seeing "tremendous growth" in its business, says CEO Monty Hamilton. The company’s revenue grew 300 percent in each of its first two years, and Hamilton expects that growth rate to continue into 2011.

"There’s a ton of demand driven by many companies looking at an alternative to going offshore, which can be complicated and difficult to manage," Hamilton says.

Rural Sourcing’s customers include Fortune 100 clients as well as smaller to mid-size companies in industries such as high technology, consumer goods, life sciences/pharmaceuticals and healthcare.

Many of the company’s workers are recent computer science and business graduates, but it hires experienced developers as well. The company is also exploring data center management services, Hamilton says.

Human Genome Sciences Inc., a Rockville, MD, pharmaceuticals company, uses Rural Sourcing services for systems administration, custom development and SAP applications support.

Rural Sourcing’s rates are 50-to-55 percent of what Human Genome has paid in the past for SAP development contractors and consultants, says David Evans, associate director of IT at Human Genome. "While cost is not the main driver for our selection," he says, "cost certainly does matter."