Rural Outsourcing's Impact on IT Employment

Ann All

As comments from readers on some of the posts on this site prove, at least some seasoned IT pros see low-cost overseas labor as a serious threat to their future career prospects. Here's a comment from smg71 on a post IT Business Edge contributor Don Tennant wrote about the NBC comedy "Outsourced":

The issue with this "comedy" is simple. When you have 15 million people who have been displaced due to outsourcing and the overuse of H1B visas you don't rub it in their faces with a "comedy." People don't find a situation that has caused them to lose their dignity due to having to be put on food stamps and welfare amusing. I'm not running around burning the Indian flag, that's kind of stupid overall, but to pretend that this show isn't offensive is foolish and uninformed. Yes, I was unemployed for 15 months due to outsourcing, I looked every day for work to find out government contracts were given to American based companies that then took the jobs and shipped them overseas. I did find work eventually. ...


Slide Show

Check out highlights from Rural Sourcing Inc. CEO Monty Hamilton's presentation at the 2010 Outsourcing World Summit.

But do IT pros feel similarly threatened by workers in the rural United States, who are willing to work for far less money? If so, is it OK if they lose their jobs to Americans rather than folks from other countries?


Back in August I wrote about how rural onshore outsourcing could be a great fit for some U.S. companies, as an alternative to offshoring. But what about the folks working for those outsourcing companies? Do they benefit as well?


A recent InfoWorld article asked the question "Is your future in IT a job in the boonies?" and offered the examples of several experienced IT pros who had relocated to rural areas to find employment. Outsourcing providers with operations in rural areas often pay experienced employees 30 to 40 percent less than what they earned in a prior IT job, the article notes.


In some cases, that's offset by lower living expenses-but not always. Jerry Jensen, who works as a team leader for CrossUSA, says some costs like groceries are actually higher in rural areas. Jensen describes lifestyle adjustments such as clipping coupons and shopping sales. Another CrossUSA employee mentions that he's already saved enough for a comfortable retirement so was willing to take a pay cut.


According to the article, CrossUSA "generally recruits older, experienced workers approaching retirement." (Guess that's one way of using age discrimination in IT to your advantage.)


Rural outsourcing providers also recruit young workers willing to work for lower salaries than more experienced IT pros. The article mentions Alex Ross, a senior technologist with Onshore Technology Services, who "was working as a fry cook at a KFC restaurant before joining the outsourcing firm five years ago." He now develops coding standards and best practices, leads group training courses, develops pilot projects for new clients and mentors other technology employees.


Tennant recently wrote a post about his interview with the SVP of skills certification at CompTIA, who said high school dropouts with IT certifications may make good job candidates. This is certainly true of some dropouts and presents a great opportunity for them, but that doesn't change the fact that one result of dropouts entering IT may be a reduction in salaries.


The article does mention that rural outsourcing companies give both rookie and veteran IT pros opportunities to work with a variety of technologies. The same cannot be said for some other IT employers, who seem unwilling to consider hiring folks who don't possess specific skill sets. A reader named Scott M. commented on another of Tennant's posts about IT employment Catch-22s. After noting he was an IT contractor familiar with a wide variety of platforms, he wrote:

... In the past, all I had to do was to learn a new language and I could leverage my past experience to move to a newer technology. Unfortunately, software development has become such a commodity that most companies are now demanding experience in a particular skill. This means that it has been almost impossible to move to newer technologies, as they are demanding experience with it. Entry-level positions are almost a thing of the past, and most companies do not allow mentoring anymore. It has gotten so bad that some firms will not even tolerate a two week layover time to learn their system software and methodologies.

Perhaps rural outsourcing companies can provide the kinds of training opportunities that will open up more employment options for IT pros.

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Oct 19, 2010 11:08 AM Marcie Marcie  says:

Ann, the diference is that IT Pros can move/commute to rural USA if that is where the jobs are. As an IT pro, I would have no problem if my job moved to a rural area.

Oct 19, 2010 12:25 PM Jake_Leone Jake_Leone  says:

I work in the Silicon Valley, but I know things are very expensive here.  (I heard today, on KCBS, that cheap rent is 1400$ a month, according to the City of San Jose).  Basically I moved to suburb of the suburb in order to find an affordable house (still 2x what you would pay anywhere else).  Luckily just missed the bubble by about 2 years.

But when I was searching, I was looking at new homes in Texas that were virtual mansions compared to what I own, and they cost about half what I paid. 

So moving jobs to the interior is great.  I also don't have a problem with foreign companies investing in the U.S. (so long as they hire fairly).

I wouldn't take a contract job in a rural location.  I would need to have benefits, severance, and an exit plan, should things go south.  Because the downside of areas with low cost of living is often (not always) low availability of living-wage jobs.

I worked for a Japanese company, in San Jose, (SONY) for 4 years.  I loved it, went everywhere, that was me then (single, no fam).

I love the fact that Toyota and Hyundai have assembly plants in the U.S.

Oct 19, 2010 1:21 PM abe_forman abe_forman  says:

Outsourcing hurts all Americans!!

Don't be fooled, corporations and foreign governments are heavily lobbying congress through outsourcing/H1B advocacy organizations.  Don't let corporations and foreign governments be the only voice that congress hears.  Call your local representatives and senators today.  You can also visit and contribute to the American Engineering Organization to make sure your voice is heard: http://www.aea.org/

Oct 20, 2010 3:04 PM Geo Geo  says:

Ann - as if you didn't know it - picking up and competing with other Americans in a lower-cost locale within the U.S. is way, way, different than picking up stakes and relocating to compete in a developing country with a different language(s), a completely foreign culture with a caste system, and most of all - an extremely low-wage work environment with little to no labor protections (by American standards).

This is like comparing someone who has painted their toenails green to someone who has painted their whole body green. Please have IT Business Edge conduct a study for us of how many American CIOs have permanently relocated themselves and their families to India.

Oct 20, 2010 4:04 PM christopher hytry derrington christopher hytry derrington  says:

I'm Christopher Hytry Derrington, the CEO for a rural OnShoring company: Rural America Onshore Sourcing.

If I may address various elements of your article:

Rural OnShoring is more about creating jobs than trying to take jobs away from urban areas. We focus on bringing jobs back from overseas by providing experienced, talented USA rural talent. One of our KEY selling points is that we are less cost than offshoring when all the soft factors of communication, additional PM oversight, extra rework is considered.

Our focus is provide challenging, fun employment opportunities for IT, Marketing, and Creative Design Talent across the nation. We are recruiting in 47 states. 90% of our Team works from home with occasional trips to our Development Centers for collaboration. We provide 12% training and personal time allowance, a health care allowance, and equity in the Company. 

Each week, we receive 100-200 resumes of people who predominately live in rural areas. As their cost of living is approximately half of urban areas (in many places, a nice house costs $90-125K), they are willing to work for less. Many have 5-7 years of experience. We pass this labor saving onto our customers.

As far as hiring a certain age, or only raw talent; we don't do any of that. We look for the perfect match between the person, their goals, our Company culture, and the Customer needs.

My email is chris@ruralamericaonshore. Our URL is www.ruralamericaonshore.com

Thank you.

Oct 20, 2010 4:47 PM BB BB  says: in response to Marcie

Marcie is right. It is difficult if not possible due to the enormous legal restrictions (not to mention airfare) for an individual to move all the way to India to work, but they could move to Two Egg, Florida if they had to.

May I suggest a different solution?

Any hungry lawyers out there looking to make a percentage of BILLIONS?

Pursuing the following idea would even be socially useful, not like those lawyers you read about suing companies for having an expired patent number printed on their products.

Improving the U.S. education system, while a laudable goal, does NOT fix this problem. There are a million or more un-or-under employed engineers and IT people that are already very well educated.

A better fix would be for someone to initiate a class-action lawsuit challenging the constitutionality of the H1B visa under the 13th Amendment to the U.S. Constitution (the amendment that freed the slaves).

An H1B employee is 'out of status' if they are laid off, and is required to leave the country immediately. There is no statutory 'grace period'.

This gives an employer the power to threaten an employee with IMMEDIATE DEPORTATION. The employer is not, of course, directly ordering the deportation, they are merely making the employee subject to immediate deportation by the U.S. government.

In United States v. Kozminski, 487 U.S. 931 ( 198 ), the Supreme Court of the United States ruled that the Thirteenth Amendment circumscribed involuntary servitude to be limited to those situations when the master subjects the servant to:

1. threatened or actual physical force,

2. threatened or actual state-imposed legal coercion or

3. fraud or deceit where the servant is a minor, an immigrant or mentally incompetent.

The federal anti-slavery statutes were updated in the Trafficking Victims Protection Act of 2000, P.L. 106-386, which expanded the federal statutes' coverage to cases in which victims are enslaved through psychological, as well as physical, coercion.

Being put 'out of status', subject to immediate deportation, is a form of 'threatened or actual state-imposed LEGAL COERCION'

Oct 20, 2010 5:56 PM Ann All Ann All  says:

Don't misunderstand. I see rural onshore outsourcing as a largely good thing, for both clients and employees. My point is that as more IT work goes to companies in rural areas, it could drive down IT salaries. That may not be a bad thing. It may also create hard questions for companies trying to come up w/ the right balance of contract, outsourced and FT staff. Which skills are worth investing in? How important is a college degree? (Or even, based on the comments from the CompTIA exec, a high school degree?)

Nov 4, 2010 10:16 AM Chad Black Chad Black  says:

It's still in the same country following the same jurisdictions on employment. Some companies find other countries attractive for offshoring their operations. However, relocating to another country can be a lot harder than just finding a good spot in a Wisconsin farm.

Sep 22, 2011 12:33 PM Accountants in Leeds Accountants in Leeds  says:

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