Rural Sourcing the Right Option for Some

Ann All
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12 Trends Shaping the Outsourcing Market

Rather than just seeking the lowest prices, buyers are relying on more sophisticated techniques.

I just read a silicon.com story that discusses the growth of BPO business in rural areas of India. The story presents this as an all-around win. BPO customers enjoy costs up to 50 percent lower than those in metropolitan areas. BPO employees also benefit from lower costs and lower attrition rates. Rural residents do not have to relocate to find BPO work. The rural areas gain a higher standard of living and improvements in infrastructure. And finally, a more even distribution of population promotes a higher standard of living throughout the country.


Having written several times about emerging onshore alternatives, I know similar benefits are available here in the U.S. McKinsey last year tapped onshoring as a growing trend, featuring in a McKinsey Quarterly piece several companies that enjoyed labor savings of up to 40 percent by moving operations from large metropolitan areas in the U.S. or Europe to less-populated areas.


In my post I noted that local governments are often eager to offer economic incentives to attract outsourcing companies, and local educational institutions sometimes partner with employers to ensure a supply of workers with desired skills, an especially advantageous approach for companies trying to build a staff with specialized skills.


In a separate post from last October about the expansion of Canada's CGI Group into areas of the rural U.S., I cited a remark from Anand Ramesh, a research director at Everest Research Institute, who said interest in sourcing from rural areas was then more talk than action.


Interest in this model does still appear to be growing, as evidenced by a CIO Update piece written by Compass Management Consulting's Max Staines that lists several other possible benefits of rural U.S. outsourcing, including:

  • Lower transition costs
  • Fewer time zone issues
  • Better cultural fit
  • Positive PR for keeping jobs "at home"


Scalability is the biggest challenge for rural areas trying to win outsourcing business, Staines writes, noting that "even the largest state universities in states like Arkansas, Kansas, Iowa, and Oklahoma can't produce the level of talent emerging from the technical academies of Bangalore and Beijing."


Staines includes a comment from Rural Sourcing CEO Monty Haines, who says rural sourcing is an especially good fit for mid-sized businesses, who may lack the management capabilities of their larger counterparts to ensure smooth service delivery. Staines also hints that a large Indian outsourcing company could partner with a U.S. rural sourcing provider to bring together its scale and skills with the U.S. company's local market knowledge and staffing capabilities.


To ensure rural sourcing is a good fit, Staines advises companies considering it to use the same service level agreements and productivity measures in cost comparisons between rural outsourcers and traditional or offshore outsourcers.

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Add Comment      Leave a comment on this blog post
Nov 10, 2011 3:38 PM FD Thornton FD Thornton  says:

I think this is a great idea and a great move to create jobs in the US. I myself live in a rural area of Georgia and I'm currently finishing up my degree in IT. Even here in my small town we have great broadband access and something like this would be a wonderful boost to our local economy. It would also allow students like myself the opportunity to remain in our local areas instead of having to move to larger cities like Atlanta or Orlando.


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