Rural outsourcing on the rise in the U.S.

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The rural option offers better intrateam communication than offshoring, better pricing than the huge outsourcing firms

For years, U.S. companies have been shipping development work and other IT tasks offshore in pursuit of low labor costs. Now a growing number of organizations are taking advantage of lower costs closer to home, by hiring outsourcing providers with operations in rural areas of the U.S.

Hard numbers on the growth of rural outsourcing are difficult to come by because none of the leading IT and sourcing research firms breaks out data specifically on rural outsourcing. But Mary Lacity, professor of information systems at the University of Missouri's College of Business, who has been conducting extensive research on the market, says that in the past year or two there has been huge demand for the services.

One indication of the growth in demand, Lacity says, is that the service providers are quickly ramping up staff. "Suppliers are scrambling to get enough qualified people to make sure they can meet the surge in demand," she says. "So many clients I've heard from are interested in this model." Lacity estimates that there are about 20 rural outsourcing providers in the United States and, based on her analysis of the providers, the total market size is about $100 million.

"In general, the rural outsourcers haven't fully implemented the process maturity models such as CMMI [Capability Maturity Model Integration]," Hall says. "That means oftentimes you're not going to get the higher levels of quality reviews or process improvements that we've seen" with bigger outsourcing firms.

Hall says most of the outsourcing engagements with rural service providers are relatively small, typically with a total contract value of less than $5 million. Nevertheless, rural outsourcing is having an impact on companies' abilities to solve problems and meet immediate needs.

The Rawlings Group, a LaGrange, Ky., company that provides medical claims recovery services for healthcare clients, uses application development services, including .Net programming. It's working with Rural Sourcing, which has provided developers to work on projects related to Rawlings' internal accounts-receivable processes.

Diversified skill sets

In addition to gaining access to development resources, Landgrave says, Rawlings benefits from the fact that Rural Sourcing workers have flexible schedules and diverse programming skills, and have easily blended into Rawlings' existing teams and processes. "The primary plus of Rural Sourcing for us has been how seamlessly resources have integrated into our development life cycle," he says."

Matt Ross
Matt Ross, president of FormShare, says he's had a good experience with rural outsourcing during a three-month contract and is now looking to extend the relationship for a longer term.

"One of the objectives we had in partnering with CrossUSA was to build a team of experts with experience working on complex mainframe applications critical to the business objectives," Villalba explains. "Because of the expense associated with developing these teams in [New York] and the potential for turnover -- and the obvious turnover associated with other sourcing models -- we felt that Cross offered the best price and workforce stability model for our long-term needs."

Keeping in touch is easy

Rural Sourcing developers work on Rawlings teams, attend daily meetings by phone, and securely access Rawlings information and systems remotely so they can participate "in the team's processes as if they were in our building," Landgrave says.

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