Startup opens offshoring alternative in distressed Michigan

Computerworld - Michigan's unemployment rate, at 17.5%, is among the nation's highest. At the same time, the state boasts a large pool of highly educated workers.

The available workforce, along with low real estate prices and aggressive financing programs available from the state government, is starting to attract new businesses.

One of the latest arrivals, Fremont, Calif.-based IT services firm Systems in Motion Inc., (SIM) has opened an operation in Ann Arbor that now employs some 35 workers, more than half the company's overall workforce of 65 people. In five years, start-up SIM hopes to employ about 1,100 people in Michigan.

SIM's plans for the state was cited by Michigan Gov. Jennifer Granholm in her State of the State address earlier this month.

SIM is the latest IT firm boasting a domestic business model designed to compete with offshore providers. SIM, though, has a different approach than the oft-used strategy of running operations in rural locations and home offices. SIM is focusing instead on strong employee training and development programs and on creating streamlined processes.

What's particularly interesting about the SIM effort is that its management team has a wealth of offshore experience.

The executive team includes CEO Neeraj Gupta, previously an executive at Patni Computer System Ltd., in Mumbai, India, and Debashish Sinha, the chief marketing officer who had held a similar post at HCL America Inc., the Sunnyvale, Calif.-based division of HCL Technologies in Noida, India. Michael Parks, the chief delivery officer, is former CIO at Virgin Mobile USA, and executive vice president in charge of IT operations at Wells Fargo & Co.

This team could have easily created an outsourcing company based offshore with offices in the U.S. While such a strategy has proven successful for many IT services firms, "I don't think the world needs another offshore company," Sinha said.

Instead, the SIM management team is using their offshoring experience to make a case for keeping work onshore. SIM believes its delivery costs are some 30% below in-house IT operations and comparable to those of offshore development firms.

Sinha says that the differences between offshore and onshore costs narrow when security problems, management issues and overseas travel are considered. He also contended that offshore workers may be as much as 20% less productive than domestic workers because of location and communication issues.

To maximize the productivity of its workers, SIM is focusing on workforce development.

Prospective employees hired in Michigan must go through an intensive training process, specifically focused on the work they will be doing at SIM. It's a six week training program that runs daily between 8 a.m. to 5 p.m. at Eastern Michigan University in Ypsilanti. Two classes of 15 students, one on quality assurance and testing and another on infrastructure systems and support were recently completed and more are planned this spring.