The Argument for Rural Sourcing: Not Just 'Flag Waving'

The Argument for Rural Sourcing: Not Just 'Flag Waving'
by Don Tennant, none
Mar 3, 2010 4:26:56 PM


Don Tennant spoke with Monty Hamilton, CEO of Rural Sourcing Inc., about the growing popularity of outsourcing IT work to relatively low-cost, non-metro U.S. areas as an alternative to offshore locations. According to Hamilton, it’s not just about “waving the American flag,” but about serving a sweet spot that falls squarely in the midmarket.



Tennant: You presented at the 2010 Outsourcing World Summit in Orlando last month. How was the receptivity?
Hamilton: It was great. I was shocked, to be honest with you. I went in there thinking I was going to be the little minnow swimming amongst all the sharks. But even the larger competitors in India understand and get the model, and understand that they’re probably going to have to put up some similar kinds of centers to build up their onshore capabilities as well. There was no denying that this is a viable model, and a place that companies are going to want to take a look at.



My bandwagon is what I call Outsourcing 2.0, which is not just looking at India as my default choice. What are my other choices out there? Could it be Eastern Europe? Could it be China? Could it be my backyard in the U.S.? My goal is to put backyard U.S. as one of the check boxes people will look at. There was a group there from Ghana, pushing Ghana as an outsourcing location. I can give you all the competitive reasons why I think we’re better than Ghana.

Tennant: Give me a couple of them.
Hamilton: Ghana is a country of 4 million people, compared to 60 million people living in non-metro U.S. – I think we’ve got a much better opportunity to scale our model. Obviously, the infrastructure and other things aren’t up to speed in Ghana, not to mention some of the political issues. But I applaud the hell out of them for saying, “Hey, here’s something we’re going to go after and see if we can’t make this work.” The point is, there are a lot of locations out there saying, “We could be the next India.”



Tennant: What effect has the recession had on your business?
Hamilton: What we’re seeing is a reverse-migration trend. It happens every recession – as long as things are going well, we all flock to the big cities for big opportunities. Once the food begins to dry up and the weather doesn’t look so good anymore, we return home. I’m sure we’ll see in the next census that people are moving back to their roots and their family infrastructure.



Tennant: How many clients does RSI have?
Hamilton: About 15, from entrepreneurial ISVs to GlaxoSmithKline and R.J. Reynolds. I don’t think either of those extremes is where the sweet spot for us will eventually be. I believe our sweet spot will be mid-size companies, anywhere from $3 million to $3 billion [in annual revenue]. Those are the companies that are primarily going to have U.S.-based businesses. They’re not going to have the patience or wherewithal or investment dollars to go make an offshore operation in India work. But they’re going to have to figure out how to stretch their IT dollars and be more cost-efficient. For them, outsourcing is something they haven’t done a lot, or even looked at in the past.


Tennant: Is there any work that’s more suitably outsourced offshore rather than to rural locations in the U.S.?
Hamilton: Yeah. The rote, very little thinking about it, move stack A to stack B kind of stuff is going to be done cheaper offshore.



Tennant: I’ve written about the backlash from some areas being promoted as offshore alternatives, which stems from the perception that offshoring equates to low-quality call centers. Have you seen that?
Hamilton: I have not. I don’t think that fairly represents most of non-metro America. In fact, there’s a company called New Corp. in the warranty call-center business. They put their locations in places like Meridian, Mississippi; Pine Bluff, Arkansas; the Dakotas; and other places all around the country where there’s a low cost of living.



They’ve won all sorts of awards, and what they will credit it to is the kinds of people they’re able to get in these locations, who really like what they do. They’re great on the phone, they give great service, and they don’t turn themselves over every other day.



I have a friend who’s an entrepreneur, and he’s looking at putting one of these call centers in Fannin County, Georgia, a retirement location in the north Georgia mountains. He’s going to be one of those retirees – he’s been a senior-level executive at Cox [Communications] in Atlanta. The Fannin Chamber of Commerce said, “Frankly, there’s only so much golf you can play. And the retirement funds that some of these people had have been cut in half. If we had some jobs they could do for four or five hours a day, they would love that.” Nobody wants to wilt away. And in some cases, they’re forced to look at their retirement a little differently than they did a few years ago.



Tennant: Do you employ any workers from outside the U.S. who are here on non-immigrant work visas?
Hamilton: We currently do not.



Tennant: Does that mean you’re open to the possibility?
Hamilton: They would be perfectly welcome to apply, although we do have some sensitive data support work that would have to be kept separate.



Tennant: To be clear, you’re fully open to hiring someone here on an H-1B visa?
Hamilton: If they’re already here. I’m not going to be the one supporting that visa request.



Tennant: What’s your position on the H-1B visa program? Is it good or bad for the country?
Hamilton: My answer to that would be yes. It is both good and bad, and I don’t mean to be evasive. It certainly has been abused. I think it was put in with good intentions, and I think honestly, we needed it at certain times in this country. Does that mean we need it every year, and at the same exact number every year? I think not. I think we need to look at it like anything else we do, which is in terms of supply and demand. If the demand this year says we need 65,000, then great, let’s turn the spigot on. If the demand says 10,000 probably gets us to the right number this year, let’s adjust accordingly. Now, is the government quick enough to do that, and evaluate that? I’m not sure.



Tennant: Do you think there’s a shortage of needed IT skills in the U.S.?
Hamilton: Yes.



Tennant: What skills?
Hamilton: I couldn’t give you specifics. I think it’s probably across the board. I do think there’s been a lack of interest in going into what might be considered old-school typical computer software skills. If you’re asking whether that has been aided by the H-1B legislation, I can’t say – I haven’t looked at any empirical evidence of that one way or the other. I do think there’s a shortage, otherwise we wouldn’t have been importing so many of those talented people, right? I think we have to figure out a way to create that supply internally.