Giving Rural America a Competitive Edge

When 28-year-old Derek Gleim graduated as a computer programmer four years ago, he hardly expected he would craft a career as an IT professional in his hometown of Menasha, Wis. "I wanted to live with my parents in Menasha, where life is simple and inexpensive," he said. "But I was sure that to get that big break I had to move out to a city that's more urban; Menasha is a small, rural town."

He was pleasantly surprised when he landed a project manager job at Rural America Onshore Sourcing, a Louisville, Ky.-based IT company that provides business process outsourcing services using professionals who telecommute from rural areas.

"Aside from his capabilities, we could hire Derek because -- despite living in ‘Middle of Nowhere,' Wisconsin -- he had access to broadband," said Christopher Hytry Derrington, the company's CEO.

Gleim said he's lucky. Although a large section of rural Wisconsin still lacks broadband, he lives in a place that has it. "Broadband is making it possible to do what I want to do, by living where I want to live," he said.

As increasing broadband penetration brings remote and rural regions closer to the world, niche IT services firms, such as Rural America Onshore Sourcing and Xpanxion, are trying to build a sustainable model of rural outsourcing within the United States -- instead of sending IT projects and jobs overseas. Slowly the foundation of this "onshore" outsourcing is being built amid barns and ranches in rural America.

The $7.2 billion broadband push that's funded by this year's economic stimulus bill aims at two broad objectives: bridging the digital divide and job creation. However, a significant and positive side effect of building out broadband in rural districts -- where only 38 percent of citizens can afford broadband subscriptions, according to the Communications Workers of America -- is that rural America could better compete with the world.

"Over the last 15 years or so -- while regions like India, China, the Philippines and Eastern Europe took advantage of IT and back-office services outsourcing -- rural America was sitting back and just watching," said Paul Eurek, CEO and chairman of Xpanxion. "But with the playing field leveling out, access to broadband is suddenly giving rural America the ability and opportunity to compete in the multibillion-dollar IT outsourcing market. All that rural America needs is to grab a small piece of that to start with [in order] to have a huge impact."

Corporation Catch On

Corporate America has rediscovered its backyard too. Faced with the tough economy, U.S. companies increasingly favor onshore outsourcing. According to a recent survey conducted by accounting and consulting firm BDO Seidman, when asked which location they might consider for outsourcing in the future, participating chief financial officers most frequently cited the United States, China, India and the Philippines.

"It is purely about cost, not because anyone's more patriotic these days," said Don Jones, an international tax partner in Seidman's technology practice. "Maybe it's good news from a U.S. perspective."

Experts say that even though sending operations offshore might offer long-term cost benefits, many cash-strapped companies are deterred by the startup costs of implementing an offshore strategy.

That's partly the reason why the playing field is leveling out. But another big reason is that the global financial turmoil has decreased salary levels significantly, even in the U.S.

"American talents can be hired at a good price these days," said Hytry Derrington of Rural America. "I hire people with different capabilities with five to 15 years of experience for $20 an hour." That's still higher than wages in India, but Hytry Derrington said such rates are cheaper than the overall cost of using India, China or Eastern Europe outsourcing destinations. The hidden costs of communication barriers,