Will Rural Sourcing catch up?

Several organizations in US are pioneering the rural IT sourcing initiatives over the last few years. These companies are typically located in low cost rural American towns. Prominent locations include states like Nebraska, North Dakota, South Dakota and Arkansas. The rural sourcing industry is still at a very nascent stage though and has a long long way to go before maturing.

Why would American corporates interested in them? What are the benefits of rural sourcing? The benefits of rural sourcing compared to cities like New York or San Francisco include:

  • Lower operating cost
  • Lower salary levels due to lower living costs
  • Close proximity to customer
  • Less travel time
  • Cultural affinity (thus no cross cultural and communication issues)
  • Same time zone and so easy to reach and better availability of staff
  • Under same legal framework and no cross-country legal issues
  • Lower overall risk

The threats /negatives of rural sourcing include:

  • Unproven
  • As the industry is still nascent and maturing, there is no management depth and experience in managing large and complex outsourcing engagements with stringent service levels.

  • Challenge in attracting highly qualified technical people
  • Attracting highly qualified techies to rural areas will be a challenge. The salary levels offered by rural sourcing organization would be far less than one would make in the city based organizations. Though this is compensated by low living expenses, this would call for life style adjustments for many people and may be a stumbling block.

  • Small size and Ramping up may be an issue
  • Most of the rural IT sourcing organizations are very small. The biggest of the lot have not more than hundred employees. So, the rural sourcing will work only for small projects. Rural sourcing organizations have not demonstrated their ability to quickly ramp up projects thus far. So, it is best to avoid any complex/large projects and/or projects that may need ramp up in future. Besides, other veteran onsite and offshore providers have experience, execution stealth and can quickly ramp up their rural delivery capability if required.

  • No compelling wage differences
  • The wage differences are in the realm of 10% to 20% which may not enable the rural service providers to offer compelling value propositions to the clients.

Outsourcing is not just having bunch of technical geeks. The service provider needs to build capabilities in processes, infrastructure, business solutions and technical competencies and management. There is no rural sourcing player that has matured as a complete outsourcing organization at this stage. However, one cannot rule them out completely and it would be interesting to watch how this industry would be evolving over the next few years. If this clicks, sourcing managers will have the choice of mixing between various service providers – onsite, offshore and rural.

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1 Response to “Will Rural Sourcing catch up?”


  1. 1 Pandu March 5, 2009 at 12:05 pm

    Amen.

    Agree.


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© Dhandapani Ammasai, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given with appropriate and specific direction to the original content.

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