By Dan Berthiaume
The concept of “rural sourcing,” where US-based BPO service providers domestically locate delivery centers away from major metropolitan areas, is gaining momentum. Potential benefits include access to relatively low-cost labor, fewer time-zone and cultural constraints, potentially lower transition costs, and the public relations/political benefit of keeping jobs in the US.
Rural Sourcing Offers Wage, Staffing, Political Advantages
A recent white paper from advisory services company ISG, “Gone Country: Rural Sourcing Gains Ground and Adherents,” details several of the advantages rural BPO sourcing can offer US companies compared to offshore BPO sourcing. ISG estimates rural sourcing suppliers can leverage wage rates 20 to 40% lower than those found in metropolitan areas. In addition, rural delivery centers can produce further cost savings by employing a “factory framework” model that utilizes best practice processes, tools, training, operating models, and knowledge management disciplines.
In terms of staffing, domestic BPO providers often locate rural delivery centers in smaller towns that house colleges and universities, in order to have access to educated and skilled workers who may be seeking a lower cost of living and/or better quality of life. In addition, underemployed residents of rural areas will likely have interest in lower-skill outsourcing service jobs as entry-level opportunities. Politically speaking, there has been intense public and political backlash against offshore BPO in the US in recent years, especially as the domestic economy continues a pattern of shaky performance. There is even legislation being considered to penalize US companies who outsource help desk operations to offshore locations.
In addition, in the case of customer-facing BPO services, having native English speakers familiar with US customs and terminology can be a huge advantage. Satisfaction surveys conducted by ISG for a major global retailer found that help desk users actively avoided dealing with agents in a Mexican operation in order to speak to an agent based in the Midwest.
Rural Sourcing Pitfalls Include Scalability, Maturity
Naturally, rural sourcing has its disadvantages as well. Among those cited by ISG are scalability, as the paper states, “Even the largest state universities in states like Arkansas, Kansas, Iowa, and Oklahoma produce only a trickle of talent relative to the technical academies of Bangalore and Beijing.” In addition, ISG notes that rural domestic providers tend to lag larger offshore providers in maturity.
How to Assess a Rural BPO Provider
When assessing a rural BPO provider, ISG adviser advises a potential buyer to consider factors including labor arbitrage, different management and training requirements, the impact of different time zones, and savings on travel. To ensure a meaningful comparison, ISG recommends that service level agreements (SLAs) and productivity measures included in the total cost of outsourcing (TCO) assessment should be the same for a rural outsourcer and a traditional or offshore outsourcer. Blended rates should account for the percentage of work completed offsite, which is likely to be higher in a rural model than in a traditional offshore setting.
Looking ahead, ISG predicts that although currently smaller local providers dominate the rural BPO sourcing market in many areas, Tier 1 global service providers with rural delivery centers will eventually gain an advantage due to their ability to integrate process and tools and to provide leverage and scale of operations. Furthermore, ISG expects an increased interest in US-based rural sourcing as industries such as healthcare, which are often restricted as to what data can be sent overseas, get more involved in outsourcing.