IT services customers are increasingly looking for onshore delivery options, either to replace or complement their offshore outsourcing relationships. A May 2013 Gartner report predicted continued growth in onshore delivery to satisfy buyer needs for proximity in projects that deliver greater business impact.
Indeed, key industry players from U.S.-based multinationals to Indian providers to specialized domestic providers have increased their presence on American soil.
But IT service providers of all types face significant challenges in expanding their U.S.-based staffs. Those challenges include an aging workforce, availability of the hottest technology skills, and the capability to scale to meet customer demand.
One strategy to overcome those issues is partnering directly with local universities to build the IT career programs capable of providing the kinds of talent IT outsourcing providers will need stateside in more significant numbers. IBM Global Services, for example, has invested in a high-performance computing center at Louisiana State University as it seeks to expand its Baton Rouge delivery center.
CGI has forged relationships with Ohio University and Hocking College to support its Athens, Ohio, operation. Eden Praire, Minn.-based Eagle Creek Software Services and the state of South Dakota, in conjunction with the University of South Dakota, have launched a new scholarship program to bring 1,000 IT jobs to the state in the coming three to five years.
CIO.com talked to Ken Behrendt, President of Eagle Creek, which operates project delivery centers in the Dakotas and Minnesota, about growth in both rural and urban U.S.-based sourcing, growing dissatisfaction with the offshore model, the real problem with Gen Y, and how immigration reform might impact the domestic outsourcing space.
Who is your typical customer?
Behrendt: Our primary services are front office software implementations, like Siebel and Salesforce. We offer java and mobile development, data warehousing, and business intelligence services. Our typical customer has revenues in the $5 billion to $60 billion range.
Your focus is on lower-cost domestic delivery. Why might a buyer come to you vs. a multinational like Accenture or IBM or the Indian service providers?
Behrendt: Our typical customer has either had its own offshore presence or have contracted out to a third party offshore. They recognize, for any number of reasons, that offshoring front office development either isn't working or won't work and they ask us to step in.
Eighty percent of our customers have some type of operation in India, but as soon as they move to a large front office implementation— these are typically $5 to 20 million dollar implementations of over 1,000 users — they're no longer willing to take the risk offshore. They may want to do agile development or the deployment isn't conducive to the offshore model. They may be dissatisified with the quality or the effective cost. A $25 hourly offshore rate doesn't really translate to a $25 rate.
Sign up for CIO Asia eNewsletters.