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1M/1M: Rural America’s Outsourcing Potential

Posted on Wednesday, Jun 16th 2010

I was at the University of Oregon (Eugene) graduation ceremony on Monday. The university has over 22,000 students. Oregon is a relatively poor state with low cost of living, unemployment hovering between 10%–12%, and a population of only about 4 million. In May, I was in Montana, Wyoming, and Idaho, all rural states with low costs of living. Montana’s population is less than a million, Wyoming’s only half a million. Idaho’s is 1.5 million. Yet in terms of area, these are all large states. Montana is the fourth- largest state in the United States, Wyoming the ninth, Oregon the tenth, and Idaho the eleventh.

They are each very beautiful, with vast expanses of open land. As I have driven through these states, especially the rural areas, during theplast month, I have felt an increasing sense of wonder. The quality of life is wonderful, the air is fresh, houses are affordable, and people seem to be very nice.

A question keeps coming back: why isn’t the United States developing these areas into outsourcing destinations? With ubiquitous broadband, decent infrastructure, a low-cost structure, and great quality of life, it seems to me that all four states should be able to create a compelling mix of jobs and affordable quality of life that places like Silicon Valley or Bangalore simply cannot offer.

In 1M/1M, I am interested in exploring this question, and working with some entrepreneurs who want to build rural outsourcing companies in places such as Oregon, Montana, Wyoming, or Idaho.

Of course, the same applies to the Indian entrepreneurs: Why not Siliguri, Jodhpur, Bhubaneswar and Patna? I’d like to see 1M/1M entrepreneurs cropping up everywhere with outsourcing value propositions that leverage the affordable quality of life of these places and build sustainable companies in rural and small-town India.

This segment is a part in the series : 1M/1M


. An Interview With Wayne Hurlbert
. Ambassador Program
. Ambassadors Finalized
. Internships
. Does It Need A Bank?
. Receivables Financing
. Entrepreneurs, What Do You Need?
. Entrepreneur Grant Harris On CNN
. Facebook Cause
. Need Twitter Help
. Rural America's Outsourcing Potential
. Local E-business Joins Global Effort To Boost Economy
. Oct 6 Video Conference
. Alternative Financing For Startups Using A Sales Channel Partner
. A Policy Suggestion To President Obama
. How We Differ From YCombinator
. VCs, Angels, Incubators, Accelerators - What Are You Doing With Your Rejects?
. VCs, Angels, Incubators, Accelerators - What WE Do With Your Rejects
. Outsourcing Module Of The Curriculum Is Ready
. Cloud Computing Module Of The Curriculum Is Ready
. Web 3.0 & E-Commerce Module Of The Curriculum Is Ready
. Vision India 2020 Module Of The Curriculum Is Ready
. Mobile and Social Apps Module Of The Curriculum Is Ready
. Healthcare IT Module Of The Curriculum Is Ready
. Online Education Module Of The Curriculum Is Ready
. The Entrepreneurship Curriculum
. How We Will Interface With AngelList
. Video Message Based On Recent Talks
. Affiliate Network For Entrepreneurship Blogs
. Corporate Sponsors, Affiliates, Incubators - Business Models for Partnerships
. OrangeScape Wins TiE50
. Message To Incubators
. Self-Assessment Tool
. Premium Member FreshDesk Wins Microsoft India Startup Challenge
. Kimbra Studios, Littleton, Colorado
. Partnership Overview
. Insane Logic, United Kingdom
. MMIS, Portsmouth, New Hampshire
. Zuznow, Israel
. Live Well! Philadelphia, Pennsylvania

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Many unlisted states are even better, with housing that can be purchased below construction cost. While attractive to outsource to these locations, there’s a few problems. First, Asia time zones complement those in North America. Second, Asia is still much cheaper, with lower wages, healthcare, taxes, etc. Third, many of these places have political hurdles. Montana may be all open land but they’ll be damned if it is turned into a giant office park full of cars. It seems they’d rather be unemployed, a prospect that’s not so bad when considering that public safety nets in these parts take you pretty far. Last, and the biggest reason not just in this context but with all new ventures, is that no one has done it yet so there’s a lot of unforeseeable hurdles that you’d have to jump over and capital that’s required. That doesn’t mean it’s not possible just that it’s a risky venture. Still, I agree there seems to be potential if someone wanted to take that risk and either knew the outsourcing industry well enough to make it happen or is confident enough that they could learn it.

balor123 Wednesday, June 16, 2010 at 12:47 PM PT

1) Time Zone: Asia’s day time is America’s night time. I agree with you that when it is day-time for Asia, they should service the US calls. But I don’t like at all the idea of millions of people in Asia lying awake at their night time, servicing America’s calls. Those should be serviced by the Americans themselves. This is an issue that is causing some serious social problems in Asia – the principle of working at night, servicing America. Night time is for sleep. Not work.

2) Cost-structure: Yes, Asia is still somewhat cheaper. But if the governments in these states create incentives to attract employers, they will be able to compete. I also like the idea of work for welfare. Isn’t it better to work for a lower wage than be unemployed and on government hand-outs? Governments themselves can create these work-for-welfare programs, or let private employers run them. There are some interesting moves recently by states running call-centers in prisons.

3) The entire state doesn’t need to be turned into office parks. Even after active conservation of nature and natural assets, there is still plenty of land to turn into office parks.

4) I really don’t think this is all that risky. There are hundreds and thousands of managers and executives in the outsourcing industry who have been working for large outsourcers who can and should take this on. Rural BPO is this generation’s opportunity for wealth creation by hitching on to a trend that can yield riches relatively easily.

Sramana Mitra Wednesday, June 16, 2010 at 1:07 PM PT

Btw, for those of you who are seeking rural BPO ideas from India, take a look at eLance and check what people are charging for what kinds of services. Then see if you can offer that same service at 10% of the price.

Example: Interview transcribing is an easy service to provide from rural India. People charge about $50 for an hour-long interview today. Can you do this for $5?

America’s rural BPO strategy needs to be different. I would look for ideas and opportunities in Disease Management and Healthcare IT / Claims processing and collection, for instance.

Also, straight up engineering outsourcing would be good as well, just because places like Silicon Valley have become so expensive … having a place close by where engineers can be hired at a lower cost is attractive for customers. For engineers, it is attractive to be able to live well within a decent cost of living.

Sramana Mitra Wednesday, June 16, 2010 at 6:15 PM PT

well you can get hour-long interview transcription in $10 if not $5 with rural BPO but believe me still we are at a stage the quality is not at par in semi-urban yet. So it depends…but yeah if you invest significantly in training, things could happen!

mturk.com is also a good place to check for small jobs that could be done with people in rural india…

Prashant Sachdev Thursday, June 17, 2010 at 2:53 AM PT

Wouldn’t it be cool if rural America outsourced for Asia? At least it would make good headlines.

As for engineers, as I’m sure you know the snowball is just not big enough in rural America. Also, many engineers want to live in or near big cities. There isn’t a large supply of them in those parts and there’s a worldwide shortage of them so you can’t convince them to move there. Again, public safety nets give strong disincentives for people to relocate to take jobs elsewhere. For example, moving to another state without a job would cause you to lose your unemployment coverage. Americans also have a strong aversion to moving away from home. In any case, if the goal is to save money on engineering costs or improve the standard of living of engineers, they don’t need to relocate to Montana. They can just move to Texas or North Carolina, which is comparable in cost to these places or at least close relative to the high cost hubs.

I also wonder, is there not already outsourcing to these places? I’ve at least heard of some hospitals that offer cheaper services to those willing to travel there. I know I occasionally get call centers in weird American locations. I suspect there is outsourcing already just not the bulk of it.

That may also be because at the time outsourcing started to Asia the price difference was much larger and the American economy was strong so it didn’t make much sense. At this point it makes more sense but Asia now has an outsourcing reputation so you have to win over customers who have presumed that Asia is the place to be.

You seem to have experience setting up an outsourcing shop. Do you think the best way to change the trend is through entrepreneurship or politics?

balor123 Thursday, June 17, 2010 at 11:11 AM PT

both.

Sramana Mitra Thursday, June 17, 2010 at 3:06 PM PT

We regularly track the US onshore sourcing market at Nearshore Americas and have found it is not an “all or nothing” proposition. Firms seeking outsourcing services are smart to examine all options – including onshore, nearshore and farshore – and crunch the numbers to see what really shines. Our piece on onshoring – http://tinyurl.com/2dhyk8n – showed there still remains concerns about the lack of scale within the rural parts of the US.

Kirk Laughlin Friday, June 18, 2010 at 5:10 PM PT

Great point of view Sranama, I found your website on Google a couple days ago and I've read a bunch of articles already. I live in West Linn Oregon and would love to see something like this implemented around here. I know the prices in Asia are way more competitive, but still, it would really help to develop some rural areas.

Fumoto Valve Friday, October 14, 2011 at 5:06 AM PT