Onshoring: ‘Made by Americans’ Resonating in Tech Sector
For years technology businesses have been outsourcing and offshoring “back office” operations. In fact, the offshore services industry is expected to grow 8% annually for the next five years, but that will be down from its 15% annual growth rate during the last five. One of the reasons for the change in direction – towards onshoring – is a lowering payroll differential: 10 years ago an American software developer cost five to seven times as much as an Indian developer. Now, it’s estimated, the gap has shrunk to two times. For example, the standard billing rate for the engineers who work for Rural Sourcing is $60 to $70 an hour, compared with those who earn $30 to $35 in India, according to Monty Hamily, CEO of the onshoring company.
But, cost isn’t the sole driver of this new trend. According to Steve Lohr, the author of a recent New York Times article that profiles a number of these young American onshoring companies, another factor is the energy and money pouring into websites and mobile app development; and determining that there’s “value in having developers in the same time zone, or at least on the same continent.” As René Lacerte, CEO of Bill.com and recent convert to onshoring has found, the headaches of navigating time zones, cultures and language often outweighed the cost savings.
Reverse Sticker Shock
Nexient is among the “domestic outsourcers” profiled in the article, and while the company is headquartered in Newark, CA, in the South Bay Area, its “delivery centers” are all in the Midwest: Ann Arbor and Okemos, MI, and Kokomo, IN. And Rural Sourcing’s 300 employees work in Albuquerque, NM, Augusta, GA, Jonesboro, AR, and Mobile, AL. According to Trulia, the cost for a home in Newark is $550 a square foot. In Ann Arbor, it’s $181; and just $84 in Mobile. Needless to say, for programmers who’d like to own a home larger than a closet in San Francisco (at $1,049 per square foot) or Palo Alto (at $1,551), “non-Bay Area America” has some appeal.
Debt-free Tech Ed
Another onshoring outsourcing company, Techtonic Group, headquartered in Boulder, CO, not only nurtures, but trains its homegrown talent. Three years ago, Techtonic established a training academy that, after six to nine months, feeds new grads into its Department of Labor-approved apprenticeship program for software engineers. So far the company has hired 27 of its 30 graduates, with starting salaries between $65,000 and $75,000.
Politics aside, no one can argue that having more high-paying Tech Jobs Made in the U.S.A. is good for the country, our tax base, and great for the programmers who are filling them.
by Mimi Grant, President, Adaptive Business Leaders (ABL) Organization – Round Tables and Events for CEOs of Technology and Healthcare Companies