Many mid-sized U.S. cities are proving to be viable alternatives to Indian offshore locations for firms providing back-office services in finance and IT services, according to the latest research from The Hackett Group.
The diminishing gap in labor costs, greater business knowledge, proximity to customers and headquarters, and state tax incentives are some of the major factors driving the trend.
These US cities include Syracuse, NY; Jacksonville, FL; Tampa, FL; Lansing, MI; Grand Rapids, MI; Atlanta, GA; Allentown, PA; Green Bay, WI; Richmond, VA; and Longmont, CO.
Some US companies are already making the most of this opportunity. Verizon Communications, for example, downsized some of its offshore operations and created more than 1,500 jobs in Lake Mary, Florida and Tulsa, Oklahoma, in the past two years.
Some years ago, as more and more companies began offshoring to cut costs, there was a dramatic decline in the number of corporate IT, finance, procurement, and HR jobs in the United States. But, over the past few years, the number of new business services jobs moving offshore has declined steadily, says the research firm.
“Companies are realizing that the U.S. is becoming an increasingly viable option for elements of their service delivery organization, and we’re seeing real growth in this sector, with nearly 700 U.S. centers of excellence, shared service centers, and global business services operations now up and running,” says Jim O’Connor of Hackett Group.
Labor and operating costs are still high in the U.S. compared to Eastern Europe, Latin America, and Asia. But, O’Connor says, the gap is shrinking.
“Even if companies are using offshore centers, the U.S. is an essential part of almost any service delivery network for American companies, particularly when the work is complicated, knowledge-based, or requires a high level of communication with customers and internal clients, or when fast turnaround or extensive collaboration is a critical element.”