Different slant on outsourcing

Discussion in 'Economy' started by Merlin1047, Dec 20, 2004.

  1. Merlin1047
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    Merlin1047 Senior Member

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    http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P103849.asp?GT1=5847

    Forget India; outsource jobs to Arkansas

    One woman believes that companies can send jobs to rural areas and save just as much as they could sending them to places like India.

    By Scott Cohn
    4:26 PM EST December 16, 2004

    Kathy Brittain White is on a mission.

    White's goal is to find high-tech talent in the heartland. "I think of this as an integration of all that I am," she says.

    Why outsource to India, she's decided, when you can outsource to Arkansas?

    "I've always tried to look for solutions to difficult problems," White says. "So when all you see is we're losing jobs and there's no ready answer, I thought this was a great one."

    She was chief information officer for Cardinal Health (CAH, news, msgs), the big drug distributor, and under pressure to send computer work overseas. But recalling her roots in rural Arkansas, she knew there was a better way.

    "I guess I've always been an advocate for folks that maybe are underestimated," she says.

    So she left her job, trading the corporate jet for a rental car. With $2 million of her money, she created Rural Sourcing, an information technology contracting company that she claims can do the same work companies are sending overseas, for virtually the same price.

    "It really does come very close," she says.

    One reason is because the cost of living in Arkansas is as little as half that in the big cities. Her first Rural Sourcing center, with 15 employees, is on the campus of her alma mater, Arkansas State University in Jonesboro. She'll open two more next year, one in New Mexico and one in North Carolina.

    Outsourcing has been a particular problem in rural areas, where officials were looking to high tech jobs to make up for job losses on the farm. So people got the training, only to find the new jobs had gone overseas.

    Molly Marshall graduated near the top of her class at Arkansas State this year and wound up waiting tables -- for $2.40 an hour plus tips.

    Good money

    "It was just a tiring experience, having to go there and not doing what I really wanted to be doing," Marshall says.

    Now, her starting pay at Rural Sourcing is $20,000 a year, which is good money in Jonesboro.
    White says this isn't a charity project. She already has five companies signed up, including her old employer, Cardinal Health, and another 50 in the pipeline.

    Her efforts won't mean the end of so-called off-shoring of jobs by any means. But attorney Robert Zahler, who advises companies on outsourcing, says this will be an alternative for some clients.

    "Someone like Rural Sourcing should be able to save them somewhere between 30% or 50%, depending on what geographic market they're already in," Zahler says.

    White has big plans -- 50 Rural Sourcing offices in five years, making her company a business with a cause that just might change the rural economic landscape.
    +++++++++++++++++++++++++++++++++++++++++++++++

    Actually, this makes a lot of sense. California, New York City, Washington DC, Seattle, New England all share a similar characteristic - the cost of living in these areas is outrageous when compared to much of the rest of the country.

    For example, an average 2,000 sq ft home in certain areas of CA will set you back at least $300,000. The exact same home, on a much larger lot in AL will cost only about 80 - 90,0000. The people living in areas like NYC and CA tend to view the South as a "poor" region because the average wage is much lower here. What they fail to consider is that down here, two people can live very comfortably on an income of around $60,000. You can get by on half that much. You can survive on as little as $15,000. The purchasing power of a dollar in this area is at least twice as much as in an area like D.C.

    So employers would have to pay less to attract qualified workers in low cost-of-living areas. As the internet begins to handle more and more commerce, it will make a lot of economic sense to take advantage of an American work force which can be hired for about half the wage of the folks living in the high priced spread.
     
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  2. dmp
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    dmp Senior Member

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    excellent!! :)
    :thewave:
     
  3. Merlin1047
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    Merlin1047 Senior Member

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    Assume that you move from San Franciso to Monroe LA. Also assume your income in SF was $50,000. The equivalent income needed in Monroe LA is $25,920.79. You may take a 48.16% decrease and still maintain your standard of living.

    Product...................San Francisco CA....Monroe LA.......... Difference
    HOME PRICE ............ $845,999.67..........$233,550.00....... $612,449.67
    PAYMENT+ INTEREST $3,770.00............ $1,041.00.......... $2,729.00
    APT. RENT........... ....$2,099.83............ $564.17............ $1,535.66
    TOTAL ENERGY .........$124.14............... $133.28.............$9.14
    DENTIST VISIT...........$107.30................$81.00............. $26.30
    OPTOMETRIST............$106.30................$60.50..............$45.80
    DOCTOR VISIT............$104.70................$65.33............. $39.37
    PART ELECTRICAL........$72.32..................$0.00.............. $72.32
    BEAUTY SALON............$59.50..................$25.40.............$34.10
    WOMENS SLACKS.........$54.50..................$28.19............ $26.31
    OTHER ENERGY............$51.82..................$0.00...............$51.82
    WASHER REPAIR..........$51.00...................$59.67.............$8.67
    VET. SERVICES...........$45.80...................$38.00............ $7.80
    MENS SHIRT...............$39.00...................$23.69.............$15.31
    PHONE.......................$30.01...................$19.20.............$10.81
    HAIR CUT...................$12.40...................$8.00.............. $4.40
    PIZZA........................$10.87...................$10.47.............$0.40

    So it takes about half as much to live at the same level in Louisiana as it does in San Francisco CA. Wonder when the corporations paying those high wages are going to wise up and "discover" the pool of reasonably priced labor right here in the USA?

    I selected only some of the items listed in the table on this site. If you want more details, or if you want to compare other areas, here's the link:

    http://www.bankrate.com/brm/movecalc.asp?a=0&d1=50000&d2=182.435880848087&d3=94.5776531949183
     
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  4. rtwngAvngr
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    rtwngAvngr Guest

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    Yes. This is awesome. I hope this takes off.
     
  5. freeandfun1
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    freeandfun1 VIP Member

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    There is one BIG problem I see with this. As jobs go to the rural communities, more burdens will be placed on the communities and politicians, as they are, will then start pushing for big ticket programs to support the growth. Berfore long, the unions will move in also.

    Think about it, I guarantee you, the same people that get the jobs will end up electing officials that will burden the businesses with increased taxes, demands for benefits, etc. and before long, the tax burden will be so high that the cost savings will no longer be realized.

    The problem with creating jobs in America isn't the workers, it is the politicians. It sounds great and it will work for a while (remember, at one time high-tech moved to North Carolina for the same reasons). Once the jobs get there, it will eventually cost the same in rural Arkansas as it does in other parts of the country.

    Just my two cents.
     
  6. ciplexian
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    ciplexian Member

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    There are already tons of factories across the south. Heck, even a Chinese company recently announced they are constructing a new plant in South Carolina.

    The advantages of "deep South" outsourcing compared to "third world" for most companies are:
    1) Better infrastructure
    2) Proximity to consumer markets
    3) Cheaper high-quality materials
    4) No tariffs
    5) Proximity to research and development facilities
    6) Centralization of corporate branches
    7) Political and economic stability
    8) Language simplicity

    With these advantages, median income in the South has been growing faster than the national average since at least the 1960's, and probably since the Boll Weevil and Stock Crash of 1929. Nevertheless, it should take another 20-30 years for the South to fully catch up. The Delta region (LA, MS, AR) should take a little longer.
     
  7. KarlMarx
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    KarlMarx Senior Member

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    Yes, from what I am seeing, outsourcing jobs to third world countries is still happening, but it isn't viewed by companies as being the silver bullet as it once was.

    There are problems associated with outsourcing (infrastructure, start up costs etc). The biggest plus to outsourcing overseas is labor cost, which is cheaper. But for some jobs (e.g. white collar IT jobs), those positions may be getting harder to fill as many IT workers are looking to move to the US where the real money is.

    I heard that the state of North Carolina actually outsourced some government jobs to India. It had something to do with welfare administration. Supposedly, North Carolina saved over a million dollars a year by doing so.
     
  8. Merlin1047
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    Merlin1047 Senior Member

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    I'd love to know how they calculated those alleged savings. Especially if it was only a measly million bucks. The state government should have taken into account that tax money spent within the state recirculates and generates its own revenue. The million dollars "saved" probably ended up costing the economy of NC something on the order of $3m due to the fact that instead of recirculating, the money was flushed out of the country.
     
  9. Working Man
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    Working Man Member

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    Any job created in the US is better than any one lost to an offshore company.

    If Puerto Rico is such a great place for United Technologies, and the major drug companies to move their ops to, then they can support the deadbeats the North East states have gained as immigrants.. Time to make PR the 51st state and tax the shit out of those bastards too.

    I agree with the other guy, if too much prosperity hits the rural areas, they too will grow faster than they would want and then be sattled with high paid cops, teachers and firemen.. No, I guess you figured out that I don't care for "public servents"... The problem with them is that the public is there to serve THEM,, not the other way around.

    Screw Mike Dell and his piece of shit computers too. If he thinks that the Indians can better serve his customers, then he can shove his computers up his but and go move to India. Dells, Gateway, HP, Compaq, all junk to me..

    Once upon a time, IBM came to a two year college looking for technicians to work on their products. The rep told all the attendies that "Unless you were in the top 10% of the class, you could leave now." Wonder if that asshole likes learning Chinese these days now that the company has sold out. Boy, Big Blue sure knew how to run a business too.
     
  10. Adam's Apple
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    Adam's Apple Senior Member

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    Probably another advantage of keeping the work in the U.S. is that our workers are more skilled and know how to make a good product. Not too many years ago we had a huge RCA plant in our city. When they began outsourcing their work to Mexico, they ran into a terrible problem. At least 50% of the product manufactured in Mexico was sent back to our plant to be reworked. Our plant closed up shop for good and is gone now, so I've heard no further updates on the quality of the products made outside the U.S. But I wonder if companies outsourcing their work are still having problems with getting good quality products produced.
     

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