Federal IT contractors find domestic sourcing an alternative to offshoring

Federal information technology contractors should move jobs to rural areas of the United States where labor costs are low rather than outsource jobs overseas, some federal vendors said on Wednesday.

George Schindler, president of CGI Federal, said IT companies that invest in rural areas, a practice known as domestic or rural sourcing, have access to new pools of talent and can deliver services at a significantly lower cost. Schindler was part of a panel discussing technology procurement issues that was sponsored by the lobbying group TechAmerica.

Rural sourcing is an attractive alternative to outsourcing jobs to India or China because U.S. companies can avoid the problem of different languages and time zone issues while taking advantage of the lower cost of living as compared to large metropolitan areas, he said. CGI Federal opened its first rural center in 2005 in Lebanon, Va., a town with a population barely more than 3,000 and located near the Tennessee border. The company is planning to open this fall a second center in Troy, Ala. -- population about 15,000.

"The phrase I use is corporate social responsibility" to explain moving jobs to small towns, Schindler said. "We're clearly bringing jobs to regions that desperately need jobs."

But domestic sourcing still must be driven by a business case, said TechAmerica President Phil Bond. Many federal agencies have rules restricting contractors from moving government work offshore, and companies within the Beltway face constant competition for a shrinking pool of talented IT workers in that region.

Companies are facing a shortage of talent in the metropolitan areas, Schindler said, adding that access to talent is the No. 1 factor in determining the areas that are most attractive for IT vendors to locate. "Talented people live all over the country," he said. "It has to be a place where people want to live, want to stay, but [small towns without jobs are] losing talent to metropolitan areas because of the lack of opportunities."

IT jobs that are based in a rural area not only provide opportunities that pay more than the area's average income, but also encourage residents to stay, Schindler said.

President Obama toured CGI's Lebanon site during last year's campaign and asked company officials how CGI's efforts could be replicated. The key for communities courting IT firms is to set up partnerships with regional universities and community colleges to ensure workers have the necessary skills, Schindler said.

John Richardson, commissioner of Maine's Department of Economic and Community Development, said his state used public-private partnerships to entice IT companies with grants and political support. Richardson said residents in rural states such as Maine were more likely to stay with a company for the long term.

"In domestic sourcing we've seen very low turnover," Schindler said. "It's a different workforce and commitment. It's in their DNA; they're in it for the long haul."

Jeff Lande, executive vice president with TechAmerica, said IT infrastructure and the availability of broadband also play a critical role in attracting technology companies.