Companies increasingly turning to US cities for their outsourcing locations

27 May 2015

Mid-size US cities are increasingly seen as attractive alternatives to offshore locations like India for companies considering outsourcing finance, IT, and other business functions, according to research from The Hackett Group.

A shrinking gap in labour costs, lower turnover rates, greater business knowledge, proximity to its customers and headquarters, and state tax incentives have led many companies to seriously consider US locations, the study found. These factors were particularly important for companies that were considering creating centres to handle complex and higher-value processes.

The Hackett Group cited Verizon Communications as an example of a company that chose to create business service centres in the US after initially considering offshoring. Verizon has consolidated nearly 1,500 finance operations staff from 300 offices into two US service centres in Lake Mary, Florida and Tulsa, Oklahoma over the past two years.

Karan Mehra, Verizon's director of corporate finance restructuring said the company had gained an array of benefits by keeping finance operations in the US. These included recruitment and training advantages. "Our goal was to build 'bench strength' to support succession plans, so that our staff had the ability to learn new skills and develop professionally,” he said.

He added: “By staying domestic, we got instant buy-in from both our clients within Verizon and throughout the finance organisation itself. We have also been able to maintain complete control over our finance operations and processes, which can be difficult to do when you move offshore.” Avoiding extended travel to visit offshore centres had also been an advantage, he said.

The research said the top 10 most appealing US cities are: Syracuse, New York; Jacksonville, Florida; Tampa, Florida; Lansing, Michigan; Grand Rapids, Michigan; Atlanta, Georgia; Allentown, Pennsylvania; Green Bay, Wisconsin; Richmond, Virginia; and Longmont, Colorado.

And while offshoring has led to a dramatic decline in the number of corporate procurement, IT, finance, and HR jobs available in the US, a previous Hackett Group study found the number of new business services jobs moving offshore had declined steadily over the past few years and would continue to do so.

“We’re seeing real growth in this sector, with nearly 700 US centres of excellence, shared service centres, and global business services operations now up and running,” said Hackett Group principal and global finance executive advisory practice leader Jim O’Connor.

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