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New homegrown operations challenge offshoring trend

BOWIE, Md.—From her home office in the suburbs, Susan Smith is part of a growing movement that may help stem the flow of American jobs to low-cost Asia.

Within a decade, some 3.3 million service-sector jobs will be offshored, or shipped to countries with low labor costs, according to a projection by Forrester Research, a consulting firm.

But Smith is part of a parallel movement called "homeshoring." Instead of moving offshore, call-center jobs like hers are going to home-based U.S. workers, and software programming jobs are moving to low-cost U.S. metro areas such as Oklahoma City or rural Greenville, N.C., instead of to India.

"It just makes a lot of sense. It's like having American-made cars vs. foreign-made cars. You want to keep the work within the United States," said Smith, who takes phone orders over her computer from 9 p.m. to midnight after putting her toddler to bed.

Low-cost airline JetBlue pioneered the concept in 2000 with home-based reservation agents. It has since spread to retailers like Office Depot, roadside-assistance providers like AAA and even to the Internal Revenue Service.

For decades, corporations have struggled to lower costs by farming out tasks ranging from help desks and product design to payroll management. In today's global economy, the battle is over where those jobs go.

If offshore jobs tend to offer cheaper labor, homeshoring's big advantage is that there's virtually no capital expense for offices, parking lots, cafeterias and other employee amenities, not to mention benefits. Workers even provide their own computers.

Today, from the Maryland suburbs of Washington, D.C., Smith takes sales calls for a distributor of public broadcasting DVDs. She's one of 3,000 home-based agents in 34 states working in a virtual call center operated by WillowCSN of Miramar, Fla.

"You are tapping whole new labor markets—military spouses, stay-at-home parents, retirees," said John Edwards, the chairman of the Telecommuting Coalition, which advocates home-based work.

Virtual call-center agents in the United States are generally 35 to 40 years old, work 20 to 30 hours a week and earn $10 to $16 an hour, plus bonuses. Some virtual call centers offer bare-bones health insurance; others don't.

As homeshoring grows, offshoring also is accelerating. And it's no longer just call centers and information technology jobs. Now it's architects, accountants, tax preparers and financial analysts.

"I am convinced there's a tremendous amount of work besides software that can be done virtually," said Kathy Brittain White, founder of Rural Sourcing Inc. in Durham, N.C. "Foreign countries are showing that."

Rural Sourcing focuses on software applications and has offices in North Carolina and Arkansas. It expects to open in five more states next year. It offers software design, development and support from low-cost rural communities, tapping graduates from smaller colleges and universities for its labor pool.

Experts say average homeshore wages for software developers in rural areas are $35 to $40 an hour. By contrast, in-house wages in major U.S. metro markets run $75 to $100 an hour, vs. $20 per hour in India.

"The low end of some of the (homeshoring pay) numbers sort of begins to overlap with some of the numbers of offshoring," said Mark Peacock, a principal of Archstone Consulting, which publishes with Duke University a biannual survey of where and why companies are offshoring.

The wage overlap suggests that U.S. homeshore providers can compete on labor costs.

How big is homeshoring? Verifiable numbers are scarce, as they are for offshoring. Consultant Gartner Inc. predicts that 10 percent of all U.S. call centers may develop some homeshoring component. One reason why is that some corporations rushed abroad with mistaken cost assumptions, said Joseph Feiman, a Gartner vice president.

"Expectations that savings from offshore outsourcing will be directly proportional to low offshore (labor) costs were wrong. Many bad decisions were made," Feiman said. He thinks software development in low-wage U.S. areas can compete with Asia.

IDC, a market-intelligence company, estimated in 2004 that there were more than 100,000 homeshoring jobs in the United States. Senior analyst Stephen Loynd said homeshoring "is going to become ever more significant" as Internet and telecom technology advances make it easier to work from home far from major metro centers.

Consider CIBERsites. It has low-cost software application and support centers in Oklahoma City and Tampa, Fla., and expects to open four more next year.

In Oklahoma, CIBERsites takes advantage of lower living and wage costs. In Tampa, it taps the large pool of older workers trained in COBOL, an early computer-programming language still used in many data-processing centers. COBOL tasks are harder to send abroad because the technology isn't well known.

"We've seen a handful of work come back after they've attempted to offshore it and had disappointing results," said CIBERsites President Tim Boehm.

After several years of managing global call centers, Garth Howard became chief executive officer of Alpine Access Inc., based in Golden, Colo., earlier this year. Alpine operates virtual call centers with about 7,500 agents in Utah, Texas, Colorado and Arizona.

He believes that lower travel costs, fewer cultural and management differences and minimal overhead costs make homeshoring a competitive alternative to offshoring.

"Offshoring is always going to be lower cost, no doubt about it. But decision-makers have got to do a better job analyzing total costs, not just per-hour costs," he said.

Homeshoring also offers employee-retention rates of 85 percent or higher, where some traditional call centers have 100 percent annual turnover, said Angela Selden, chief executive officer of WillowCSN. Virtual call centers are manned by older, more reliable workers. With the baby-boom generation nearing retirement, more people will want part-time work.

"The comfort level with technology has created a population of people who are ripe for work from some place other than the office," Selden said. "We now believe that the industry is credible, and the next three years, we believe, is a wave of explosive growth."


(c) 2005, Knight Ridder/Tribune Information Services.

PHOTO (from KRT Photo Service, 202-383-6099): WRK-HOMESHORING

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