More companies are choosing to keep IT and finance operations close to home, rather than offshoring. Here's why.
In late 2011, Verizon wanted to pull all of its finance operations together from about 300 locations scattered across the U.S. So the company scouted locations around the globe.
“We looked at all the typical places where companies usually move their operations offshore, in Asia, Eastern Europe, and Latin America,” says Karan Mehra, the company’s director of corporate-finance restructuring. Fast-forward four years and the company is putting the finishing touches on two new finance centers with about 1,500 employees — one in in Tulsa and the other in Lake Mary, Fla., near Orlando.
Verizon isn’t the only big U.S. company that’s recently decided to keep finance, IT, and other in-house services close to home, or bring them back from abroad. A new study by strategy consultants the Hackett Group counts more than 1,000 such service centers that have sprung up stateside in the past couple of years, many of them in smallish cities.
Hackett’s researchers looked at 33 metropolitan areas, analyzing each according to 30 criteria, including quality of the local talent market, state tax incentives, infrastructure, and “overall quality of life.”
The top 10: Syracuse; Jacksonville; Tampa; Lansing, Mich.; Grand Rapids, Mich.; Allentown, Pa.; Atlanta; Green Bay; Richmond; and Longmont, Colo.
“Companies are realizing that the U.S. is becoming a viable option,” notes Hackett Group principal Jim O’Connor, who led the research project. “Labor and operating costs are still high in the U.S., compared to Eastern Europe, Latin America, and Asia. But the gap is shrinking, and there are significant other benefits that often outweigh the added cost.”
Such as? “Our main consideration was being able to develop the available talent and have a succession plan,” says Verizon’s Mehra. Another concern was data security, he adds. “You get a level of control and security here that we just didn’t find anywhere else.”
Convenience counts, too. Mehra says Verizon is saving big on travel costs, and employees like being able to meet with finance staffers without the hassle of passports, inoculations, and jet lag. Another plus, he adds, is that anyone planning to bring hundreds of jobs to town gets an enthusiastic welcome. “Visiting these smaller cities across the country, we were met with the same level of energy and enthusiasm that I saw internationally ten years ago.”