Saturday, November 04, 2006

Accenture Experiments with Rural Outsourcing

World’s knowledge economy is growing – and this economy needs talented people. The success of Indian IT services companies hinges on talent, Internet and connectivity. The current shortage of talent has driven companies to look at different sources of talent. One of the sources available in the US and yet rarely tapped is the rural population. This population can be tapped via remote connectivity – to provide IT Enabled Services (ITES) to the local markets.

Accenture’s Managing director Randall L. Willis is experimenting with a new model of ITES service delivery by the Native American Indians who live in American Hinterland at Umatilla Indian Reservation area of Oregon. (see http://www.businessweek.com/magazine/content/06_45/b4008053.htm)

In my opinion, this is a bold experiment – to integrate American Indians into IT based economy and tap into a talent pool which promises to offer 10%-30% savings in wages (when compared to US urban areas). The innovative nature of this proposal – is something which other companies can learn from.

On October 6th, Accenture announced a 5 year agreement to manage Cayuse Technologies, an IT services business owned by Umatilla tribes. Cayuse Technologies will offer Call centre, document preparation and software development services to Accenture – which Accenture will resell to its customers.

Though it is advantageous to outsource to low cost economies, The value of offering services from a near-by location by a local population offers tremendous advantages if such service is price competitive.

Main Benefits

The idea of rural outsourcing is nothing new, for decades, people in rural areas were offered options to work from their homes. But what I liked about this initiative is the idea of how Accenture can get monetary benefits and at the same time help integrate rural Indian communities into the main stream economy – without physically relocating people.

Accenture is gaining brownie points with the American public – which is a major PR benefit. At the same time Accenture is getting a head start (w.r.t competitors – IBM, HP, EDS) into tapping this talent pool.

Accenture can tap into this talent pool to win lucrative US government contracts which mandates that the work be done in the US, and at reap the financial savings from the low cost. The cost of living in reservation areas are low, which keeps the wages low (when compared to US cities) Companies owned and operated within American Indian Reservation areas are exempt from US corporate taxes – thus lowering costs.

Accenture will use this experience to learn how to deliver low cost IT/ITES services from near by locations – so that it can offer viable alternatives when compared to Indian/Asian competitors.

Lessons to Indian IT companies

A recent (November 2nd 2006) article in Financial Times reported that Indian IT companies (TCS, Infosys, Wipro) are setting up development centres at locations near their customer locations – Also called “Near-Shore” locations. TCS is setting up centres in Mexico, Costa Rica, Caribbean Islands, Ireland, and Eastern Europe etc. The development centres in these countries is driven by the need to serve customer’s better – have multi-language service delivery, and build a truly multi-cultural organization.

Indian firms are still in their infancy when it comes to building a multi-cultural organization. Only 2-3% of their total work force is non-Indians. As a result, Indian IT firms have a steep learning curve and a tough challenge when it comes to building a multi-cultural workforce.

Closing Thoughts

As the competition for talent increases, companies need to be innovative and find newer sources of human capital. Accenture has demonstrated one such innovative approach which is both also profitable. Accenture benefits through improved corporate image, a lower cost, increased ability to serve local US markets and created a learning opportunity in managing multi-cultural workforce.

I have campaigned for the need to create a multi-cultural workforce via my articles, and this experiment by Accenture shows that global IT giants are committed a truly multi-cultural and a global organization.

Also See:

Building a Diverse Workforce
Global Manager
Managing Diversity for High Performance
Encourage Diversity to attract top talent
Distinguish Yourself As a Culturally Diverse Candidate

4 comments:

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Munaz Anjum said...

Rural outsourcing in a country like India does not seem to be a feasible idea because of lack of proper infrastructure apart from the availability of skilled manpower. Suggest how rural outsourcing is possible in India.

Remya said...

Outsourcing these inevitable everyday jobs to a BPO firm will save a lot of your time, money and most of your tension.
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