View From Lodi, CA: HomeShoring, the Patriotic, (And Profitable) Answer to Outsourcing
On this Labor Day, thanks to Dustin Crane, some
American workers are hearing less about outsourcing and
more about "HomeShoring." Crane is the Chief
Executive Officer of the Georgia-based
When Aelera, a ten-year-old information technology
firm needed to expand, Crane did what most other
executives do. He thought, "I`ll
Crane had received countless calls from promoters
begging him to come to India and other
far away places like
Armenia and China where—he was told—operating costs
would be lower without sacrificing efficiency.
But before committing, Crane decided to do his own
fieldwork. Instead of taking guided tours provided by
the host countries, Crane ventured out by himself.
Crane didn`t like what he found.
In China, Crane found pollution
so thick he couldn`t breathe.
"It is one thing to
offshore call-center work where transactions last one to
five minutes and repeat 20 times an hour. It`s different
to offshore a piece of work that takes two to three
months to master and maintain that momentum and
Trip teaches lesson on outsourcing jobs By Tammy
Joyner, The Atlanta Journal-Constitution, July
But what surprised Crane the most was that the
savings weren`t what they were cracked up to be. Hidden
costs, both in terms of salaries and operating expenses,
made overseas relocation prohibitive.
When Crane abandoned the idea of outsourcing, he
relied in part on a study by Ramp Rate Sourcing
Advisors. According to Ramp Rate Chief Executive Officer
Anthony Greenberg, sometimes the best thing to do is
Arguing for relocation within the US, Greenberg says
"Companies must realize that ultimately the vast
majority of `outsourcing` is done cost efficiently in
the U.S. and that offshore outsourcing is not for
Greenberg suggests companies follow Crane`s example
by exercising greater due diligence before taking the
"We have a whole series of questions,"
Greenberg says. "What do you hope to gain from
outsourcing — cost reduction, business transformation?
What criteria do you use to identify vendors? Do you
truly understand your internal costs?" [The
art of successful offshore outsourcing 29 June
Seeking validation, Crane commissioned his own study
to see if other companies were realizing the savings
they had hoped for.
Crane asked 216 key U.S. executives to share their
experiences with him.
"What we found was kind
of amazing. Those that are doing offshoring expected to
have a 30 percent to 50 percent cost savings that would
drop to their bottom line.
What we found across the
board is that they are not receiving that much savings.
Many of them are between 0 and 20 percent. We asked in
our survey if people were losing money and I think we
were the first company to do so. Surprisingly, many were
losing money. And so we looked at that and said, this is
validation. Second thing is most companies in the United
States hear the sales pitch from these companies like
Tata and others that say they could save a lot of
money. What they don`t realize is that there are
additional costs. When we looked at those costs, it took
away those savings."
About half the companies surveyed indicated that
their overseas projects were likely to bring the work
back to the U.S.
With outsourcing no longer an option, Crane created
HomeShoring which he defines as finding smaller
metropolitan U.S. cities where
technical professionals readily trade lower wages to do
challenging, interesting work in premium lifestyle
cities. Minimal travel, labor, training and project
management costs result in lower costs for clients and a
proven methodology shrinks delivery cycles while
negating the multiple potential problem areas associated
One such city is Savannah, Georgia. Aelera has
just announced plans to locate an application
development center in Savannah and Fitzgerald, GA. that
will add 250 jobs over the next two years.
"We realize there is a better business case closer to
home," Crane said.
Delta Air Lines
announced that it would close a call center in
India, possibly because of customer complaints about
And in Crane`s opinion, other companies may soon
start to repatriate their operations to the U.S.
Nothing could be better for the
American worker than a re-evaluation of outsourcing.