For American Firms, Many US Cities Now Make Attractive Alternatives to Offshoring For Corporate Finance
Many mid-size U.S. cities and other areas now make attractive alternatives to India and other offshore locations for companies considering consolidating finance, IT, and other business services operations for shared service or global business services centers, according to new research from The Hackett Group, Inc.
The diminishing gap in labor costs, combined with factors such as lower turnover rates, greater business knowledge, proximity to customers and headquarters, and state tax incentives has created conditions where many companies are now seriously considering U.S. locations, particularly for centers handling complex and higher-value processes, the research found.
Verizon Communications is one of many companies that has made the decision to locate business services operations domestically, consolidating nearly 1,500 finance operations staff into two U.S. service centers over the past two years.
Previous research by The Hackett Group has found that while offshoring has led to a dramatic decline in the number of corporate IT, finance, procurement, and HR jobs in the U.S., the number of new business services jobs moving offshore has declined steadily over the past few years and will continue to do so, as companies reach the practical limits of the type of work in these areas that can be effectively offshored.
“Companies are realizing that the U.S. is becoming an increasingly viable option for elements of their service delivery organization, and we’re seeing real growth in this sector, with nearly 700 U.S. centers of excellence, shared service centers, and global business services operations now up and running,” said The Hackett Group Principal and Global Finance Executive Advisory Practice Leader Jim O’Connor.
“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. In more and more cases, those benefits outweigh the additional cost. In addition, the public response to offshoring has made keeping jobs ‘at home’ an attractive option for U.S. companies.
“Even if companies are using offshore centers, the U.S. is an essential part of almost any service delivery network for American companies, particularly when the work is complicated, knowledge-based, or requires a high level of communication with customers and internal clients, or when fast turnaround or extensive collaboration is a critical element,” said O’Connor.
‘Array of benefits’
At Verizon, a variety of options were considered before the company decided to consolidate nearly 1,500 finance operations staff from more than 300 U.S. locations into two service centers located in Lake Mary, Florida (near Orlando) and Tulsa, Oklahoma.
“By keeping our finance operations in the U.S., we’ve derived an array of benefits,” said Karan Mehra, Verizon’s director of corporate-finance restructuring.
Talent was Verizon’s primary deciding factor. The company wanted to make sure it could recruit the quality talent that it needed, and that it could put strong training and development in place.
The Hackett Group’s Global Business Services Executive Advisory program developed the research, which provides detailed rankings for more than 30 cities across the U.S., based on a weighted mix of factors.
