When Paul Eurek graduated from the University of Nebraska-Lincoln in 1982, he had to leave the state to find a technology job. Thirty years later, he is at the leading edge of a trend called “rural sourcing” that is bringing high-tech jobs to places in the rural Midwest as small as Eurek's hometown of Loup City.
Eurek's Atlanta-based firm, Xpanxion Technologies, now employs six in Loup City, 85 in Kearney and 25 in Ames, Iowa, and has plans to open a Kansas office. Those are in addition to about 40 employed in Atlanta and about 300 in India.
Large corporations looking to outsource their information technology or software development services increasingly pass over India and the Philippines to find help in places like Nebraska, South Dakota and Iowa. It's still outsourcing, but it's the opposite of “off-shoring.”
“It is probably the hottest concept that's going on in the sourcing industry,” Eurek said. “It's going to have high growth rates over the next few years.”
The International Association of Outsourcing Professionals called rural sourcing one of the top 10 industry trends for 2013.
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Wednesday, a Minneapolis-based rural sourcing firm announced it would open a $10 million technology center in Vermillion, S.D., just over the border with Nebraska. It will employ 200 IT consultants.
It expects to recruit many of them through a new partnership with the University of South Dakota and pay between $40,000 and $60,000 annually. The employees will have a focus on developing mobile app software. Eagle Creek employees in other area locations work on customer relationship software services and data management.
In addition, the Rural Futures Institute, launched last fall by University of Nebraska President J.B. Milliken, earlier this year awarded a $125,000 grant to a group including Eurek who hope to build on the successes and strategies of rural sourcing to recruit University of Nebraska alumni back to the state in high-tech and other professional fields.
“The strategy is to reverse the brain drain,” said Shawn Kaskie, director of the Center for Rural Research and Development at the University of Nebraska at Kearney.
Eurek started Xpanxion after he built and sold a different business that developed software for touch-screen point of sale systems.
It started as a more traditional software development and business processes outsourcing business, with an engineering center in Pune, India. But Eurek realized, “There were jobs we were creating offshore in India that we could be creating in Loup City.”
The traditional advantage to hiring Indian engineers was the cost savings, but as salaries there have risen, the intangible benefits of rural American workers have become attractive to companies.
They don't have to pay high urban wages but still can have workers in U.S. time zones who have native English language skills, lower attrition rates and the much-touted Midwestern work ethic — some of the same benefits that have led banks, retailers and insurance companies to locate customer service call centers in Nebraska.
Other benefits are that U.S.-based IT operations must follow the country's data privacy and intellectual property laws, and corporate social responsibility policies may encourage the use of American workers, according to technology research firm Gartner.
When Eurek's clients started dealing with his employees in Nebraska, “The customer satisfaction numbers went through the roof.”
That doesn't mean he has closed up shop in India. On the contrary, his Pune workforce is growing.
“Most major corporations have made huge investments in offshore; they're not prepared to just throw that away,” Eurek said. “Rural centers will never displace what's going on in the offshore markets.”
He said an all-rural workforce is not scalable or practical, and often takes a partnership with a university to maintain a supply of employees. Eurek has worked with UNK to establish a course in software quality assurance and testing.
An even bigger higher education program is a major part of the initiative announced Wednesday in Vermillion.
Eagle Creek Software Services of Minneapolis, which says it is the largest U.S.-based onshore software services company, is expanding its “Dakota model” after earlier success in Pierre, S.D., and in Valley City, N.D. The company envisions bringing 1,000 jobs to South Dakota within five years.
To staff its first centers, Eagle Creek President Ken Behrendt said he has to bring in 85 percent of his employees from out of state, mostly from other Midwestern areas. He is hoping to cut that to just about 50 percent in Vermillion, by working with USD to create the new IT Consultant Academy at USD, providing scholarships for both an undergraduate certificate program and a graduate master's degree program.
The South Dakota Board of Regents is expected to approve the program in April. Graduates will be top candidates for jobs with Eagle Creek but would have the skills to work anywhere, Behrendt said. He said U.S. technology and technology support graduates are just as technically proficient as those in India.
At Xpanxion, Eurek has found the same. When he started the Kearney shop, employees were doing “the simplest thing they could do” — manually testing software. But now they are handling far more complex jobs, including project and product management, mobile software development and software programming.
“We are doing everything that can be done in an engineering shop,” Eurek said. “We can work with multinational corporations that are doing cutting-edge projects.”
Besides education partnerships, economic development incentives are needed too. Eurek said a $500,000 zero-interest loan through the Community Development Block Grant program was essential to the Kearney operation. The Vermillion Area Chamber & Development Co. worked with Eagle Creek on incentives for that project.
The rural sourcing project that has now received funding from the Rural Futures Institute will build on these successes to expand the concept to recruit NU alumni back to Nebraska.
UNK's Kaskie submitted the grant application with Eurek and representatives of the Nebraska Alumni Association and Nebraska Department of Labor, among others.
The first year of the two-year grant program — an effort to research what would bring alumni back, then contact them about opportunities — will be focused on recruiting IT engineers and software programmers, and in the second year Kaskie hopes to expand to corporate executives and professionals in medicine and law.
He says of people who grew up in Nebraska, “Those folks are more likely to stay if they move back, to fill jobs and create jobs where there might not be one.”
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