Large companies like Verizon (VZ) are involved in a growing trend to bring at least some portion of their global business services back to the U.S. The reason: American cities are becoming lower-cost places to do business, at least for certain types of services. These are among the findings of a new report from strategy and operations consultancy Hackett Group, which ranked American cities accoriding to their attractiveness to companies.
Here are the top five domestic locations:
- Syracuse, N.Y.
- Jacksonville, Florida
- Tampa, Florida
- Lansing, Michigan
- Grand Rapids, Michigan
Companies have moved services such as administration, human resources and accounting to overseas locations for decades to form centers that could serve all their operations across the globe. Sometimes the services were outsourced to third parties, while other times companies developed their own specialized operations in another country.
For example, Verizon wanted to consolidate 1,500 finance operations workers from 300 locations. Rather than move them to India or Eastern Europe, the company built two service centers in Lake Mary, Florida, and Tulsa, Oklahoma. Hackett Group spoke with nearly a dozen additional large companies about how they've built or expanded domestic service centers rather than shipping more work overseas.
"In some cases, people have already placed their bets 15, 20 years ago, so it's not necessarily a matter of I'm going to unearth everything I did in Poland or India," report co-author Jim O'Connor, a Hackett principal and global finance executive advisory practice leader, told CBS MoneyWatch.
Operating costs were a major consideration because lower labor rates in other parts of the world allowed significantly lower expenses. But companies have other considerations, like the quality of service or necessary levels of expertise.
"What's your reason for [creating a services center]?" said O'Connor. "Is it highly service-oriented, or is it a pure cost play? Business knowledge, the language, cultural [understanding] ... can all be important."
A combination of such factors as rising wages and job turnover overseas, domestic proximity to expertise, lower office rent and telecom costs, and local tax incentives have reduced the economic advantage that shifting jobs to other countries once enjoyed. In a growing number of cases, the advantage of proximity to customers, having services in the same time zone as company departments or retaining business knowledge locally were more important than the money that could still be saved.
Hackett has previously predicted a shift of manufacturing jobs back to the U.S. because of the diminishing cost advantage in countries like China.