U.S. Firms Eyeing Benefits of Onshoring

Based on economic considerations, business environment, workforce quality, infrastructure, and risks, many midsize U.S. cities look attractive.
Matthew HellerMay 13, 2015
U.S. Firms Eyeing Benefits of Onshoring

U.S. companies are increasingly considering onshoring finance, IT, and other business services operations at home, with many mid-size U.S. cities now offering attractive alternatives to India and other offshore locations, according to a new survey.

Consulting firm The Hackett Group said the diminishing gap in labor costs, proximity to customers and headquarters, and state tax incentives are among the reasons that firms are looking at onshore locations, particularly for facilities handling complex and higher-value processes.

“Companies are realizing that the United States is becoming an increasingly viable option for elements of their service delivery organization,” Hackett Group Principal Jim O’Connor said in a news release.

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While labor and operating costs are still high in the United Sates compared with Eastern Europe, Latin America, and Asia, he noted that “the gap is shrinking, and there are significant other benefits [to staying onshore]. In more and more cases, those benefits outweigh the additional cost.”

“In addition, the backlash against offshoring has made keeping jobs ‘at home’ a attractive option for U.S. companies,” he added.

One U.S. company that has made the decision to locate business services operations domestically is Verizon Communications, which has consolidated nearly 1,500 finance operations staff into two U.S. service centers over the past two years.

“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 told The Hackett Group. “Talent was perhaps our primary deciding factor. We wanted to make sure we could recruit the quality talent that we needed, and that we could put strong training and development in place.”

Other advantages of onshore locations she cited were maintaining control over finance operations and processes and avoiding extended travel times when visiting service centers.

Top 10 U.S. locations, according to The Hackett Group, included Syracuse, N.Y.; Jacksonville, Fla.; Tampa, Fla.; Lansing, Mich.; Grand Rapids, Mich.; Atlanta, Ga.; Allentown, Pa.; Green Bay, Wisc.; Richmond, Va.; and Longmont, Colo.