U.S. Cities Look More Attractive Than Offshoring, Study Finds

The report noted communications giant Verizon was one of many companies that made the decision to locate business services operations domestically.

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Several midsize U.S. cities are now attractive alternatives to India and other offshore locations for companies considering consolidating IT, finance and other business services operations for shared service or global business services (GBS) centers, according to a report from The Hackett Group.

While labor and operating costs in the United States are high compared with Eastern Europe, Latin America and Asia, America continues to attract GBS centers when the benefits outweigh the costs of delivering business services. Business knowledge, closeness to customers and state tax incentives were also important factors in the decision to locate in the United States, "particularly for centers handling complex and higher-value processes," according to The Hackett Group.

According to the research, the top 10 cities are Syracuse, N.Y.; Jacksonville, Fla.; Tampa, Fla.; Lansing, Mich.; Grand Rapids, Mich.; Atlanta; Allentown, Pa.; Green Bay, Wis.; Richmond, Va.; and Longmont, Colo.

The report noted Jacksonville, the most populous city in Florida, has an economy that is balanced among various industries—such as financial services, biomedical technology, consumer goods and other manufacturing, information services and insurance—and is home to many prominent companies.

The Hackett Group study took economic factors, including cost of labor and office space; workforce makeup, including availability, quality, labor laws and languages; and the availability of both office infrastructure and other elements, such as electrical supply and airports, into consideration in calculating the attractiveness of various locations. Researchers also looked at risk factors, including corruption and fraud, political instability, data and intellectual property theft, foreign exchange fluctuation, the potential for natural disasters and the quality of the judicial system. Finally, the quality of the business environment was considered, including the general economic climate, level of political freedom and overall quality of life.

The report noted communications giant Verizon was one of many companies that decided to locate business services operations domestically, consolidating nearly 1,500 finance operations staff into two U.S. service centers over the past two years. 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 in Lake Mary, Fla., and Tulsa, Okla.

"By keeping our finance operations in the U.S., we've derived an array of benefits," Karan Mehra, Verizon's director of corporate-finance restructuring, said in a statement. "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."