United States
Contrary to common perceptions about outsourcing, not all projects are being sent overseas. Known as “homeshoring,” call centers are moving to living rooms, where individuals are connected via telephone systems to national customer service lines. One company, Arise, for example employs more than seven thousand agents in nearly every state who work from home keeping overhead low. Call centers are also being built in parts of the country with lower real estate costs and lower wage requirement. Companies like American Express and Humana Insurance prefer to keep their call centers domestic, with the idea that customers prefer local service for sensitive issues like insurance, financial products, and health care.
Sourcing projects within the United States generally includes a team of freelance professionals, primarily with the job functions of web developers, virtual assistants, and writers. Employing an American staff is more expensive than India, for example, but the quality and range of skills within the workforce is broader and therefore more appealing to companies searching for top-quality resources.
India has always been the biggest player in the outsourcing market, but as wages and the demand for higher quality of life increase, major Indian companies are now setting up operations in the US.
American companies are seeing new incentives to create jobs domestically; tax credits are being issued to companies that are creating jobs at home and not sending them overseas. President Obama rallied that its important that companies are encouraged to invest more in the United States, closing loopholes that make it more attractive to source jobs overseas. The state of Ohio has placed a ban on sourcing jobs overseas, intending to keep jobs in its state and keep its resources employed.
Country overview
The United States, at more than double the size of the European Union, is home to an excess of 313 million people. Eighty-two percent of the population lives in urban areas, with more than 19 million living in the New York metropolitan area, almost 13 million in Los Angeles metro, 9 million in Chicago, and nearly 4.5 million in the capital of Washington, DC.
The US has a diverse population, with many languages spoken. English is the official language and 82 percent of the population speaks it fluently, and eleven percent are Spanish speaking. Adult literacy is among the highest in the world at 99 percent. The total workforce is the fourth largest in the world at 155 million people.
The US has the largest and more technological economy. It is market driven; private businesses make up the largest portion of the GDP, which is valued in excess of USD 414 trillion, ranked second in the world. The nation has a high per capita of $47,700 annually.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
Employee compensation
The United States is generally more expensive for conducting sourcing projects. Software developers in countries such as India or Poland earn far less, as little as eight percent of comparable resources in the US. Senior web developers in India also are far less than their American counterparts with salaries more than 70 percent less.
Similar savings are available elsewhere globally for a multitude of professions, but the American resources have the advantage of no language barriers, proximity to businesses seeking sourcing staff, and a workforce with a wide variety of necessary skills.
Real Estate
According to Colliers International and their annual real estate survey, office space in prime downtown locations such as New York, San Francisco and Washington, DC is some of the more expensive real estate globally. New York and San Francisco average USD $65 per square foot annually and Washington’s real estate averages $70 for Class A real estate. Suburban office space in these cities’ metropolitan areas offers some savings – New York’s outskirts (northern New Jersey) has an average rate of $38 per square foot, while Washington’s is $57. San Francisco’s suburban real estate is more expensive than downtown space averaging $120 per square foot – this inflated number is because of Northern California’s high demand and Silicon Valley.
Taxes
Corporate taxes in the US are forty percent, but there are incentives and tax breaks available for companies that maintain business domestically. The US benefits from having no indirect/VAT taxes on good or services as well. The SMB effective tax rate is 46.8 percent, well below that of China or India.
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010
Source: Colliers International, SourcingLine, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Real Estate : Occupancy costs are averages across New York (downtown), Washington DC, and San Francisco. Taxes: There is no national Value Added Tax (VAT) in the United States, however, many states and local jurisdictions levy sales taxes.
Resources and skills
Education and skills
The United States has an adult literacy rate of 99 percent, one of the highest globally. The US has some of the highest educational achievement scores according to the Program for International Student Assessment (PISA). Reading, mathematics, and science achievement scored 500, 487, and 502 respectively.
The US is home to some of the most prestigious universities in the world, attracting international students and top researchers. In a 2010 ranking of the top 200 universities globally, 103 of them are within the United States. More than 18 million students are enrolled in American universities, according to the US Department of Education.
Language
The official language is English, with 82 percent of the population speaking fluently. Another eleven percent of the population claim Spanish as their native language. Foreign language education in the US is on the rise. Between 2002 and 2006, the number of students enrolled in language programs at the university level jumped 13 percent to 1.5 million. Spanish is the most common language taught, but French, German, and Arabic are steadily gaining.
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Educational Achievement : Reading data is not available for the US in the 2006 PISA study.
Business and economic environment
Economic competitiveness and stability
The United States’ economic competitiveness scored a 5.43 GCI index, the highest among sourcing nations. Its macro economic stability is average , and has a 4.4 index.
Infrastructure
A nation’s infrastructure is a major component in choosing where to set up sourcing projects. When compared to many nations globally, the US is very strong in its infrastructure – road quality has a 5.7 index and electric supply has a 6.2 index.
Regulation
Doing business in the United States is generally an easy venture, ranking fifth globally in the Doing Business 2011 survey. The time required to start and register a business takes an average of just six days, much lower than most competing countries such as China (38 days), Indonesia (47 days), and Brazil (120 days). Filing and paying taxes is also much simpler than other outsourcing locations requiring just 187 hours to complete.
Corruption
The perception of corruption in the United States is very low, falling behind only Canada and Chile. This low corruption attracts businesses and investment, because with corruption there are often unforeseen costs and inefficient time delays.
Legal and intellectual property protection
Contract enforcement in the Unites States is strong. There are 32 procedures required to fully fulfill a contract’s obligations, and this process generally lasts 300 days. The cost to enforce averages 14 percent of the total contract value.
The protections for intellectual property are among the best globally, only behind Singapore, Canada, and the UAE. Software piracy is also good with just 20 percent losses.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009