The Other Indian Outsourcer
November 5, 2006, Bloomberg Business
It's the only board presentation Accenture (ACN) Managing Director Randall L. Willis has ever made in a trailer, wearing shorts and flip-flops, surrounded by a buffalo hide and photos of Native American chiefs. During a vacation last August, Willis, who is Native American, stopped by the Confederated Tribes of the Umatilla Indian Reservation to visit a family friend and throw out a business idea.
Accenture Ltd. needed low-cost places to fill the growing demand for outsourced work performed in the U.S. The Umatilla tribes, based in northeast Oregon, needed jobs and a way to diversify their gaming- and government-dependent economy. Would the tribes be interested in teaming up? Within minutes, Willis' friend ushered him into a tribal board meeting already in session, led by Chairman Antone Minthorn.
While the pitch to the board was impromptu, the idea wasn't. For the past year, Willis had been researching Native American tribes to find an appropriate partner. And on Oct. 6, Accenture announced a five-year agreement to manage Cayuse Technologies, an outsourcing business owned by the Umatilla tribes that will offer call center, document preparation, and software programming services. While Accenture will not share in Cayuse revenues, it will be paid a nominal management fee -- and have a ready place to turn for low-cost onshore work. Demand, says Willis, is "tremendous" as government agencies require that more outsourced work be done in the U.S. and as private-sector companies seek cheap local options. "Whether it's cost concerns or security, a number of industries would like to keep it in the U.S," he says.
Call them the other Indian outsourcers. While a handful of tribes have set up outsourcing operations, Accenture's efforts mark the first time a major global tech-services firm has joined forces with tribes to create a low-cost domestic alternative. Native American tribes are similar to rural communities in that they have a very low cost of living and, therefore, much lower wages and real estate costs. Gartner Inc. (IT) Vice-President for Research Frances Karamouzis estimates that rural-based outsourcing work, and by extension, Native American outsourcers, offer at least a 10% to 30% savings on outside work performed in urban U.S. markets.
Working with the tribes may offer additional advantages. Their 17% unemployment rate, says Umatilla Economic Development Director and Cayuse board member Bill Tovey, is not high by Native American standards, but it still offers a population that's both in need of jobs and fairly stable, thanks to the ties the tribes have to the reservation. And because they don't pay corporate income taxes, the tribes can, potentially, charge lower rates. Eventually, they hope to qualify for a Small Business Administration program that confers special status when competing for government contracts. Analysts say subcontracting to the tribes will attract some clients looking to fill requirements to work with minority-owned businesses. "I'm surprised nobody else has looked at this yet," says Forrester Research Inc. (FORR) government industry analyst Alan E. Webber. "I think it has a high potential to work -- if they can develop the quality [workforce] that's necessary."
Coaches and Trainers
That's the same risk Willis sees in the venture, which will soon begin to train workers and could eventually hire 250 people. Most employees will have had little or no relevant experience, and Accenture's five-year contract puts it in charge of ensuring that the work is up to par. It will place coaches and Accenture managers on site, as well as provide longer training periods (up to nine months for some programming jobs). Whether or not the plan succeeds, Accenture can walk away after its contract is up.
Of course, Willis, who is also co-chair of the National Council of the Smithsonian's National Museum of the American Indian, hopes the venture takes off. Eventually he would like to see a few more Accenture-affiliated tribal outsourcing locations. Plus, Willis feels more than just a professional responsibility to the venture's success. Not only is he an Oglala Lakota, his wife is a member of one of the Umatilla tribes. "The last thing I wanted, from a personal perspective, was to have this thing fail."
By Jena McGregor
This story and photo originally appeared in Business Week.