Analyzing the numbers

When I see numbers in a story, I’m always tempted to see if they add up.

Wired News (“Outsourcing to the Heartland”) is featuring an article about Rural Sourcing, a company that offers an alternative to off shore outsourcing by tapping into the growing number of IT professional in rural America. The company claims cost savings of 30-50% over the highest cost urban centers. But I’m having trouble making sense of the numbers.

According to Wired, Rural Sourcing claims 20 clients, including Mattel and Cardinal Health, $1 million in revenue and 50 full-time employees at five IT centers. By my calculations that works out to about $20,000 per employee. Sounds like too low an amount to cover salary, benefits and other costs, not to mention corporate overhead. Also, according to Wired, the company charges $35 to $50 per hour for IT expertise. Assuming an average of $42.50 per hour and a 35 hour work week, that works out to about US$70-80k per year. The numbers don’t seem to add up.

Also, I would have thought most US domestic outsourcers would have already established centers in lower cost US regions so that they could shift work away from costlier urban centers where possible. So its probably not accurate to simply compare hourly rates against those being paid in the highest cost US urban centers.