Jobs on farms, not abroad
High-tech companies are keeping jobs in the US by setting up offices in rural areas to cut costs.
LEBANON, VA. — In a crook of Clinch Valley in Lebanon, Va., there are no counterculture coffeehouses, no art museums, and the "ginger" salad dressing at the town's only Japanese restaurant is really Thousand Island.
Despite its country couture, Lebanon (pop. 3,300), once betrothed to King Coal, is on the cutting edge of a new business trend. The farmshoring phenomenon, in which high-tech companies choose to open offices in rural America as opposed to India, China, or Mexico, is coming to this mid-Appalachian plateau.
Late last year, two major IT firms, CGI-AMS and Northrop-Grumman, announced they were bringing more than 700 technology jobs to Lebanon that pay around $50,000 a year. These positions are in the same class as the 112,000 IT jobs nationwide that were lost to overseas outsourcing in 2003, according to Global Insight in Boston.
In a town where the average salary is around $27,000, many residents welcome the arrival of the IT revolution. It's also a subtle promise that the region's talented young people may stay where horses and mules graze behind rickety fences on sloping hillsides.
Other technology companies are also putting high-level programming and data- crunching jobs in rural America locales with less traffic and lower rents to cut costs and remove the legal entanglements, cross-cultural differences, and time-zone hassles that come with overseas outsourcing.
"When you look at [farmshore] communities that are becoming successful, they're saying, 'Yes, we can compete with offshore, and we add value to these companies,' " says John Allen, director of the Western Rural Development Center at Utah State University.
Critics, meanwhile, worry that these jobs, which are often temporary, could give false hope to desperate communities.
For CGI-AMS and Northrop-Grumman, the decision to set up in Lebanon was mostly driven by high labor costs in hot job markets such as Fairfax, Va., and neighboring Reston in northern Virginia. In another instance, DaimlerChrysler recently hired Lakota Express to do its Web design, which it is sending to a South Dakota Indian reservation. Even Dell, which recently announced another major offshoring gambit, is now shipping some of its work to Twin Falls, Idaho. In Cheyenne, Wy., transportation logistics firms, full of young people, dot the interstate.
To be sure, with as many as 3 million IT jobs expected to go overseas in the next few years according to Forrester Research in Cambridge, Mass., only a handful of companies are setting up shop in rural areas in the US.
That Appalachia is on the forefront of farmshoring is a result of massive investing in broadband, which connects wide, rural swaths to the Internet. The Department of Agriculture has handed out more than $800 million in low-interest loans for broadband expansion nationwide, a portion of which went to Virginia. Lebanon and Russell County, Va., received more than $4 million in grants from the Department of Commerce as well as from the state's tobacco settlement fund. The fiber optic cable through Russell County, Daniel Boone's old stomping grounds, officially went live last year.
"If you don't build it, they won't come," says Jim Andrew administrator for the USDA's Rural Development Utilities Program. "Somebody out there has to have the vision ... because it's really not an easy thing to do where the people are few and far between."
Ex-coal miner Mike Rhea, now a Baptist minister and self-styled computer geek, is one of a handful of Lebanon locals who has worked to wire this valley over the past 20 years. From his cluttered workshop, where ancient Intel chips lie in dusty piles and a paint can is perched on a server rack, he runs one of America's most inexpensive website hosts, with headquarters here in Appalachia.
Over the years, his company Mike's Computerland has taken on some 60 local apprentices, several of whom have gone on to run IT departments at local universities and firms. He says the region's work ethic can be adapted from the coal fields to seams of silicon.
"We have a huge availability of people ready to work, but not yet enough who can do the work," says Mr. Rhea, as stacks of keyboards threaten to topple around him.
Some wrongly think the region is a backwoods enclave unable to compete beyond traditional industries, says Lebanon Mayor Tony Dodi. "Our kids can compete with anybody in the commonwealth," says Mr. Dodi, who is also the high school principal.
At least three Lebanon natives, for example, have been hired at CGI and are returning to the area from other jobs. Still, Lebanon had outside help to bring CGI and Northrop-Grumman into town. The state and county offered the companies several million dollars in tax breaks. Northrop-Grumman also recently won a lucrative state contract.
But Rep. Rick Boucher (D) of Virginia says the companies also did their homework. Several colleges - which have graduated more than 4,000 computer science majors in the past decade - are within an hour's drive. Also Lebanon High School is the only one in the region where students can get certified to build and maintain the Internet.
Some observers, however, question whether the IT industry is like many others before it - quick to move out when the economy falters. Across America, says Mr. Allen, former call centers sit quiet on rural roads.
Even so, Lebanon residents are enthusiastic about the town's place in the global IT market. "It's almost like a miracle," says Judy Settle, a Super 8 motel clerk.
Chandler Meade, a high school junior and budding videographer, is also encouraged. "It's nice to know that I might be able to stay here and raise a family instead of having to go somewhere else to do that," he says.