Despite the firm’s international outlook, COO Larry Mieldezis struggled to make offshoring work for some parts of the business, so decided instead to cook up a rural sourcing plan with his alma mater Southern Illinois University, snagging well-educated but lower-cost recruits from a region not exactly known as tech hotspot. We called him up to ask how it’s going and what advice he has for other organizations who are considering setting up shop in America’s heartland.

Why did you decide on rural sourcing versus offshoring?

I’m responsible for our technical delivery services, so basically our managed services. I’ve done that with this company for about 12 years. Over those years, just like our competitors, we went down the path of offshoring to try to lower our costs but also expand our just-in-time capacity in terms of development, technical delivery and customer service. We’ve run at that for a number of years, but we’ve had mixed results, ranging from quality issues with the data that came back, to availability, to turnover and really understanding the business practices that we’re trying to solve. The solutions that we’re delivering aren’t just people that can go in the corner and code. They actually have to interact quite a bit with our customers.

Some years back I had had an idea. I’m from a rural part of the country. I know there’s some good talent that comes out of local university systems in those areas, yet the opportunity for those people to stay is typically limited. I thought, let’s try an alternative to offshoring.

The experience we saw with offshoring, and what we were able to do with people here in the U.S. – common time zones, business cultures, communications and all the security issues — have been completely more than what we had anticipated. We still do some selective offshoring on our development side, but we’ve moved managed services 100 percent to rural sourcing.

Are you happy with the workforce in Illinois? Have your turnover issues decreased?

I definitely think we’re seeing better results than what we saw in offshoring. The offshoring model has become so fluid and transient from the perspective of employees moving from one company to the other, and then in recent years providers moving from country to country because of the wage escalation in those markets.

What we’ve seen in rural sourcing is quite the opposite. I think the key was to build really strong relationships between our company and a local university, so as a result of that we partnered with Southern Illinois University, which is a pretty good-sized university with very good computer science and applied engineering programs. We went in and worked with the deans and professors to identify top candidates out of those programs — candidates that are from that region and want to stay in that region. You’re going to find people coming out of school that want to go to New York, L.A., San Francisco, whatever it may be. That’s fine. But you’re also going to find people that want to stay local, raise a family, invest in a way of life and are strong, intelligent contributors in technology. We’re seeing a lot less turnover if you target the right people with the right message.

Let me say, our population up there is not exclusively recent graduates. A third are seasoned people who have either moved back to the region after having a high tech job elsewhere or people that have found opportunities in the region even though they were sparse.

How were you able to locate those more seasoned people?

Basically, tap into those local communities, the Chamber of Commerce, professional networks in those markets. You’re not going to necessarily get there by using things like Monster and Indeed. People don’t look there if they want to stay local, so it’s mainly been people on the ground, word of mouth, and making an investment in the community. These communities embrace this like you wouldn’t believe because it’s an opportunity for these people to take on some important, challenging technology roles. Otherwise they’d be working for a local bank or an attorney.

How about on the financial end – was this a money saver for you?

I look at it overall as a winner. There’s a cost component, and there’s the ability for us to respond competitively. There’s new business that we’re able to obtain that otherwise we would not. On the pure cost side, I have data that shows anywhere from 1.5 to two offshore resources can be replaced by one domestic resource – just the effectiveness, the creativity, the understanding of the business, all the other challenges of offshoring. I’m hiring less people than I have to hire if I go overseas, so obviously that’s a cost savings.

The cost in that part of the country, whether it’s rural Illinois or Kansas or Indiana, is obviously going to vary, but I am seeing somewhere in the area of probably a ten to 15 percent higher salary rate than what you can find overseas, in some places a little bit more than that. But that, by far, gets offset by what I see as more effective resourcing.

Do you find it easier to manage on your end in terms of things like time differences, logistics, cultural differences, etc?

Absolutely. I’ve had six people in southern Illinois get in car on a Sunday and drive down to spend the weekend in Atlanta with the engineers. It’s very easy for them to do that. It’s very easy for them to communicate and plan and be a part of the product planning cycle as well, so the communication disparity is night and day, and the physical availability also is pretty extreme.

If another company were thinking about rural sourcing, what advice would you give them? 

On the university side, building that relationship with the local university. Make sure the technical programs that are being taught in that university are aligned with the skills that you need. Make a connection with the top of that school, whether it’s the president, the dean, the lead professor, to make sure there’s alignment.

Going into these regions, the flexibility that they show in wanting to help and conform to what your company needs is night and day compared to offshore. We’ve had discussions around, why don’t we take some of the real world concepts that Liaison is solving and build it into our curriculum? Then you have students coming out of the program that are trained in real world examples of technology solutions that we’re providing to the market. So number one is, really depend on that relationship to the university. You’ve got to find a university that’s willing and interested.

The other thing is, I think it’s strategic to identify a university where there’s not an overrun of a lot of other companies wanting to do this. You’ll get their undivided attention.

How about bumps in the road – did you run into any problems that others should avoid?

I guess really recruiting that one-third that’s not coming right out of the school system, and building a connection with the local community early on. We didn’t do that right up front. We mainly focused on the university, and as a result we quickly staffed up a lot of people that were freshly out of school and then had to aggressively go after some more seasoned folks for leadership, mentoring and management. So doing that up front at the same pace that you’re building a relationship with the university is critical.

You mentioned it’s a good idea to find relatively fresh territory. In your experience, are you competing with many companies interested in rural sourcing?

I think the concept has been there for a while, but it’s not been called rural sourcing. It’s been very low-key. Where we went into Carbondale, Illinois, there were probably two or three other small technology companies that recruited locally. We found there was plenty to go around. I think the area could even house some additional companies.

What’s interesting was the university’s economic research arm had just performed a study the year before we came in on how to lure technology companies into the region and what the demographics were, so we were able to peek at that to target our message. There are some universities that want to be a driving force for the economy in the region, and I think if you find a university that wants to do that, then they’ll be able to get you the data to show what the availability is and the demographics of the resources.

What are your plans for the future?

We’re actually looking now at expanding our footprint a little bit. We’ve identified two other universities in the region. Each is about 60 miles away. It’s not uncommon for folks to drive 30, 40, 50 miles there — not in traffic, by the way — to work in a role like this, so we’re expanding. The one piece that we have not tapped into that I think there’s opportunity there to help perpetuate this, is tying in to the local and state government. That’s one area I think you’re going to see us look into a little bit more. How do we get our message out through the state government entities, whether it’s through financial help or through reach and marketing?

I absolutely embrace globalism. We’ve got operations in Finland, the UK. We’re serving customers in China. We need feet on the street over there. But at the same time, if I can find a way to help employee people who live here in the US of A and help my company grow, I’m absolutely going to do that. That means we’re going to be a global company, but we’re going to do it out of rural Illinois.

Image courtesy of Flickr user tlindenbaum.

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The ITC’s initial ruling, which was handed downDec. 19, found HTC devices running Android  infringed on an Apple patent related to how data in notes and other documents, including emails and phone numbers, are automatically linked to other relevant external apps. HTC quickly responded to the decision, saying it had a software tweak in place that would allow it to avoid the ban entirely.

The specifics of Apple’s appeal, which FOSS Patents’ Florian Mueller discovered after Apple referenced it in a filing related to its ongoing case against Motorola, seems to involve U.S. patent No. 6,343,262, which details “a real-time signal processing system for serially transmitted data.” Mueller has described it as one that’s likely “extremely hard to work around.” The ITC initially denied that patent’s inclusion in its import ban, but in Apple’s filing in the Motorola case Tuesday, it seems likely Apple is trying to get it included in the scope of the decision via the appeal. Mueller suggests the appeal may also address other issues, including additional patents and the terms of the ban.

Mueller says ITC decisions appealed to the CAFC take some time to resolve, so it might be a while before we see any ruling. One thing is certain however; Apple’s nearly $100 billion cash pile means it’s likely in no real rush to settle its ongoing legal disputes.

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The Malaysian Life Sciences Capital Fund, formed by the Malaysian government and Burrill & Co., led the Series C funding round. Other investors included Malaysian’s national oil company, PETRONAS, and Malaysian engineering firm Dialog Group. The company has raised just over $85 million and counts Khosla Ventures and Qiming Venture Partners as investors as well.

The money will enable LanzaTech to continue developing processes for converting the carbon monoxide from waste gas from industrial operations and other sources into biofuels and chemicals. The company, founded in 2005, originally hailed from New Zealand and uses microbes and fermentation to produce products.

The startup is building demonstration projects and targeting China, which has become the largest car market and whose government has been promoting policies to promote cars that run on alternative fuels. LanzaTech is already working with two steel manufacturers – Baosteel and Capital Steel — to turn waste gas from their operations into ethanol. LanzaTech said it has installed equipment for a demonstration plant at Baosteel and plans to start production later this year. Last November, the biofuel company also announced a plan to work with a large Chinese coal producer – Yankuang Group — to produce fuels and chemicals from synthesis gas produced by Yankuang’s gasification equipment.

LanzaTech also is working on similar projects in India, where it has teamed up with Indian Oil and Jindal Power and Steel to produce ethanol. In addition, it’s working with Concord Blue to turn municipal solid waste into ethanol in India, LanzaTech said.

The biofuel company added a project in the U.S. recently when it bought a biofinery plant from the ill-fated Range Fuels during a liquidation sale earlier this month. Range Fuels, also a Khosla Venture-backed company, built the plant in 2010 to produce ethanol from wood chips but closed it in 2011 after it ran into trouble with its production process and needed more money to continue. LanzaTech told Bloomberg it plans to use the Georgia plant to develop a process for converting biomass into chemicals. The company has named the Georgia plant the Freedom Pines Biorefinery.

Photo courtesy of PETRONAS

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My conclusion? It’s no picnic. Beginning with my home state of Texas, it took a phone call to get a basic report faxed over (they can’t email it). The report offers the total complaints registered against telecommunications companies vs. those lodged against electrical companies and lists the top offenders in each category. More details require a Freedom of Information Act request and a wait of up to 10 business days. California required a phone call and some back and forth to get some information, which includes data on the number of repairs and the amount of time a customer waits for refunds. A week later, I’m still waiting to hear back from the commission in New York.

Illinois publishes its quarterly quality reports on its web site, and tracks information ranging from length of time services were out and whether credits were issued for no service to the amount of time it took to get an operator on the line. Florida also published the reports on its web site, but the most recent one for AT&T (the company I was trying to track) is from 2007. Florida tracks a lot of stuff (their reports are about 24 pages compared to one in other states) from the timeliness of repairs and to how long it takes to get a number listed in directory assistance.

So compiling and comparing these reports to get a measure of how network quality and customer service complaints are settled is not all that easy and may not even be doable, since the information might be old and may not match across all states. At the least, it would at least take multiple FOIA requests and weeks rather than days. My research covered five states where about 36 percent of the population lives, but an apples-to-apples comparison on a nationwide basis seems to be impossible.

Another FCC objection to collecting this data is that it only covers access lines, the wireline telephone service rapidly going out of style in many households. I agree with the FCC that this data is bordering on obsolete, but instead of ditching it, the federal government should really expand the regulatory oversight of other voice services, from wireless to cable VoIP.

The difference between regulation of various broadband delivered services from video to voice should be eliminated, and it should be done at the federal level. Cable companies and telecommunications firms should not be held to different standards when it comes to reporting quality data, getting local franchise agreements for deploying television services or even requirements to serve rural areas. There will be plenty of fights over which questions to ask given how different the cable and telco networks are, but at the end of the day both types of companies are offering video, voice and data over broadband. They should play by the same rules.

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