Topic: Perspectives on Tier II/III Cities of the United States as Locations for IT Services Delivery

Service providers are evaluating locations in the United States with increased interest for the purpose of setting up their onshore IT delivery centers. This is due to reasons such as focus on industry verticals that demand an onshore presence such as the public sector and health care, demand from clients to establish operations closer to their businesses, and certain state government incentives. However, cost pressures associated with high-cost onshore locations are driving service providers to look beyond the established business centers in the United States to tier II/III cities which offer some cost savings as well as a reasonably-sized talent pool for making the operations scalable in the long term. Further, non-traditional options such as rural sourcing and crowd sourcing are also attracting attention.

During the first three quarters of 2011, locations in the United States witnessed 13 new delivery center setups by the 20 leading Market Vista service providers. Out of these, nine were in tier II/III cities. Our research brief investigates this phenomenon and provides a perspective on tier II/III cities in the United States as locations for global services.

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