Outsourcing viability, part 2

Last week, I talked about the viability of outsourcing as relating to contrasting pricing models.

One topic I discussed was the difference in price based on geography. I aluded to a worldwide scheme, but I got to thinking more about just the US, which I am most familiar with.

I currently reside in an area where the cost of life is low, relative to other parts of the country. If you look at my house payment vs. the house payment for someone living in a much more metropolitan area, they are paying considerably more.

My entire cost of life is less than some counterpart of mine living elsewhere in the US.

As such, as a "virtual" consultant, I'm able to charge less for my services than someone living in New York City, or Washington DC, or Other Big City, USA. This is a competitive advantage to me.

Granted, I'm speaking hypothetical here. My consulting services aren't for sale at the moment. But if they were, I'm sure there someone out there who is equal in talent and ability to me, but would have to charge more in order to maintain their style-of-life overhead.

In this case, a company looking to outsource isn't getting more by paying more. They're getting the same from both virtual consultants - one just has to charge more in order to live where they do.

Perhaps now it's not as big of a deal. But I bet it will start becoming one, quickly. The ability to charge less for the same service is a huge advantage for a company. The company who has to charge more in order to stay afloat will have to find their own advantage to counter-act this.

Don't get me wrong - these "other" advantages exist. But they'll require some work to find. And while they're being sought, the company that can charge less will take the business.

Can anyone attest to this? Is the price differential between a big-city hourly rate and a small-town hourly consultant rate big enough now to even have an impact?

Another Big City - DC

Rusty,

My thoughts have been along similar lines. Right now we're based outside DC and a large portion of my customers are in this area. As time goes on and our development becomes a bit more productized, that should give some flexibility, but in the meantime having the connections around here will still be more valuable than anything else.