Outsource to America
Duluth-based Saturn Systems offers a homegrown alternative to offshore IT outsourcing.
BY BRIAN LIEB
Every corporate fiscal officer knows that you can save big money by outsourcing IT functions to an offshore vendor, right? Well, maybe. It depends on what you think of as big. Two recent studies have put savings from offshore IT outsourcing at roughly 15 percent—far below corporate expectations. And, researchers point out, the cost difference may actually diminish as standards of living in other countries improve and as offshore vendors attempt to address problems with quality and customer satisfaction by using more experienced—and more expensive—staff.
Enter Saturn Systems Inc. Located in Duluth, the company provides an IT alternative for small and medium-size businesses that want to reduce costs but don’t have the deep pockets or the infrastructure to manage a full-fledged offshore operation. Specializing in project management, custom application design and development, and database architecture, Saturn Systems uses Minnesota’s North Shore to compete with offshore. The idea for the business started when company founder Keith Erickson discussed outsourcing and the loss of local jobs with Jim Gustafson, a former Minnesota state senator and Iron Range Resources and Rehabilitation Board (now known as Iron Range Resources) commissioner.
They realized that the primary cost difference between offshore IT vendors and major U.S. vendors was salaries—not surprising, considering many U.S. firms are located In places such as the Bay Area of California, Seattle, and Boston. They also realized that a U.S.- based IT company could be competitive with offshore vendors if it could control salaries. Fortunately, Duluth offered an ideal location. Saturn Systems is able to offer lower salaries and still attract skilled technology workers because of Duluth’s high quality of life, low cost of living, and short commutes. “The benefits are typically 30 to 50 percent reduced costs for our services compared to metro-based firms,” says Gustafson, who is now Saturn’s CEO. “Why go offshore when you can go to the North Shore?”
Saturn Systems also competes with offshore vendors by focusing on service. “We have low turnover and high employee satisfaction, which leads to a stable, knowledgeable work force,” says Gustafson, noting that such stability allows the company to manage projects over substantial periods of time, further reducing costs. “That’s important. The cost of turnover for customers of technical consulting firms is very high.”
The approach seems to be working: The company has had 30 percent annual growth over the past three years. “We’re just free-enterprise guys who want to compete,” says Gustafson. “We have the right set of circumstances to be a good alternative to going offshore.”