What do CGI-AMS Inc. and Northrop Grumman Corp know about Virginia's heartland that would prompt them to hire hundreds of software engineers and build multimillion-dollar technology centers there? Ellen McCarthy provides a number of answers in Mining Coal Country for Tech Workers - Economics, Politics Send Contractors Into Southwest Virginia, (Washington Post, January 2, 2006)

• rents are cheap
• traffic is light
• talent is available

Are you thinking "duh" to the first two, but "huh?" to the last? Don't be so surprised!

"The area turns out plenty of résumés that the companies want to see. Local officials drafted a study to show that 4,566 computer science degrees were awarded in the past five years by colleges within 100 miles of Lebanon [Virginia], including Virginia Tech, Radford University and James Madison University."

But the overriding driver for businesses?

• 'Most companies expect to save 30 to 40 percent on projects done through a process dubbed "onshore outsourcing," or "farmshoring." The average salary for the 300 people CGI-AMS expects to hire in Lebanon, for instance, will be $50,000 -- far above the town's $27,606 average annual wage but about half the salary an advanced software developer in Northern Virginia might earn.'

And while the salaries may be a bit higher than oversees outsourcing options, there are advantages beyond the fact that some government contracts insist on U.S. workers for security purposes. As I've blogged about in the past, a number of studies have found the cost of outsourcing is frequently underestimated. Issues related to time zone separation and cultural differences must be factored in when outsourcing to places like India. Southwest Virginia has a distinct advantage here. Even the spread of corporate culture is easier to handle when workers can rotate in to headquarters for occasional training and team building exercises. Adding this to the list of reasons:

• U.S. citizenship and/or work location may be required for some government contracts
• Cost to overcome time zone and cultural differences is lessened
• Cost for the occasional face-to-face meeting is lower

Then there's the political angle: government wheelers and dealers are helping make these deals even more attractive. In Virginia, Governor Mark Warner would love to boost his approval ratings as he plots a path to run for President,. Similarly in Kentucky, SAIC has expanded in the hometown of Rep. Harold "Hal" Rogers (R), who controls some of the purse strings for homeland security spending. The Economic Development Administration of the U.S. Department of Commerce, sponsors a number of programs with this goal in mind. So add to the list:

• economic incentives

And have you wondered yet, "why Lebanon, VA?" Perhaps it's the '$1.65 million in federal grants that, along with funds from the state's tobacco commission, was used to install fiber-optic cable necessary for tech companies to operate.'

• technical infrastructure

This is where my favorite topics come into play, because without the bandwidth to communicate electronically and transfer large files and databases, distributed work simply won't work. Lebanon branch offices could become a development island, leaving the workforce to react to a constantly shifting govenment contracting environment. An integrated workforce can more easily be tasked to fill in holes across the entire company, enabling long-term economic advantage for the area.

The parting thought: 'Speculation about when a Starbucks will appear is rampant on the streets of Lebanon'.  I'd say as soon as the execs move in!

5:31:37 PM