In the 16th century, members of the Northern Ute tribe were the first Native Americans to acquire horses from Spaniards. Their embrace of what at the time was advanced technology in the New World changed their lives, making Northern Utes mobile and far more prosperous. That heritage of open-mindedness has served them well. Today, that same tribe is in the vanguard of a budding wave of tribal technology-outsourcing businesses popping up on reservations across the Western U.S.
Seeking to augment scant employment opportunities for the tribe and build tech savvy, Northern Ute elders paid cable companies to install hundreds of miles of high-speed optical cable through the mountainous terrain of the 4.5 million-acre Uintah and Ouray Reservation located 150 miles east of Salt Lake City in Utah.
That cable has proved an economic lifeline for Sonny Van. A 20-year-old high school graduate, Van's job options until recently were limited to chopping wood or changing oil at a Wal-Mart 24 miles away for $7 an hour. Today, he works as a $9-per-hour technical-support specialist and maintains computers for Uinta River Technology (URT), a technology-outsourcing startup with $2.3 million in seed capital from legal settlements recently won by the tribe.
MUSIC TO TRIBAL EARS. Launched in March, 2001, URT employs 25 tribe members for data-entry and scanning work smack in the middle of the reservation, or the rez, as the locals call it. "We never thought technology would make it here," Van says, still half-disbelieving.
High tech could strongly influence the future of this tribe, which suffers unemployment rates of 65% or more and per capita incomes far below the median in this prosperous, Mormon-dominated state. Already, URT has grabbed a contract for scanning airplane drawings onto CD-ROMs for Utah's Hill Air Force Base.
That contract is the mainstay in what the tribe expects will be $280,000 in gross revenues this year. More orders will be coming, and URT's sales are expected to grow 890%, to $2.5 million in 2002, says Carey Wold, the company's general manager. URT hopes to grow fourfold, to 100 employees, by the end of the year, he adds. That's music to the ears of the tribal members. "With information-management work, there are no boundaries," says Wold. "The walls [around the reservations] have come down. With technology, [Native Americans] have more choices. They are empowered."
GOOD TIMING. Wold manages just one of a growing handful of Native American IT outsourcing companies that are making startup splashes despite the economic troubles in the high-tech sector and the U.S. economy as a whole. Another, Lakota Technologies (Lakota means allies or friends), owned by South Dakota's Cheyenne River Sioux Tribe, hopes to increase its staff from 20 workers to 114 within the next few months and turn profitable next year, says general manager J.D. Williams, who is Native American.
Tribes have established at least four IT outsourcing companies in the past few years. They're small and provide services ranging from software consulting and data entry to servicing call centers. And their timing is excellent. Declining sales and profits have forced many companies to outsource labor-intensive tasks to cut costs. Native American IT outsourcers undercut domestic competitors by as much as 50% in terms of price.
Pakistani and Indian IT outsourcers are cheaper still, but security worries in those countries and across South Asia now preclude many U.S. businesses from sending their documents to these more volatile places.
THE RIGHT SECTOR. Lakota, URT, and others have significant sector momentum in their favor: 2001 was the best year ever in outsourcing services' history, says Howard Lackow, director of outsourcing services at the Outsourcing Institute (OI). Global outsourcing sales hit $400 billion in 2000, a number it will easily top in 2001. And the IT portion is outpacing other types: According to OI and Dun & Bradstreet, IT outsourcing will grow 18% annually, from $56 billion in 2000 to $100 billion in 2005. That compares with a 15% growth rate for the entire sector.
So far, tribal businesses account for only a tiny slice of that pie. But it could change. "Tribal IT outsourcing has been a well-kept secret," says Lackow. "[But now,] I see more companies looking at it." Aside from price, the feel-good factor is huge when a company pays Native Americans for IT work. Further, tribal employees feel a strong affinity for their land, so they present a relatively stable workforce that won't leave once trained. That also makes the logistics of laying off workers during slow times and rehiring them when needed much simpler.
Customers testify to the Native Americans' quality of work. The National Library of Medicine in Bethesda, Md., contracted with Lakota to keep its documents in the country. The library gets its funding from taxes, and these tax dollars should be spent locally, says Donald Lindberg, the library director.
"EXCELLENT JOB." Lakota employees created a database of citations of hundreds of thousands of medical records published in the 1950s and early 1960s. That data is crucial now, during the anthrax scare, as much of the research on drug resistance to anthrax and smallpox was published at that time and is now available only in a print form, Lindberg explains. And Lakota "has done an excellent job," he says.
Hill AFB, too, has been happy with URT's work scanning 100,000 old engineering drawings onto CD-ROMs. The airbase needs the digital images because it still supports all types of planes, such as the old B-52 heavy bombers made in the 1950s. The database will make scavenging for parts easier, since the airbase will simply be able to e-mail images to contractors instead of searching for and mailing out photocopies.
Hill picked URT because the tribal business offered the best rates, says Brent Bradbury, director of small business at the airbase. The tribe will do the work over two years for $365,065 -- significantly less than other companies in the U.S. would have charged. The slim price tag on Native American IT work is in part due to the lower wages paid on the rez.
MAJOR MENTORS. Through federal programs to encourage technology businesses in depressed rural areas, the tribal companies have received counsel and assistance from heavy-hitting mentors such as software giant Oracle (ORCL) and IT outsourcer Affiliated Computer Services (ACS). They provide training and occasional business advice to URT.
The relationship is a two-way street. For Oracle, the partnership with URT opens another retailing channel, says Virginia Callahan, senior-practice director at Oracle's government-business division. URT employees provide consulting services and resell Oracle's software to state and local governments that are required to give special preference to small and minority-owned businesses. That usually tends to shut out giants like Oracle, which relies heavily on government business. Oracle's government sales constitute the largest portion of its database-licensing revenues, says Callahan.
The mentoring and government support are crucial, since Native Americans often lack experience in building businesses. They have the lowest number of entrepreneurs of any minority group, says Diane Garsombke, co-author of a study on American Indian entrepreneurs and the dean of the School of Business & Mass Communication at Brenau University in Gainesville, Ga. That comes from the lack of enough schooling and a long history of poverty, she says.
"THIRD WORLD." Per-capita annual income at U.S. Indian reservations averages $4,478 a year, vs. $14,420 elsewhere in the country. The 1995 Census found that 53% of American Indians' homes did not have a phone. By contrast, only 9% of homes in rural areas didn't have phones. Until a few years ago, only a few rez residents knew how to use computers. "Reservations are almost like Third World countries," says Lakota's Williams. "We've been in a downturn since we've been on the reservation."
The Net has given them hope, however. Take the Cheyenne River Sioux tribe, which years ago paid for 300 miles of high-capacity data cable to be laid in populated portions of the reservation. The tribe bought the special equipment needed for high-speed Internet access. Tribal Chairman Gregg Bourland began taking Webmaster and computer-assembly classes at a local college. He created the tribe's Web page (www.sioux.org) before he and Williams got Lakota Technologies going in 1998.
The company now offers average wages for technicians of $15 to $18 an hour. Data processors average more than $9 an hour. Competition for such jobs is fierce. At URT, whenever a position opens, up to 75 people apply, says Wold. "These are the jobs that are going to be able to feed families," says Bourland.
If all goes well, the jobs could do more than that. OI's Lackow thinks tribal companies will move quickly to expand their core business beyond simple IT services such as data entry. As their members' skills increase, the tribes could easily become systems-integration specialists or even software-coding houses. Says Lackow: "It's just a matter of time." For tribes such as the Northern Utes and the Cheyenne River Sioux, time may finally be on their side. By Olga Kharif in Portland, Ore.