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India Off Limits? Offshore to Puerto Rico

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By David Perera March 21, 2007

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Economic development officials from the Caribbean island and U.S. territory of Puerto Rico are in Washington, D.C., promoting their island as an information technology outsourcing haven for federal IT work.

Puerto Rican officials hope to take advantage of restrictions that prevent government agencies from outsourcing to popular -- and money saving -- offshoring venues India and other Far East countries. Exporting and citizenship requirements do not allow federal agencies and contractors to outsource to any company based outside the United States. But federal agencies and contractors can outsource to Puerto Rico, whose inhabitants have been U.S. citizens since 1917 and has commonwealth status, according to Boris Jaskille, executive director of the Puerto Rico Industrial Development Company (a commonwealth entity). Puerto Rico's low labor and tax rates, combined with an educated workforce, make it an attractive outsourcing destination, Jaskille says.

Puerto Rican companies have conducted business with the U.S. government, mostly in manufacturing military clothing. But the federal IT business would be a new one for the commonwealth, one they’ve only just decided to start chasing. Last year, after an internal reorganization of its economic development organization, Puerto Rico officials decided to pitch its IT outsourcing business.

Island officials believe they can compete in software development, network management and help desk services, says Marcos Polanco, PRIDCO’s director of information and communication technologies. Puerto Rico's costs for those services are about 30 to 40 percent lower than what U.S.-based firms charge, Polanco says.

PRIDCO officials say the University of Puerto Rico system is a source of local talent and they have a business-friendly environment.

Would you as a government manager or contractor consider offshoring IT work to Puerto Rico? Why or why not?

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