Duluth company keeps outsourcing in U.S.

Two years ago, the owners of Duluth software engineering and consulting company Saturn Systems Inc. announced an "Outsource to America" marketing campaign to attract business.

Two years ago, the owners of Duluth software engineering and consulting company Saturn Systems Inc. announced an "Outsource to America" marketing campaign to attract business.

With the popularity of sending technical work offshore to save money, Saturn Systems wanted to show that it could compete for the business that was sent to India, China and elsewhere by charging 30 percent to 50 percent less than competitors in large cities.

It seemed like a way for Saturn, which had grown in the 1990s and then contracted with the technology slump around 2000, to level out its business while fulfilling the larger goal of keeping jobs in the United States.

Two years after launching Outsource to America, the company's revenue has increased from $1 million a year to almost $2 million. Its work outside the Twin Ports rose from 18 percent of total revenue to 51 percent, Vice President Scott Risdal said.

By aiming the company's marketing message at small and medium-sized businesses, moving a sales representative from Duluth to Minneapolis, being the subject of several business articles and becoming heavily involved in nonprofit consulting firm Minnesota Technology, Saturn has done what it set out to do.


"I think we've got the momentum," Saturn's President Keith Erickson said.

Much of Saturn's business is from the Twin Cities, but "we're starting to get interest from outside of Minnesota," Risdal said. For example, Saturn expects to sign a final contract in late June with a Colorado firm that had outsourced its work to India.

About 28 percent of the company's work takes place in Charleston, S.C., where Saturn opened an office four years ago. But that's not a result of Outsource to America. The company found a market with the U.S. government there and acts mostly as a subcontractor for work from that office. Revenue from Charleston has grown 110 percent in the last two years, said Jim Gustafson, Saturn's CEO.

Saturn aimed its message at smaller businesses because many can't cover the costs of setting up an infrastructure for offshoring.

The company can charge lower fees because the cost of living is lower in Duluth than in large metropolitan areas, Risdal said. People are attracted to the area by the quality of life, he said, noting that he is a University of Minnesota Duluth graduate who grew up in the Twin Cities and lives here because he loves the area. The company's three other partners, Erickson, Mark Chmielewski and Lee Matson, are also UMD graduates.

Originally, the plan was to use undergraduate and graduate interns to help keep fees low, but that idea didn't work out as planned. "We have found ... that the majority of our customers are not overly excited about this approach and show concern that it may affect quality. So we have to carefully choose their [interns'] roles in our projects," Risdal said.

"Regardless, we are still able to deliver rates that are 30-50 percent less than metro rates due to our rural location," he added.

This summer the company will have one returning and one new intern.


At the same time, Saturn is not trying to be all things to all people. "We have to be careful not to do everything," said Erickson, who is the company's president. For example, the company does no networking work or computer building.

"They have learned that through trial and error," said Mark Baron, president of Compudyne in Duluth, a firm that partners with Saturn Systems when a customer needs networking services. The company has an excellent reputation, he said. "Integrity and character are just a couple of reasons we push business their way," Baron said.

One of Saturn's customers is Class 1 in Ocala, Fla., a division of Hale Products. "There are a lot of opportunities for people in our position to outsource work to India," said Brad Busch, vice president of technology. "It's easier to communicate with people who exist in your own time zones."

Saturn developed a software package to configure embedded controllers for equipment such as pumps and lights in fire trucks, ambulances and other emergency vehicles. The systems are sold worldwide.

Since Saturn announced Outsource to America, other companies have picked up on the idea. Some are hybrids that send some work to other countries and do some in the United States. Others do work completely in the United States in rural areas.

Saturn's advantage is the presence of three colleges that provide a steady stream of students and graduates, many of whom want to live in the here, Risdal said.

"Duluth is an extremely desirable place to live," Risdal said.

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