In the digital age, it's not that clear-cut. Warecorp, a Web and software development company, is based in downtown Minneapolis, where its three founders have an office in the old Grain Exchange building. All of its data, including proprietary customer information, is locked in a computer at a Twin Cities data center.
But 50 of Warecorp's 60 employees live in the city of Minsk, Belarus. Minsk, one of the technology centers of the former Soviet Union, is a place where English is a foreign tongue and automobile ownership is a sign of prosperity. There Warecorp workers program software projects over the Internet, using data that never leaves Minnesota.
That arrangement helps Warecorp (the name is based on the word "software") provide customized Web and software development at reduced prices, since Belarus programmers make about a third as much money as their U.S. counterparts.
Is this international outsourcing -- sending would-be U.S. jobs to another country -- or is it a different kind of corporate structure, in which a company's head is in one city and its body is eight time zones away?
Warecorp's founders, CEO Chris Dykstra, Mike Milkovich, the chief technology officer, and Lee Rogas, the chief operating officer, say it's the latter. They say they're running a "virtual corporation" from afar, even though they speak only English and most company workers start out speaking only Belarusian or Russian, though they're required to learn English.
To Dykstra, using foreign labor is both a business strategy and a bit of idealism.
"There's market demand for outsourcing," Dykstra said. "And, if you are a capitalist, you believe those other countries have a right to get on the playing field."
Milkovich argues that seven-year-old Warecorp doesn't fit the profile of an offshore company because its Belarus workers are full-time employees who are closely managed from the United States.
"Offshore companies put together a document, hand it off to a group in another country that doesn't have any cultural connection to the customer or local business knowledge, then wait months to get something back," Milkovich said. "The difference with us, as local folks, is that we're your primary contact. We figure out how to make things in your company work, and then deal with really bright technical people who just happen to be eight hours in time ahead of us."
The three founders monitor the work in Belarus daily via Skype conversations, Facebook, Twitter and cellphones, Milkovich said. When a software project is completed, the three do quality control testing in Minneapolis.
But the "virtual company" has encountered cultural barriers.
"We had to teach them that they could disagree with us," Milkovich said. "That's the American way of dealing with difficult technical problems."
The Warecorp founders say they have more than 30 customers, including eight in the Twin Cities, such as MinuteClinic (since sold to CVS Caremark Corp.) and Internet Broadcasting Systems, which does Web pages for TV stations.
"The key benefit Warecorp gives us is related to the Belarus time zone," said Dave Michela, vice president of strategic initiatives at Internet Broadcasting in St. Paul. "We can drop off tasks, such as creating digital website ads, at the end of our business day, and they're done when we come to work the next day. It's an efficiency play for us because the work is being done in the wee hours of the night."
Warecorp's founders concede that the recession nearly ruined them, but say the privately owned company's revenue is growing and is expected to approach $3 million this year.
"What we bring to the table is depth of business experience, which we blend with the production capacity in Belarus," Dykstra said. "Belarus was the engineering capital of the U.S.S.R., and it still pumps out more engineers than India."
Steve Alexander • 612-673-4553