Offshoring has been many companies’ preferred solution for over 40 years—and it’s easy to see why. It stands to save them big on labor, utilities, and consumable expenses. More importantly, they gain access to a wide talent pool that continuously supplies them with professionals skilled in back office requirements. At some point, however, differences in distance, time, and culture can do more harm than good. Forward-thinking companies can avoid all of these problems by nearshoring instead.
In short, nearshoring is offshoring—just without the long airplane ride. It reaps the benefits of outsourcing while mitigating the cultural and location differences that plague companies doing business with offshore partners. Instead, companies focus on acquiring cheaper (but equally effective) talent from nearby countries.
At its core, nearshoring addresses the gaps in your staffing problems. Rather than sourcing staff from across the world, nearshoring combs nearby areas for the highly qualified professionals you’re after. Though offshoring has served its purpose well over the years, nearshoring offers the modern company a better, more viable outsourcing solution.
The state of today’s technology has progressed to the point that a lot of previously manual tasks are now run by computers. Automation helps car manufacturers and computer chip makers make precision welding and installations that human hands simply cannot replicate. Computers also help manage power plants through the help of sensors, cameras, and other measuring devices. This has lessened the dependency on human management, which is inherently prone to error. A more practical example of automation is the automated tollways that scan passing cars and instantly deduct toll fees from the car owner’s electronic wallets.
It’s important to note, however, that the takeover of automation doesn’t have to force humans out of work. The jobs are simply being transferred to the people who make automation possible. Demand for developers, coders, testers, UI designers, QA testers, and other IT professionals and consultants grew exponentially even as supply couldn’t keep up. This led to companies competing for talent, which sent compensation offers soaring. When small and middle-sized companies couldn’t afford the local talent rates, many began looking at outsourcing as a solution.
Unfortunately, the situation won’t improve as technology continues to. A 2021 Harvey Nash Group Digital Leadership Report disclosed that the gap continues to grow—with 69% of digital leaders saying they can’t keep up with technological changes due to a lack of manpower.
Businesses across the globe recognize this truth and are looking overseas to fill the gap. Here are some of the many advantages of nearshoring:
To reiterate, nearshoring provides the benefits of offshoring without its pitfalls. That results in the following:
While the cost savings might not be as significant as with offshoring, nearshoring makes up for it by eliminating or reducing many incidental offshore costs. That includes reduced travel and transportation expenses, especially since nearshore agencies usually operate from within the region. At the same time, contracting staffing requirements to nearshore companies automatically means lower salaries and fewer added costs.
For jobs that require a manager’s personal touch or consistent face-to-face interactions, nearshoring offers more time and budget-friendly traveling to nearshore team members. That, in turn, means better coordination and more opportunities to align business efforts.
Regional differences between the client company and nearshore agencies are less pronounced compared to an offshore company that’s located halfway across the world. While HR trainers can help address these cultural issues by conducting frequent sensitivity training, the time zone difference remains. Both client and offshore agency need to compromise on how to meet halfway during alignment and reporting matters. Meanwhile, nearshore agencies enjoy the same time zone as their clients, so they share the same official business hours.
Though offshore agencies carry smaller upfront costs, partnering with nearshore ones can lead to better long-term efficiency, as well as faster and higher ROI. Any initial cost advantages enjoyed by offshore agencies erode through frequent communication issues, staff performance issues, and lack of coordination. Meanwhile, the close proximity of nearshore companies means that clients can easily get wind of potential issues and nip them in the bud.
Of course, all of this isn’t to say that nearshoring is always the better back-office outsourcing option. Companies should also consider factors that may apply to their situation but not to others, such as:
The cost difference between offshore and nearshore services largely depends on business location. For example, to avail of nearshoring options, US companies will have to look to Canadian or Mexican agencies. While the cost differences between Canada might be too negligible to consider, Mexico’s lower labor costs make it an attractive option. The same goes for many Latin American countries that also feature a modern internet and transportation infrastructure, as well as an army of qualified technical personnel.
Companies availing of outsourcing services are often subject to local regulations that carry heavy penalties when ignored. Being part of the same region, nearshore companies are often subject to the same guidelines. Even without prompting from the client, regional guidelines require these agencies to comply with these legal and privacy laws. Meanwhile, offshoring companies may have a different perspective on these regional laws and have less incentive to comply. The same applies to intellectual property rights held by clients over specific technology they developed. Offshore companies might not be as vigilant in guarding these trade secrets, knowing they have fewer or no liabilities.
Right now, offshore companies hailing from the eastern hemisphere hold an advantage in managing the talent pool and improving talent retention. Asian countries like India and the Philippines possess a strong IT labor market that can readily supply any and all IT requirements. Meanwhile, nearshore countries are slowly realizing their potential as outsourcing agencies within their region. Today, they’re ramping up efforts to train and develop more local IT professionals.
When it comes to making calls on urgent matters, nearshoring companies hold the advantage. The proximity of location, the time zone non factor, and fewer cultural clashes mean that clients can make more timely decisions. Even when communication systems are down, it’s not farfetched to drive to the nearshore agency to announce updates or plan changes.
As technology continues to evolve, IT consultancy firms will need to adapt alongside it. As a result, many companies unable to cope with the challenges of doing so are eager to pass the torch to IT consultancy firms.
Cue: Growin—the IT consultancy firm specializing in nearshore solutions. From staffing recruitment and career management to program development and turnover, Growin’s team has the skills, knowledge, and tools to help you achieve your business goals.
Learn more about how Growin can help take your company to the next growth stage. Simply visit our site and leave us a message. We’ll get back to you with a winning solution in no time.