Opinion

Is Nearshoring A Real Alternative to Offshoring?

Blackwell Consulting says nearshoring is a viable alternative to companies that want to outsource but pefer not to send work overseas.

By No Analyst or Consultant

March 22, 2005 — CSO —

By Alex Bell,
Vice President;
Diego Ferrer,
Executive Vice President;
Darwin John, Advisor;
all of Blackwell Consulting Services

As companies struggle to compete in today's global economy, offshoring work to other countries has emerged as a valid alternative in reducing the costs for crucial business operations. More than 75 percent of businesses are using offshoring companies to perform vital business functions¹ call centers, back-office operations and other strategic business operations, to name a few-to stay competitive and run efficiently. Such countries have the talent that companies desire: government-sponsored workers; Capability Maturity Model (CMM) level 5 certification; and low pay rates.

Over the past several years, offshoring has become the mantra for cost reduction. Despite all the talk about security concerns including political instability, language and culture barriers, legal difficulties and intellectual property rights protection among others, companies continue to move large components of their business offshore. And, although offshoring received a lot of scrutiny and criticism in the early stages, it has proven to be beneficial for companies that have embraced it. Increasingly, another cost-reducing alternative showing its strength is nearshoring.

How Nearshoring Can Help

With nearshoring, organizations have the benefit of outsourcing operations offsite, but in a way that is convenient physically, culturally, managerially and financially to the overall business. This has become a viable solution for many companies because "nearshore country locations offer the advantage of similar time zones, ease of travel and potentially greater control due to familiarity or physical and cultural proximity to the customer."² Areas such as Canada, Mexico and South America are becoming hotbeds for nearshoring. While offshoring is still a very popular option with companies, organizations that want to hedge their bets and curb the inherent risks of offshoring have an option closer to home.

More Than Just Proximity: Time Zone & Travel for Close Collaboration

For some companies, one of the attractions of offshoring is the round-the-clock factor derived from being in disparate time zones. The flip side of this is there is little to no opportunity for businesses to work collaboratively with their offshore partner due to the time difference.

With nearshoring, the benefit of proximity is more than just working in the same, or close, time zone. For small projects that require close interaction with the company and its outsourcing partner, nearshoring is an excellent solution with less expensive travel costs and shortened travel time as an added benefit. Furthermore, the complexity of managing security and crisis issues is lessened with closer proximity. Another benefit of nearshoring proximity is the ability to build trusted relationships with decreased risk of linguistic or cultural misunderstandings.