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

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What we have seen recently is a trend to move non-critical back-off functions offshore while performing critical projects with nearshore resources. This model has proven to be successful for many companies because it allows them to operate in almost the same mode they have become accustomed to for years. The nearshore operation becomes more like just another office location rather than a separate entity.

Another important component in the nearshoring model that is a key benefit to organizations is the North American Free Trade Agreement (NAFTA). Because nearshoring partners can take advantage of the NAFTA treaty, it is much easier for them to gain access to visas. Plus, NAFTA ensures that intellectual property is protected.

Remember Managers: Question Transparency

How you manage a nearshore partner should be no different from how you manage any vendor. Offshore management plans today are a no-brainer for most companies - they put complex and rigorous processes in place to manage their offshore vendors - but not all put the same level of thought into their nearshore plans. This is largely because the transparency of working with a nearshore partner gives organizations a false sense of security. In many cases, the nearshore partner is transparent to you because they are a subcontractor to your onshore outsourcing partner. It is your responsibility to ask what components of your project the outsourcer is nearshoring and what they are keeping in-house for their own staff.

Companies that directly work with a nearshore partner must still take precautions to ensure protection on every front. The same processes that you put in place to work with an offshore vendor should be translated to the nearshore vendor. Another alternative is to use a trusted, neutral third-party to establish a buffer zone and manage the relationship.

Costs: Infrastructure and Travel Costs Can Add Up

While cost savings may not be as great as offshoring, having your nearshore partner run your essential business operations will nevertheless reduce costs. Certainly, we all realize that travel cost is one way in which companies save, however, in most cases, the more significant area for cost savings is infrastructure costs.

Nearshore centers, like offshore facilities, upgrade their technologies in order to better collaborate with their nearshore partner.³ There may be some nominal expense on the part of the company to integrate with the nearshore facility, but the costs are generally not as great. Furthermore, through our experiences working with nearshore partners, we have seen a technology upswing trend. Most nearshore partners tend to come with a more robust technology offering than offshore partners, thus the need to purchase, enhance or build is less than what may typically be true with an offshore partner. Before you jump into an agreement, understand the infrastructure costs.