What is Nearshoring vs. Offshoring?
Both nearshoring and offshoring are methods of outsourcing technology services to cut costs and enhance your IT team. However, while nearshoring is a type of outsourcing that collaborates with a technology services partner in a nearby country; Offshoring is just the opposite — outsourcing to a team in a very distant country.
You may be thinking, “What does it matter where the outsourced team is? Either way, the employees are in a different country,” but there are actually many advantages to working with technology service partners in nearby countries — even if you’re communicating mainly through remote work.
Nearshoring vs. Offshoring
Location and Time Zones
One of the most obvious differences between nearshoring and offshoring is geographic locations and differing time zones. Hiring a technology services partner on the other side of the world can make clear, regular communication difficult. If the country where your outsourced team lives is 12 hours ahead, it’s going to be tricky to get each other on the same page to discuss project details, IT issues, and potential solutions causing a breakdown in communication and erode effective management.
In contrast, nearshoring allows all the business stakeholders to work in the same or neighboring time zones. Mexico, for example, falls in the central time, which is why more and more U.S. companies are making the switch to this emerging IT resource. Working with a technology partner in a similar time zone allows for more collaboration and less delays and inefficiencies. Should face-to-face interactions be necessary, it’s much easier and quicker to get to Mexico than to travel around the world to common offshore countries like China or India.
Although countries all over the globe speak English, many companies practicing offshoring have encountered a serious cultural and communication barrier. Working with a team in Latin America typically leads to less communication issues as proximity to the U.S. creates a greater familiarity with the English language, history, and cultural aspects. Sharing similar experiences and having more knowledge about each other’s country and cultures is important as it positively impacts communication and problem solving. Simply put, cultural affinity means a more effective and frustration-free working environment.
Offshoring to developing companies involves risks associated with political instability, less reliable civil infrastructure, less developed legal and regulatory systems, as well as hazards to intellectual property. Mexico offers higher intellectual property security due to the support of the Mexican government as well as the country's increasingly sturdy infrastructure. As the world gets smaller and businesses go global, cultural affinity translates into greater stability and predictability.
Most companies make the choice to outsource some of their IT professional services to reduce spending. Paying a monthly fee to a nearshore or offshore team to complete certain tasks and products is almost always cheaper than hiring one or multiple in-house employees with salaries. This is partially due to the cost of labor outside of the U.S. and partially due to outsourcing business models. However, nearshoring is usually less expensive in the long run because of cultural affinity. Being nearby leads to more effective interactions at a lower cost, which leads to greater productivity. Working with a team on the other side of the world may lead to working overtime, racking up more costs than initially expected and reducing overall productivity.
Level of IT Knowledge
Historically, companies in the U.S. have offshored low wage and low responsibility jobs to cheap labor locations around the globe. However, that trend has changed somewhat dramatically in recent years as more companies rethink their offshoring strategies. Nearshore teams can offer expert level IT consulting knowledge that enhances your team and provides innovative solutions to technology issues.
Mexico’s tech industry has grown three times faster than the global average as more talented professionals enter the workforce. Every year, Mexico graduates over 90,000 students with technology and engineering degrees. Nearshoring allows companies access to skilled teams with relatively close proximity, cost reductions and cultural affinity.
Another reason outsourcing can cut costs is because companies now have access to IT devices, programs and infrastructure that are expensive to purchase and maintain on your premises. When outsourcing, you want to work with a team that has strong telecommunications infrastructure. Nearshoring to a country like Mexico ensures that your remote IT consults team will have easy access to technology tools necessary to communicate with your company and improve your technology services.
Nearshoring is the Future
Outsourcing some of your technology services is a smart idea to help boost productivity, cut costs, and gain access to talented developers and IT experts. However, there is a difference between nearshoring and offshoring — and nearshoring tends to offer the better deal. Easier, more efficient communication, higher levels of productivity, cultural understanding and geographic proximity, and a well-educated workforce make nearshore companies in Latin American countries an excellent option.