Nearshore vs. Offshore

Jul 02, 2019

Outsourcing

 

Q:What are the market drivers that have led to the IT outsourcing boom?

Over the past decade, IT operational spending has been on the rise, accounting for an increasing share of overhead costs and dramatically affecting the bottom-line of medium to large companies. As IT budgets come under pressure and new technologies are introduced, IT-centric organizations are turning to service providers, both onshore and offshore. In some cases, needs are short-term and tactical. In other cases, needs are long-term and mission critical to the success of the enterprise.

Outsourcing enables an organization to augment in-house capabilities without making long-term commitments or large capital investments. In other cases, the decision to outsource is strategic and follows a careful analysis that indicates service levels can be improved or costs reduced, by relying on a partner's expertise.

Whether tactical or strategic, the research shows that organizations most frequently engage in partial outsourcing to realize significant cost savings.

 

Q:What are the specific benefits to outsourcing?

IT executives need to continually evaluate the potential of outsourcing to help meet their organizations' tactical and strategic objectives.

The reasons for outsourcing, like the range of services that can be outsourced, are evolving. Organizations turn to outsourcing to:

 

Q:Is U.S. information technology outsourcing growing or on the decline?

2012 was a slow year for outsourcing; total global offshoring industry revenue grew between 20 and 30 percent, amounting to roughly USD 350-400 billion.

2013 IT outsourcing budgets rose approximately 23%. 66% of U.S. firms outsource all or a portion of their application development. 33% of firms have increased the percentage of work outsourced over the previous year in 2012. Mexico’s outsourcing industry is growing approximately 10% to 15% each year, amounting to roughly USD $13 billion in 2013.

 

Q:Why is nearshoring replacing offshoring?

Over the past decade, IT operational spending has been on the rise, accounting for an increasing share of overhead costs and dramatically affecting the bottom-line of medium to large companies. As IT budgets come under pressure and new technologies are introduced, IT-centric organizations are turning to service providers, both onshore and offshore. In some cases, needs are short-term and tactical. In other cases, needs are long-term and mission critical to the success of the enterprise.

Outsourcing enables an organization to augment in-house capabilities without making long-term commitments or large capital investments. In other cases, the decision to outsource is strategic and follows a careful analysis that indicates service levels can be improved or costs reduced, by relying on a partner's expertise.

Whether tactical or strategic, the research shows that organizations most frequently engage in partial outsourcing to realize significant cost savings.

  • Reduce costs
  • Improve operational flexibility
  • Increase service levels
  • Reduce management overhead
  • Rapidly deploy new capabilities

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