— February 1, 2019
Most people use the terms “outsourcing” and “offshoring” interchangeably- in their minds, they are the same thing. However, it’s important to note that outsourcing is actually a much broader term than this, and doesn’t necessarily involve offshore work. Both nearshoring and offshoring offer their own benefits and drawbacks, which need to be understood before you choose between them. In this article, we will explore the similarities and differences between nearshore and offshore, and help you decide which is the right approach for your business.
Firstly, let’s clear the definitions up. “Nearshore” involves an outsourcing vendor which is either located in the customer’s own country, or near to it. For example, a UK company looking to hire a nearshore outsourcing vendor might look to Europe, where there is minimal time zone difference and a high chance that the outsourced workers will have at least some grasp of English. In most cases, there will be a lot of overlap between customer and vendor in terms of laws, standard business practises, language, and so on. On the other hand, “offshore” typically refers to a vendor operating far away from the customer, sometimes even on the other side of the world. As a result, they will be working in different time zones, and their culture, language, and business practises may vary dramatically.
Those definitions imply that nearshoring is the better option, but in truth, things are more complicated than that. When considering the two choices, businesses will need to consider the more subtle differences between them- it’s not just a case of how far away the outsourcing vendor might be from the customer. You need to make a decision between saving money and improving efficiency, since while offshoring provides the former, only nearshoring can deliver the latter.
In general, offshore providers offer a considerably cheaper service than nearshore providers. That’s because they are usually based in developing countries, where they are able to pay their employees a lower hourly wage. In contrast, nearshore providers will charge more, but make up for this with a variety of perks which most offshore providers aren’t able to offer. For instance, communication is easier since both client and vendor will be in similar time zones, and the vendor may be able to offer more advanced resources. When time zones are dramatically different, there might be only a couple of overlapping working hours each day, so when working with offshore outsourcers, careful project planning is key.
Nearshoring offers an extra possibility which offshoring simply can’t- the chance for managers, or even your whole team, to visit the outsourcing vendor to provide some hands-on guidance. This is especially useful when the vendor will be providing specialised work, since it means that any problems can be dealt with quickly. In contrast, you will need to put a lot of faith into offshore outsourcing vendors, since a trip out there could prove to be very expensive, especially at short notice.
Ultimately, your choice of outsourcer will largely depend on your own goals. If you’re only looking to cut costs and deal with simple tasks, then offshoring is certainly a great option. However, you need to understand that these lower costs may mean you have to make compromises such as having less control over the process, and you could well run into communication issues that lead to delays in your project. On the other hand, if you want your outsourcing vendor to be readily available, so that they can work in tandem with your internal IT force, then a reliable nearshore vendor is the way to go. While they are a bit more expensive than offshore vendors, they make up for this with a range of unique benefits, including real-time communications, increased transparency of production processes, and improved availability.