Nearshoring vs. offshoring are two different outsourcing solutions for your business, each with pros and cons. Some business owners see nearshore as a more convenient model due to geographical and cultural proximity; others prefer to stick to offshore to reduce costs. The nearshore vs. offshore debate is one you must have within your leadership team to analyze the benefits and the possible risks of implementing each.
Want to discover which option is better for your company? In this guide, you’ll learn the best outsourcing model for your business and the advantages and disadvantages of each.
The nearshore option: what is it and when to use it
Nearshoring is an outsourcing model where companies delegate tasks to a third party nearby. Businesses looking for nearshoring solutions search for top talent in neighboring countries.
To start nearshoring, you must hire a remote dedicated team of professionals to help you fulfill a project or complete processes on an ongoing basis. These are a few examples of nearshore outsourcing:
- A US-based corporation hires a group of IT talents in Colombia to build a website
- A Denmark-based tech company finds a software engineering team in Poland to create software for them
- A Swiss-based business agrees to work with a Ukrainian data analytics team to unlock the potential of their data
How can you know if nearshoring is right for your company? It all depends on your priorities and the services you want to outsource.
If you run an IT business, nearshoring gives you access to a large IT talent pool at your doorstep. Consider nearshore outsourcing in the following cases:
- If you want complete control and real-time monitoring of your business activity
- If you’re looking to build a close relationship with external talents
- If being in similar time zones is necessary, as remote talents and geographical proximity are a priority for your business
Nearshore outsourcing advantages and disadvantages
When discussing nearshore vs. offshore, there are certain aspects you should bear in mind. Read on to discover nearshore outsourcing advantages and disadvantages.
These are the main benefits of nearshoring:
- Fluid communication
- Easy traveling
- Cultural similarities
Business communication will be fast if you find talent in a region in the same time zone as your company. Moreover, conversations will be fluid if you share the same language, or the group of talents has a good level of English.
Do you plan to travel often to visit and have face-to-face meetings with talents abroad? Nearshoring allows you to move in a short space of time to your destination. Remember this when choosing IT outsourcing countries.
Likewise, having cultural similarities with your international team is key to success. When you share common traditions and values, it’s easier to connect professionally and personally with the people you work with.
These are the main risks and disadvantages of nearshoring:
- Small IT talent pool
- More costs, compared to offshoring
- Challenges in maintaining 24/7 support
The first disadvantage is quite obvious. If you limit your recruiting efforts to a particular geographical region, you’re also limiting the number of professionals you can hire. This drawback isn’t significant if your neighboring countries have a rich talent pool to satisfy your needs.
Another disadvantage of nearshoring is that it’s more expensive than other outsourcing models. In comparing offshoring vs. nearshoring, offshoring is often considered cheaper than nearshoring. Despite this, nearshoring is still more affordable than hiring a team in-house.
Companies that run businesses worldwide and offer services in different time zones may have issues with nearshoring. Providing first-class service and constant support to customers in other parts of the world is challenging when you don’t have a team working in those time zones. If you want to meet customer demands in time and provide excellent service globally, nearshoring might not be your best option.
The offshore option: what is it and when to use it
Offshoring means delegating processes to a company or group of professionals in a distant location. When you implement an offshore outsourcing strategy, you hire international talent from around the world, no matter the distance or time zone they’re located.
An example of this is if you’re a New York-based corporation and outsource software development to India, you’re offshoring.
As well as nearshoring, offshoring IT processes is a popular outsourcing model among medium and large-size companies. In 2021, 54 percent of businesses outsourced IT services globally.
Consider offshore outsourcing in the following cases:
- If you can’t find top professionals in your local and regional talent pools
- If you want to reduce costs
- If time zones and geographical proximity aren’t a priority for your business
Offshore outsourcing advantages and disadvantages
To decide on nearshore vs. offshore solutions for your company, first, you need to know the benefits and drawbacks of each. Read on to discover offshore outsourcing advantages and disadvantages.
These are the main benefits of offshoring:
- Unlimited talent pool
- Increased productivity
- Lower operating costs
You can access talent on every continent if you decide to go offshore. You have the chance to outsource processes and tasks, such as mobile app development, across LATAM, Europe, or Asia. This way, you’ll be closer to hiring the perfect candidate to help you reach your business goals.
One of the more significant advantages of offshoring is that production never stops. If you work in different time zones, you ensure that you’ll have a dedicated team of professionals working while you sleep. This results in greater productivity, better results, and 24/7 business support.
Operating costs are at the center of any conversation when considering nearshore vs. offshore. As an owner or c-level executive, you always want to outsource processes to countries with cheap labor and well-educated professionals. With offshoring, you can find top-notch IT talent at lower costs.
These are the main risks and disadvantages of offshoring:
- Communication barriers
- Significant time zone difference
- Inability to make immediate decisions
Communication and language barriers are significant challenges in the nearshore vs. offshore debate. However, these obstacles are more problematic when offshoring than when nearshoring. If you outsource services in a remote country where you don’t share similar cultures and values, communication can be difficult.
The same goes for time zone differences. Let’s say you run a company in Florida, and you want to outsource IT services in the Philippines. There’s a 13-hour difference between locations! Ask yourself if you’re willing to work in different time zones before choosing offshoring as your outsourcing model.
Arguably the most significant disadvantage of offshoring is the inability to make fast decisions in real-time. As a business leader, you may need to wait several hours or a full day to change plans or make project adjustments. Both time zone differences and communication barriers can interfere with decision-making.
Nearshoring vs. offshoring: choose the model that suits your needs most
Nearshore vs. offshore is one of the critical decisions you must take if you decide to outsource processes effectively. Choosing one or another depends on your company’s requirements, the industry you’re in, and your priorities.
Follow the guidelines and recommendations compiled in this article to determine what option is best for your business.
Do you need help to empower innovation across your organization? TEAM International gives you access to some of the world’s best IT outsourcing countries and talents. Contact us and implement a successful outsourcing model for your business today.