Offshoring and nearshoring: two sides of the same coin?

Javier Minsky
Posted by Javier Minsky on Aug 20, 2020 4:00:00 PM

The last few decades have seen an increase in the number of companies that choose to outsource some of their projects. However, what are the alternatives to do so? Are offshoring and nearshoring the same thing?

 

Let’s say you are looking to start a new and ambitious software project and need to decide how to go about it. When looking at figures and options, you conclude that the best way to go is to outsource the job to a more qualified company that can carry out the project on their own, or even integrate their staff remotely to your team members, so that you can work together.

 

However, once that is decided, there is a question remaining: offshoring or nearshoring? Are they the same thing? Do they bring the same results? The key difference between the two is, as you can infer, the distance between the hiring and the hired company. Here we will take a closer look at both, with their pros and cons.

 

Let’s start with offshoring: it is the most traditional and well-known way of software outsourcing operations to other companies, which are located in a different country. Some of the most popular offshoring destinations are: China, India, Poland or Romania. They provide software development services with considerably competitive prices, although quality may not always be the best. Offshoring to the Asian continent may mean that, while you are sleeping, there is a team working in your project. So, in a way, you have staff working for you around the clock.

 

Nevertheless, this practice also has some problems. The above mentioned offshoring destinations are quite far, meaning that face-to-face meetings would be a very rare event. Also, if you need to hold meetings that include all team members, it may be difficult to find a time that is suitable for all (and when everyone is fully awake). All this can result in a lack of control of what is being done, feeling that you are working with people you barely know and who barely know you.

 

Your other option is nearshoring, who we could call “a close cousin to offshoring”. The principle remains the same: outsourcing IT services to a software company outside the country. However, in this case, the company is located much closer to the hiring company. One popular nearshoring destination nowadays for North American companies is Latin America -with Brazil, Argentina, and Colombia leading the way.

 

Nearshoring has some benefits over offshoring: teams usually share a timezone, so they can work simultaneously, being able to deal with urgent matters without delays. Team members from the outsourced company can take part in all meetings and work “as if” they were located in the company headquarters. It is also easier (and faster) to meet in person, should that be necessary. Communication tends to be more straightforward and fluid, with staff sharing a common language or having a high proficiency in English.

 

The downside of nearshoring, historically, has been the limited amount of companies that can provide high quality IT services, compared to the offer in Asia. These days, however, the number of qualified and experienced companies in Latin America has increased significantly, so that even some industry giants have moved their software development operations to the region.

 

So, it is important to study the different options, costs and characteristics of each service in order to reach a final decision. It is also helpful to interview prospective suppliers and check their previous work and references. Has this company completed successful projects in the past? Do the clients recommend it? Has it worked with North American companies before? All these questions and a conscious evaluation will definitely help you choose the best path.

 

Topics: Nearshoring

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