Nearshore IT Outsourcing
In recent years, it has become less and less necessary for companies to have all their employees under one roof. Some alternatives for IT jobs include offshore outsourcing, assigning employees to work from home, insourcing, and nearshore IT outsourcing, also called “nearshoring.” Nearshoring involves sending information technology work to a foreign country that is relatively close to the home base of the company outsourcing the work.
Reasons to Nearshore IT Services
Companies may decide to nearshore some of their IT work because they want to cut costs, and nearshoring enables this by sending work to another country where workers will generally be paid lower wages.
However, unlike offshore IT outsourcing, which involves sending IT work to an overseas location that is much further away (e.g., work from U.S. companies being sent to India), nearshoring (e.g., sending work from the U.S. to Canada) offers the following benefits:
- fewer time zone differences;
- geographical proximity;
- more cultural and/or language similarities.
These conditions may be crucial to a company that is outsourcing a complex IT project and requires a lot of ongoing communication between its internal team and the nearshore team it is working with, or frequent travel to the nearshore destination.
Usually, workers in nearshore companies will be more highly trained than those in the ubiquitous sourcing companies in places like India, China, and Malaysia (which remain the top three IT outsourcing destinations worldwide). It’s also more likely that the workers will be awake and alert if they aren’t being made to work in the middle of the night to fit another country’s hours of business.
Examples of Popular Nearshore Locations
U.S. companies have been known to nearshore IT work to Canada as well as Mexico and other Latin American countries. Similarly, companies in Western Europe may choose to nearshore work to Eastern European countries such as Ukraine or Bulgaria.
When It Is Not a Good Idea to Nearshore
Any company considering nearshore outsourcing should first spend some time weighing the logistics, as in the long run, it may not always be cheaper to nearshore. Especially if the nearshore company is in a developed country, the costs of hiring the workers may not be significantly lower.
Also, there may be time costs to consider: will the nearshore company operate independently, or will in-house company employees need to pitch in and provide guidance and resources? Will travel between the locations be required, and if so, how often?
It’s much easier for project confusion to happen when the boss and workers are on different sides of a border. Due to this, neither offshoring nor nearshoring is typically a good idea for complicated projects or tasks that need a great deal of direction and oversight from the hiring company. It’s better reserved for simpler day-to-day operations like developing, help desks, analytics, etc.
Nearshoring can certainly be of benefit to companies, as long as it’s used wisely. It can allow them to take on more work, assigning their in-house team the important projects while getting a cheaper deal on more tedious tasks. It’s definitely a leg up on full-scale offshoring, which almost always comes with the sacrifice of quality. When choosing a nearshore location, companies should research the country’s laws, the level of intellectual property security, and the nearshore company’s level of employee training.
Note: this article has since been modified by Laurence Bradford.