There are many benefits to nearshoring, and we will discuss some of them in this blog. Nearshoring tends to come up more in supply chain discussions but is also relevant for outsourcing and Staff Augmentation. We will highlight what is nearshoring, what are some of the advantages for staff augmentation and provide some examples. Before we get going, though, we might want to start with some definitions.
Level Set, What is Offshoring, Nearshoring & BPO
Offshoring is the relocation of business processes from one country to another. Offshoring can be manufacturing in a different country. However, it can also be outsourcing specific business functions to an offshore location. Offshoring can sometimes be referred to as labor arbitrage. Nearshoring is the same concept as offshoring, but it is locating roles in an offshore country in closer geographic proximity. Examples include EU companies outsourcing to Eastern Europe or North American companies outsourcing to Latin America. BPO is something else we should define and stands for business process outsourcing. BPO often comes up when discussing outsourcing and offshoring. BPO is the practice of hiring a third party company to do outsourced office tasks. Outsourcing entire departments or sizable portions of departments offshore is considered BPO. Accounting, finance, customer support are leading examples of BPO services.
Advantages of Nearshoring
Cost Reduction – One of the biggest reasons businesses engage in nearshoring is cost reduction. Businesses frequently offshore for the very same reasons. Savings can be as high as 70% less than of the salaries of onshore workers for offshore staff. When you consider that a business can get the same quality of work for dramatically lower costs nearshoring can make a lot of sense.
Expanded Talent Pool
Expansion of the available talent pool is also another reason businesses pursue nearshoring. Expanding the talent pool is also a reason companies will offshore in addition to nearshoring. In markets such as the US, where there is a low unemployment rate, it can be exceedingly difficult to find workers. Employment rates are different all over the world, and often there are more available workers in different regions.
The nature of nearshoring contractual arrangements is another reason companies will nearshore. Nearshoring contracts just like outsourcing contracts, can be very flexible and dynamic. These contracts can be short in period and also easy to adjust up and down. Engagements are also free of local taxes and regulations.
Same or Similar Time Zone
This is an area where nearshoring can demonstrate big benefits. Having workers who are nearshore work the same business hours as those in a home market is a big benefit. This is an area where nearshoring is different than offshoring. Being able to provide workers in nearshore countries coveted 9-5 and Monday thru Friday shifts is also and advantage.
In Person Meeting
Although not required frequently, the ability to meet face to face annually, biannually, quarterly, or as needed is a big benefit to nearshore staff. Visiting nearshore workers in Latin America or the Caribbean for US or Canadian businesses is easy. Likewise visiting workers in Eastern Europe is also easy for UK or EU companies. Much can be done virtually, but there is no replacement for in person contact or the productivity that can be gained with in person focused meetings.
Nearshoring also lends itself to similar cultures working together or at least having an appreciation for one another. Similar work ethic, and similar cultural touch points can pave the way to easier communication and understanding.
Popular nearshore countries for European companies include Hungary, Poland, Baltic states, and up till now Ukraine. Popular nearshore countries for the US and Canada include Argentina, Brazil, Mexico, Colombia, and Chile. Popular nearshore locations for Asia include India, the Philippines, Vietnam, and Indonesia. Many other countries can be considered if the requirements are for BPO, and not necessarily technology or software development. As we have mentioned in other articles, Valenta has opened a BPO service center in Trinidad and Tobago, a country in the Caribbean. We have found a high availability of financial and accounting professionals in this location. We have also found a well educated market for virtual staff that can be trained for specific business functions.
Want to Learn More?
Valenta is a leading provider of outsourced personnel. We provide a variety of back office staff, including accountants, bookkeepers, financial staff, medical billing specialists, medical assistants, software administrators, IT staff, digital marketers, and much more. We also provide a wide range of software developers, big data specialists, data scientists, RPA developers, plus automation and digital transformation specialists. We operate service centers in India, Malaysia, the Philippines, and as mentioned earlier the Caribbean. We are planning new service centers within the next 12 to 18 months in Eastern Europe and Latin America. We are available to discuss your business’s staffing requirements any time. We can support BPO needs, and we can also support your software development requirements. Please reach out to your local Valenta managing partner to discuss available services. Please contact us to Schedule Free Consultation.