Nearshoring or Offshoring? The Pros and Cons

Nearshoring or Offshoring? The Pros and Cons

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Outsourcing is a cost-efficient arrangement that lets clients transfer business processes to a service provider. Numerous benefits include scaled-down expenses, higher profit margins, increased productivity and overall growth. It gives clients access to a pool of skilled and experienced employees whom they might not be able to tap onshore. Outsourcing also helps them mitigate risks while expanding their operations.

However, there are clients who remain undecided as to where they should outsource. As a global industry, outsourcing presents them with a wide range of options regarding business models, project size and support packages. But perhaps the most crucial decision a client needs to make when outsourcing has to do with location. Hubs like the Philippines, India and Brazil are only some of the destinations to choose from. Location will determine the language that virtual employees will most likely be familiar with, along with the client’s purchasing power with the host country’s currency. It comes down to two choices: nearshoring and offshoring.


What is nearshoring?

It is an arrangement where the client outsources to a service provider based within the same or nearby region. South America is a popular nearshoring hub for companies in the United States. Likewise, Eastern Europe is a viable nearshore option for clients in Europe and the United Kingdom.

Nearshoring has the following advantages:

• Minimal difference in time zone
The time difference between countries within the same region is bound to be minimal and therefore negligible. This means that clients and service providers won’t have to make drastic adjustments to be able to follow each other’s schedules.

• Shared languages
Likewise, neighboring countries tend to have common languages and shared cultural nuances that will make communication much easier. A shared native language lessens the likelihood of misunderstandings.

• Proximity
It would be cheaper for clients to make regular trips to their service provider’s site if the host country belongs to the same or adjacent region. Air fare would be a lot less expensive and the travel time would also be shorter. Frequent on-site visits make it easier for clients to coordinate and build rapport with the service provider. It would also be convenient for them to fly in and out if there’s an emergency that requires their presence.


What is Offshoring?

Offshoring, on the other hand, has clients outsourcing to far off countries in another continent. The time difference could be as great as seven to 12 hours, depending on the location. Asia is the largest outsourcing hub for Western clients. Africa has also emerged as an offshore destination.

Offshoring benefits include:

• Low costs
Offshoring is a sure fire way for clients to cut back on expenses. They enjoy tremendous purchasing power in countries whose currencies are much weaker than their own. Moreover, the costs of setting up virtual offices in locations like the Philippines only add up to a fraction of what they would spend on an onshore or nearshore establishment. Additionally, service providers in the said South east Asian country typically absorb their clients’ overhead expenses.

• English proficiency
Offshore destinations like the Philippines and India are known for their English proficiency. The Philippines was occupied by the United States, while India was a former British colony, which accounts for their grasp of the language. This enables service providers in the said countries overcome any potential issues with the language barrier.

• Flexible schedules
Employees are willing to adjust to the client’s time zone, with many of them working the night shift and adapting to rotating schedules to be able to meet the account’s business requirements. Likewise, service providers offer incentives in the form of night differentials and other perks to attract employees. Filipino workers also prefer the night shift because of the faster, traffic-free commute.

• Expertise
The world’s leading outsourcing companies can be found in offshore locations like the Philippines, India and China. The Philippines, in particular, has a thriving and saturated outsourcing industry that drives service providers to offer cost-effective solutions and support packages in order to remain competitive. Likewise, offshoring gives clients the chance to hire industry veterans and new talent.

Offshoring discourages clients because they presume that the geographical distance, time difference and cultural barrier will not give them enough control over outsourced processes. However, the Philippines is one location that can cover all bases. Its skilled workforce, mastery of the English language, robust outsourcing industry and cultural affinity for Western countries lets clients enjoy all the benefits of offshoring and none of the complications that are usually associated with it. The country provides a middle ground where clients can have a high yield with fewer business risks.

To know more about the Philippine call center and BPO sector, visit this page.