Choosing The Right Outsourcing Type For Your Business: Onshore, Nearshore, and Offshore

If you’ve looked into outsourcing, you’ve probably across terms like onshoring, nearshoring, and offshoring.  What are they?  Read on as we explain the difference between onshore, nearshore, and offshore, and find out which type of outsourcing is right for you.

What Is Onshore Outsourcing?

This type of outsourcing involves hiring a provider located in the same country as you.  This setup is the right one for you if you prefer to work in close proximity with your outsourcing partner.

Advantages

• Avoid Language and Cross-Cultural Communication Issues – This will always be one of the key challenges when you opt for offshore and nearshore outsourcing.  The result of a study by the Outsourcing Center has indicated that poor communication (16%) and cross-cultural problems (9%) are two of the leading causes of outsourcing failures.  You can bypass this issue by choosing to outsource to a partner in the same country.
• Shared Time Zones And Legal Jurisdiction – You can communicate with your onshore team during standard business hours, so you’re unlikely to face problems in terms of team coordination and availability.  You’ll also be working within the same legal jurisdiction, so you should feel safer and secure knowing the legal lay of the land.

Disadvantages

• High Price Tag – When you choose onshore outsourcing, you don’t have to worry about cross-cultural communication barriers and problems that may come up when you’re coordinating across time zones.  However, this type of outsourcing is quite expensive.  In some cases, onshore outsourcing can even be more expensive than hiring locally.
• Limited Talent Pool – Since you and your outsourcing partner are within the same time zones, you’ll only have a limited talent pool to choose from.  This means high competition for qualified people.

 

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What Is Nearshore Outsourcing?

This type of outsourcing involves hiring a provider located in a nearby or bordering country.  If you’re based in the United States, the destinations for nearshore outsourcing will be Canada and Central America.

Advantages

• Time Zone Compatibility – Synchronizing meetings between your in-house team with your outsourced workers shouldn’t be a problem when you choose to do nearshore outsourcing.
• Fewer Cultural Differences – Since you’re working with a provider in the same continental region, you should face fewer issues regarding cultural differences.  And since there are fewer cultural factors to consider, there should better understanding and communication between your in-house and your nearshore teams.
• Lower Costs – Nearshore outsourcing is more affordable than onshore outsourcing because the cost of living in neighboring countries is usually lower.

Disadvantages

• Costs Are Still High – Nearshoring may be more affordable than onshoring, but it is still more expensive than offshoring.  This type of outsourcing is still not an option for companies that are trying to reduce costs to a minimum.
• Fewer Choices – Nearshore providers might not offer the services that you are looking for.  It can also be difficult to find enough candidates with the level of skill you require for your project.

What Is Offshore Outsourcing?

This type of outsourcing involves working with a provider located in another country, including the other side of the globe.  Asia and Eastern Europe are popular areas for offshore outsourcing for businesses based in the United States.

Advantages

• Save Money – Cutting costs may not be the only reason why companies outsource, but it can be a major factor in the decision to do so.  In fact, driving down costs is the number one reason why businesses choose to outsource, according to Deloitte’s 2020 Global Outsourcing Survey.  Since the cost of living is much lower in other parts of the world, especially in Asia, it is relatively easy to negotiate a lower rate with your provider.

“In the recent past, many people in the industry have stated that cost reduction is a secondary benefit behind other objectives, such as increasing agility or improving the quality of service.  This year’s survey shows a sharp increase in the number of organizations giving priority to cost reduction, and in the face of a likely pandemic-induced global recession, this number will get higher,” Deloitte’s Miles Underwood and Mike Stoler said in the 2020 report.

• Global Talent Pool – One of the best things about offshore outsourcing is that you’ll have access to the best talent around the world.  There’s a massive talent pool waiting for you to tap into, and you’re not going to be impeded by geographical restrictions.  If you’re looking for top talent with affordable rates, check out OnlineJobs.ph.  It’s the largest online job board in the Philippines, with over a million resumes.  * Disclosure: The link above is an affiliate link, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.  To find out more about our view on affiliate products, please see this page.
• 24/7 Service – While the time difference may seem like a possible drawback of offshore outsourcing, you can actually take advantage of it.  While it’s true that this can be an issue initially, especially if back-and-forth communication is needed, you can turn this into an advantage once you get things sorted out and establish the ground rules.  With your provider located in a different time zone, you can keep your business running around the clock.  By doing this, you’re putting your business on autopilot, and it can continue to grow while you sleep.

Disadvantages

• Time Zone Difference – This can be a problem initially because communicating with a team that is in a different time zone can be challenging, especially if they are working on a project where back-and-forth emails and calls are required.  Again, there are ways to turn this into an advantage.  And if you’re worried about the potential communication issues that may come up while working with someone on the other side of the world, you can always ask them to work the same office hours as you.  Of course, this won’t be an issue as long as there’s an overlap in working hours for you to set times for communication.
• Language Barrier – If you’re outsourcing parts of your business to workers who cannot speak English fluently or do not speak English as their first language, you will spend considerable time getting your message across.
• Cultural Differences – You have to learn how to cultural bridge the gap because the inability to do so can have dire consequences for your business.

Wrap Up

Hopefully, this article will help you decide which type of outsourcing is the right one for you.  Feel free to drop us a message if you have any more questions on outsourcing.

 

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