Nearshoring Explained

21-4-2015 11:06 | Views: 1401

 

 

For years, offshore outsourcing has been enabling companies to access a vast pool of skilled workforce, regardless of their location. Until a few years ago, the main objective of outsourcing was to lower costs. Today, however, priorities have changed.

While it’s still important for companies to save money, many customers are now asking about location, culture, skills and long term relationships as much as they’re asking about costs.

According to Wikipedia:

“Offshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting”.

“Nearshoring is the transfer of business or IT processes to companies in a nearby country, often sharing a border with your own country, where both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, linguistic, economic, political, or historical linkages. The service work that is being sourced may be a business process or software development.”

 

In other words, offshoring refers to relocating a business process to a foreign country while nearshoring means relocating a business to a foreign country that’s geographically close to your own country.

For example, if your company is located in Germany, you might consider transferring your business IT processes to Bulgaria, Romania or Poland. Not only are these in similar time-zones, but you’ll also be saving money as the costs for IT services are considerably lower in these countries.

Some say that nearshoring is within three hours of flying time while others believe it’s about outsourcing in the same time zone. While there’s no exact distance when defining the concept of “nearshoring”, one thing is clear: the difference between nearshoring and offshoring is proximity, but proximity refers to much more than just “distance”.

 

Proximity is more than distance

Now let’s move on to the main reason why Nearshoring is catching on so fast - proximity.

For your teams to be in sync and deliver the fantastic results you are expecting, they need to speak a common language. That’s why nearshoring will always provide better results than offshoring.

 

Proximity means...

  • Being within easy reach

Personal contact is important, especially when you and your team are dealing with complex problems that are best solved face-to-face. Nearshoring locations are geographically closer to the client, which makes visiting each other easier.

While you probably won’t need to have face-to-face meetings every week, sometimes complex problems may occur and you will need to travel to your teams’ country. You might also work on certain projects that require frequent travelling to both the customer and the provider. Imagine the hassle if you would have to travel across parts of the world to meet with your teams and your clients.

Very short travel distances (1 to 4 hours) and low cost carriers (often less than 100 euro for a return flight within Europe) are two of the main benefits of geographical proximity. Not only will you be saving time and money, but you’ll also be avoiding feeling jet lagged from lengthy trips.

Effective and efficient face-to-face, over-the-phone and email communication is a core step to success when working on an outsourcing project. This means that selecting a supplier in a close-by zone can improve the efficiency of day-to-day information exchange.

 

  • Solving Critical issues fast

 

A small, or even a no time-zone difference makes it possible for the outsourcing partner to work at the same hours as the client or the time gap might be so small that it doesn’t even interfere with the regular business schedule.

A nearshoring company can help deliver a project faster than an offshore company. In software development, close proximity to a service provider and a similar time-zone are huge advantages, especially in the event of a critical issue that needs to be solved in a timely manner.

If you’re dealing with a complex problem that must be resolved quickly, you can’t afford to wait for hours. Nearshoring companies reduce the risk of working with distant foreign companies where you might have to wait for hours for your critical issues to be fixed.

 

  • Sharing Similar Cultural Values and Mindset

 

Cultural differences can create hurdles in a project and can be a constant point of frustration, especially when crossing cultural boundaries.

Nearshoring is also about cultural proximity and sharing a common set of values and mindsets, a similar sense of humour, directness of communications, all of which are important cultural elements of successful interaction. Most often, nearshore teams have a better understanding of the cultural background of their clients compared to offshore teams. This results in a better communication and fewer misinterpretations.

 

  • A Common language

Nearshoring companies often have team members that are proficient in the language of their client, even though their official languages may be different.

With English being the Lingua Franka of businesses worldwide, your nearshore team will probably understand the importance of learning English or another foreign language in order to facilitate the communication and a successful outsourcing.

Many outsourcing contracts fail on communication and cultural differences. By choosing a nearshore outsourcing partner, the risk of failure is greatly diminished.

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