Outsourcing is the process of getting goods, services, or staff from a third party. You can either go nearshore or offshore when you need to outsource various business processes.
Nearshore outsourcing is hiring employees from nearby countries to yours, often those with whom you share a border.
Offshore outsourcing refers to hiring staff from distant countries, such as the United States, to the Philippines.
Understanding the difference between nearshore vs offshore outsourcing will help you make the best choice for your business. The differences between nearshore and offshore outsourcing include the following:
Proximity
The primary difference between nearshore and offshore outsourcing is the distance.
Nearshore outsourcing is in close proximity to your business, whereas offshore outsourcing involves vast distances.
Getting employees nearby has many advantages, such as the lack of language barriers, which makes communication effective.
Similar cultures also make working together much more manageable than adapting to a new culture.
Being in the same time zone also makes communication straightforward because you can schedule meetings without taking the time difference into account.
Because of the time difference, you and the third party might have to work around each other’s schedules.
Control And Management
Nearshore outsourcing gives businesses more control over their operations than offshore outsourcing.
Management is critical when it is a complex project with many moving parts and stakeholders involved.
Nearshore outsourcing makes travel much more accessible than offshore outsourcing.
Therefore, management can quickly oversee the project, ensuring companies achieve the desired outcome.
Some management decisions are essential and must be made by the main business.
However, offshore outsourcing presents various challenges that can delay the decision-making process.
Face-to-face meetings and real-time collaboration are critical to the success of various projects.
Unless you choose a third party with complete faith, nearshoring presents the best opportunity for optimal management.
Cost
Another critical difference between nearshore and offshore outsourcing is the cost.
Cost reduction is one of the main reasons why companies outsource their business processes.
Offshore outsourcing is often viewed as the cheapest option because of the cheap labor available in various countries.
There are also cheap raw materials for manufacturing concerns due to offshore outsourcing, which can be tremendous money savers.
However, nearshore outsourcing can lead to significant cost reductions too. For example, lower shipping costs than offshore outsourcing can increase business profitability.
Security
A significant difference between nearshore and offshore outsourcing pertains to security.
When firms contract a third party, they automatically put their data at risk by sharing it.
Even with utter trust in the third party’s security protocols, the data is more vulnerable because you will often transfer it across long distances.
Moreover, there are double the security vulnerabilities because two firms have the data.
Security also applies to the movement of physical goods. When you only have to move goods from Mexico to the US, for example, there is less chance of theft than, say, from china.
With nearshore outsourcing, the third party is essentially an extension of the parent company and uses the same security protocols and devices.
Therefore, nearshore outsourcing offers better security and data protection than offshore outsourcing.
There are numerous factors to consider when choosing between nearshore and offshore outsourcing. Understanding the pros and cons of each is the best way to decide.
The above article should give businesses an idea of what to expect. They can hence make an informed decision on the best option to ensure profitability.
