Offshore vs. Nearshore IT-Outsourcing

Companies can choose to meet their IT require­ments by outsourcing these needs to nearshore or offshore locations. Their decision is usually based on several factors, including proximity to the business location, cost compar­isons and language or cultural consid­er­a­tions. For a deep compar­ative analysis of offshore vs. nearshore IT-outsourcing, it is vital to first under­stand the concepts of the terms nearshore and offshore outsourcing.

Offshore Outsourcing

This mainly entails outsourcing IT opera­tions to other organi­za­tions that are located in a foreign country and most likely has different culture and language. However, offshore IT outsourcing offers benefits, such as higher cost saving and the access to highly skilled manpower. Therefore, it works best for the IT functions that are being outsourced for resource, overhead, or cost-intensive purposes and do not require deep collaboration.

Nearshore Outsourcing

With nearshore outsourcing, IT opera­tions are fullfiled by companies in nearby or adjacent countries that have similar language and mentality. Nearshore outsourcing has cost saving advan­tages over offshore outsourcing, primarily due to proximity for frequent site visits, while still retaining a labor pool that is highly skilled. It is ideal for opera­tions or projects that require a high level of real-time cooper­ation on short deadlines because you share a similar time zone.

What are the compar­ative aspects of nearshore and offshore outsourcing?

1. Cost Saving
One of the main reasons for consid­ering outsourcing opera­tions to another company is cost saving. In most cases the labor costs of offshore locations can be far less than in the nearshore locations. On the other hand, companies can use offshore outsourcing for efficient management of other aspects, such as travel costs. However, other companies consider nearshore outsourcing due to other advan­tages, such as easier travel to various nearshore locations and similar business culture. In addition, most companies consider offshore outsourcing mainly due to the depre­ci­ation of currencies in various offshore countries.

2. Execution Speed
Speed of execution largely depends on the complexity of the projects and the company handling it. Other key factors that can affect speed of execution include the ability to under­stand and define require­ments properly and the avail­ability of resources. Due to low labor costs, most offshore companies enjoy greater flexi­bility in acquiring the necessary resources in advance of the scheduled project commencement date. Therefore, they are likely to begin imple­men­tation of the project more quickly than nearshore firms. However, a nearshore company cannot afford to acquire and maintain idle resources. Moreover, they might hire and even train agents for imple­men­tation of a new project. Nearshore companies are more efficient in the defin­ition and collection of require­ments due to the lack of cultural and language barriers. Although offshore companies can also handle such require­ments, they must overcome culture and language barriers.

3. Expertise and Quality
Most of outsourcing companies, whether nearshore or offshore, have an abundance of qualified and experi­enced profes­sionals with specialized expertise. Although cultural and language barriers can impact quality of service, the company can overcome such challenges through quality control and specialization.
This compre­hensive comparison of offshore vs. nearshore IT-outsourcing will help the companies that are contem­plating outsourcing their IT needs offshore or nearshore by baking a decision based on the benefits offered by each option. The choice depends upon the unique goals and needs of the business.