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.