“The growing importance of Latin America in the global outsourcing industry is undeniable. With its proximity to the United States, language skills, tax incentives, and infrastructure, Latin America has emerged as a favorable destination for IT and business process outsourcing.“
(Valencia & Casanova Valencia, 2017)
Do you want your company to increase its utility level? Is it necessary to reduce costs in your company? Outsourcing some part of the supply chain may be the solution to these two questions. Outsourcing is a very used term in this area, however, if you don’t have enough clarity about it, we can define it as a practice in which “one company hires another to perform the daily management or execution of a function” And although the term outsourcing is recognized, the words onshore, nearshore and offshore can be unfamiliar.
Nowadays, these terms are associated with the outsourcing of some part of the value chain of a company. One of the main factors includes taking into account the place in which the company outsources, either within the country of origin (onshore), in a nearshore country or in a country on the other side of the hemisphere. The outsourcing of personnel seeks to improve the efficiency of companies taking into account that it reduces the costs of recruitment, selection, and training among others since they are paid by the contracted company.
Nearshore and offshore are based on the transfer of jobs to other countries, these practices seek to have a management of resources and reduce costs in the company. Relocating human resources to a country with lower labor cost is a saving if we consider other expenses such as social security, health, retirement, licenses among others.
Each of the strategies (onshore, nearshore and offshore) have different characteristics, advantages, and disadvantages. On the one hand, the onshore refers to the transfer of jobs within the country of origin, that is, outsourcing the hiring of personnel to a third party within the country’s borders. Onshore offers advantages such as better accessibility and communication, as well as benefits related to the protection of intellectual property depending on the country. On the other hand, it is the most expensive option of outsourcing. Offshoring prioritizes the reduction of costs by opting to subcontract with companies located in economically more affordable regions, however, the mismatch in the schedule and culture can decrease the level of work efficiency. Finally, the nearshore is a type of outsourcing in which activity is externalized with lower wages than in the country itself to a country with the same or a similar time zone, which is relatively close to the country of origin.
Geographic proximity decreases the costs of transfers and travel time between one country and another in cases where team members are required to meet. Bearing this in mind, although India and China can offer low labor costs, both are several hours away from the United States, and cultural values are completely different, which decreases the efficiency of the joint work with professionals from those countries. While the proximity of Latin America to the United States means few flight hours which allows customers to visit often and feel connected to their service providers. Additionally, it provides a greater level of similarity in cultural values and makes use of a cultural system similar to a Western calendar and Western culture, which increases efficiency levels in the outsourcing strategy.
The main advantages of nearshore outsourcing are:
- You can contact your team during the day and in the same working hours as you.
- You can easily visit your team without the need to travel for days.
- You can take advantage of the cultural similarities that the United States has with Latin America.
Taking into account that the nearshore offers a wide range of benefits at a lower cost it is time to rethink your business model, taking advantage of the trending strategies.
