In order to leverage the benefits of proximity and the increased control that goes with it, companies are increasingly embracing nearshoring. On other occasions we have already talked about the many reasons why organizations are doing that: costs, quality control, communication and cultural affinity (just to mention some of them).
Now well, when the meaningful, workable and scalable growth can’t be accomplished in-house with a ready and reliable domestic-grown team, and any organization decide to outsource one or more business processes, they always have to figure out which shore meets their needs best. So, a recurring doubts often arises: is the nearshoring really better than offshoring? And what about the remote teams? Let’s talk about pros and risks between each one of them, but first let’s define some terms with a little more clarity.
Outsourcing occurs when a company gives certain project to be completed by a third-party firm. At this point is important to highlight that when a company outsources it doesn’t move its location. Outsourcing gave birth to concepts like offshoring, nearshoring and remote teams, which are explained below.
Benefits of outsourcing
- No significant long term contract needed. - Flexibility to change your partners very easy or to work with multiple partners. - No need to relocate. - Saves you the hassles of hiring in-house professionals. - Reduced costs by taking advantage of a cheaper labor market maintaining the quality. - Benefits from specialized professionals. - Increases focus on the core of your business.
Risks you might want to evaluate
- More often than not, poor communication is a risk between partners. - Lack of deadlines synchronization. It is much easier to control the deadlines when working with an in-house team rather than with a partner half the world away, taking into consideration the time zones also. - Confidentiality. You need to carefully assess what kind of information you’re sharing.
Offshoring, Nearshoring & Remote Teams
Offshoring occurs when a business process is transfer to a completely different geographic location. Nearshoring is very similar to offshoring, with the main difference being that the company has transferred a business process to a closer location. And finally, the remote teams, that can simply refer to an in-house team that works remotely or a completely separate team that works for another company, yet working extremely closely with you on a specific business project.
Benefits of offshoring
- Lower costs. It’s as simple as that. - Global talent pool. You can benefit from skilled professionals able to do the work at the same quality standards, but for lower costs.
Risks you might want to evaluate
- Communication barriers unless you find people in other countries that speak your native language fluently. - Different culture and work habits. Your partners will make the effort of adjusting their schedule according to yours, but you too will need to make some adjustments. - Distance. Visiting your offshoring partners could be pretty hard to do considering the distance, the costs and time spent traveling.
Advantages of nearshoring (in addition to outsourcing)
- Cultural affinity. Neighboring countries often have a similar cultural background, and this always bridges the gap between the outsourcer and the outsourcing partner. - Still cost effective. Today, it is becoming less cost-effective to implement strict offshore services, due to rework that usually exists when the team has no local interaction. - Proximity and same time zone. This allows for less expensive and more frequent face-to-face meetings. On the other hand, similar time zones will get you a fluid communication and a faster problem-solving. - Quality Control. Nearshoring allows more vigilance and increased supervision in day-to-day operations.
The disadvantages of nearshoring
- Higher costs than offshoring. It is possible that contracting a nearshore partner will involve higher costs than an offshore partner. - Fewer providers. Sometimes finding your ideal provider might be quite hard, simply because there are fewer options on the market.
Advantages of a remote team
- Increase trust between companies. When both companies work closely to one another, trust level and efficient communication between them always increases. - Increase in productivity. Good cooperation between the outsourcing company and the provider are crucial to the success of the project. - More control for the client. You can choose the people in your team and you are always aware of the necessary changes.
The disadvantages of a remote team
- Partners might not match. Working very closely on a project, both companies might face some challenges due to different work processes, personalities or other factors. - Partners might not meet. You need to decide how important is it for you to meet and get to know people you work with.
So there you have it – there are many challenges that you have to consider. TISA Software offers nearshoring services in Argentina, combined with Houston based location. To learn more about the advantages of working with TISA Software, please contact us.
About Ariel Sztern
Ariel is a Software Engineer with more than 20 years of experience in Software Development with experience in managing projects in more than 16 countries
Nowadays Ariel is responsible for managing the operation in USA as President of TISA Software LLC.
Beyond his technical knowledge and passion for the technology Ariel enjoys watching the NBA and playing Ping-Pong, he also likes sci-fi movies and was recognized as one of the 40 under 40 by the Houston Business Journal in 2014.