Nearshore vs Offshore vs Onshore: What's The Difference
Outsourcing some of your business processes can be extremely overwhelming. When you begin your search you will notice that there are dozens of different options for you to explore. There are nearshore, offshore and onshore options, and for someone that is just starting out, it can get a bit confusing. However, there is no need to worry yourself about the process!
Outsourcing is becoming increasingly popular for the benefits like lower cost, access to skilled professionals and the ability to scale your business. If you don’t make the right choice though, it could end up costing a lot of time, stress and your hard earned money.
Some of the most common services that are outsourced are:
- IT-related functions
- Customer service/call center
- Web/software development
- Graphic design
- Manufacturing
- Back office support, including data entry
- Accounting
Nearshore, offshore, onshore – Quick rundown:
Nearshore means outsourcing to countries located in your area, at least with similar time zones. For example, Mexico would be a nearshore location for the United States.
Offshore means outsourcing to a country that is far-away with significant time zone differences. For example, the Philippines would be an offshore location for the United States.
Onshore means outsourcing to a company that is located in the same country.
There’s very distinctive differences between the three and each has unique benefits and disadvantages which could make it difficult for one to choose which one to go with.
Nearshore Outsourcing
Nearshore refers to contracting a company that is near your country, typically in the same time zone or close to it, to handle certain tasks for your business. The only real difference between nearshore and offshore is the geographical proximity between the two businesses. With nearshore you are able to quickly travel to visit your outsourcing team which makes communication easier and gives you the ability to have more frequent in-person meetings with them.
Nearshore offers the convenience of working with a company in a similar time zone so you don’t have the huge time differences like you would when working with an offshore company. Nearshore offers more of a cost savings than onshore. However, nearshore doesn’t offer as competitive pricing as offshore. Additional cost savings may come from less travel costs if you are going to visit them but that’s about it.
Nearshore outsourcing rates could run as low as $40 per hour.
Outsourcing
Offshore outsourcing refers to contracting a company in a county that is very far from you with big time differences. Some of the common countries that are used for contracting offshore work are India, Philippines, China and Ukraine. There are both big benefits and disadvantages for offshore outsourcing.
One of the biggest benefits to offshoring your work is the significant cost savings. With most businesses always looking at ways to cut costs and increase their bottom line, offshoring is what an increasing number of companies are turning to. You are able to get access to skilled professionals to complete your work for a fraction of the cost without sacrificing quality.
One of the drawbacks to offshore outsourcing is the possible communication problems with the big time differences as well as language barriers. When you have a 10+ hour time zone difference it could be difficult for scheduling meetings and being able to communicate when you want and need.
The language barrier could also be a huge problem if the trained professionals you work with are not fluent in English it will be difficult for you to communicate with them and for them to really understand your needs. There are countries, for example the Philippines, where English is fluently spoken and they also have similar cultures as in the United States. When you are able to easily communicate with your team it helps foster a great working relationship with successful output of products and services.
Another benefit to offshore outsourcing is they typically have the skilled experts already on staff that could get your project started right away. A lot of times you wouldn’t be able to otherwise afford the talent if you tried to hire onshore. So you have access to top notch experts at an affordable rate.
Offshore rates could run as low as $20 per hour.
Onshore Outsourcing
Onshore outsourcing is hiring a company in your same country to perform certain business processes for you. The benefit to onshoring is you are working with a company close to your office so you could quickly go visit when needed. They are fluent in English and in the same time zone or just within a few hours so communication is easy.
The downside to onshore outsourcing is it costs significantly more to get the same tasks done as it would if you nearshore or offshore outsourced the project. Onshore companies may not always have the skilled professional you need on staff for a particular task so they will need to take the time to hire one which means a delay in getting your project started. The reason is if they are not handling a project at that time they cannot afford to pay the high salaries during the downtime.
Onshore rates could run $100 an hour or more!
Choosing the best option
Nearshore, offshore, or onshore, what is the best choice for your business? It could be a challenge to find the right fit for your business and needs. So you will really want to take a look at exactly what your needs are and what’s most important to you. If saving money is what is most important to you then offshoring will be your best option. If convenience is what is most important to you then onshoring may be your best option. Take a hard look at the options, benefits and disadvantages and decide what is most important for your business.
More importantly is choosing the right company. There are companies nearshore, offshore and onshore that are great providers and some that are poor providers so it’s vital to ensure you hire an excellent provider. The right provider will save you a lot of time, stress and more importantly money. Hire a company that has a great culture, values and the expertise on staff that you need. Communication is so important when working with an outsourcing company so make sure you are able to easily communicate with them.
Hiring a company that has the willingness and ability to be flexible and customize their services to fit your needs will be a huge benefit when you have special projects that come up that you want to outsource rather than handle in-house. Typically, tasks that are tedious and time consuming are the ones you most likely will want to outsource.
The outsourcing industry is growing rapidly and is expected to continue. Now is an excellent time to find an awesome company to hire for your outsourcing work and grow a great working relationship with them so they will be your go-to when projects come up. They will know your business and how you operate so could quickly tackle new tasks for you.
Stats on outsourcing:
- The IT outsourcing market is expected to reach 397.6 billion worldwide by 2025.
- 78% of businesses nationwide feel optimistic about their outsourcing partners.
- 71% of financial services companies outsource or offshore some of their services.
- Nearly 54% of all companies use third-party support teams to connect with customers.
Sum it up
There are many options for outsourcing some of your business processes. Choosing the right option is based on your needs and what is most important to you. The right fit for your business will be one that could successfully perform the tasks needed but also one that you could easily communicate with. When you find the right fit you will know it as they will feel like part of your team, your go-to to help you with your business processes. They will also already have the skilled experts on staff, the technology needed and the infrastructure to start your projects right away.
If saving money is high on your priority list, offshoring will be your best bet and you could use the money you will save to invest back into your business. The additional savings you could use towards funding projects you have stored in the pipeline, product development or increased marketing efforts to scale your business. When you interview with a company be sure to take note of their interest level in your business, goals and needs as well as how easy it is to communicate with them.
Ready to outsource some of your business processes to scale your business? Contact Awesome CX today and we will show you how awesome we are!
Sources:
https://fortunly.com/statistics/outsourcing-statistics/#gref