Onshore, nearshore, and offshore outsourcing practices each offer unique advantages to different types of enterprises. If you are an entrepreneur, you may wonder which of these outsourcing practices will work best for your business. The answer of course will largely depend on your reasons and objectives for outsourcing segments of your business operations or a separate project to supplement any of your business processes.
Here’s a closer look at onshore, nearshore, and offshore outsourcing to help you determine the best option for your business.
Onshore outsourcing is exactly what the term implies. You outsource your business processes to a vendor that operates within your country. In most cases, the location of the vendor is a non-metropolitan area or any location where the cost of living and wages are lower than a major city. By operating in areas where the general and administrative expenses are low, these vendors can pay their services comparatively lower than if you were to take on the operations in-house.
Advantages: Onshore outsourcing is for businesses who want a high quality output. This type of outsourcing is also for businesses who will be sharing sensitive information such as in the case of product development. Since the vendor is operating within the country, visiting the facility to oversee operations should be cost-effective.
Communicating with the remote team will not pose any problems and there are little to no risks of anything getting lost in translation. Outsourcing to onshore vendors also spares you from issues such as unfamiliar labor, legal, and taxation practices, as well as cultural differences that can have a negative impact on your operations.
With nearshore outsourcing, you move your business operations to a remote team in a nearby country. The close proximity of the vendor will likely make cultural, legal or language differences minimal. Visiting the facility to oversee and manage the remote team will still be relatively affordable. An example of this practice is a US-based business outsourcing its operations to a vendor in Mexico.
Advantages. Apart from those already mentioned, nearshore outsourcing should be more cost-effective. Depending on the currency exchange rate, you may also be able to get more work done.
When it comes to cost-effectiveness, offshore outsourcing easily lords it over the two other outsourcing practices. Since established offshore vendors are located in areas where the cost of labor and taxes are low, the vendors can offer their services at very low rates.
Advantages. Offshore vendors usually boast of workers with highly specialized skill sets that are at par or even better than their onshore counterparts. Most offshore vendors also offer 24/7 services that are still at a fraction of what you’ll invest if your operations were in-house or onshore.