Nearshoring or Offshoring: Pros and Cons

Are you considering outsourcing to reduce expenses, increase productivity, and boost overall growth? If yes, the next important decision you need to make is whether to opt for nearshoring or offshoring. Both have their own advantages and disadvantages, and it is crucial to weigh them carefully before making a choice. In this context, let’s explore nearshoring and offshoring pros and cons to help you make an informed decision.

What is nearshoring?

It is an arrangement where the client outsources to a service provider based within the same or nearby region. South America is a popular nearshoring hub for companies in the United States. Likewise, Eastern Europe is a viable nearshore option for European and United Kingdom clients.

Nearshoring has the following advantages:

• Minimal difference in the time zone

The time difference between countries within the same region is bound to be minimal and, therefore, negligible. This means that clients and service providers won’t have to make drastic adjustments to be able to follow each other’s schedules.

• Shared languages

Likewise, neighboring countries tend to have common languages and shared cultural nuances, making communication much more accessible. A shared native language lessens the likelihood of misunderstandings.

• Proximity

If the host country belongs to the same or adjacent region, clients would find it cheaper to make regular trips to their service provider’s site. Airfare would be much less expensive, and travel time would also be shorter. Frequent on-site visits would also make it easier for clients to coordinate and build rapport with the service provider. It would also be convenient for them to fly in and out if an emergency requires their presence.

When considering nearshoring or offshoring options, it’s essential to weigh the pros and cons carefully. Nearshoring in Mexico offers significant advantages, especially for companies in North America. By nearshoring in nearby countries like Mexico, businesses can reduce costs associated with transportation and benefit from similar time zones. This proximity also facilitates long-term collaboration and streamlines the supply chain process.

Additionally, nearshoring in Mexico provides cost savings compared to offshoring to distant locations. With its strategic location and advantages of nearshoring, Mexico has become a preferred destination for companies in the United States looking to optimize their supply chain and achieve sustainable growth.

Offshoring Pros and Cons

On the other hand, offshoring has clients outsourcing to far-off countries in another continent. The time difference could be as significant as seven to 12 hours, depending on the location. Asia is the most prominent outsourcing hub for Western clients. Africa has also emerged as an offshore destination. What are the offshoring pros and cons?

Offshoring benefits include:

• Low costs

Offshoring is a surefire way for clients to cut back on expenses. They enjoy tremendous purchasing power in countries with much weaker currencies than their own. Moreover, the costs of setting up virtual offices in locations like the Philippines only add up to a fraction of what they would spend on an onshore or nearshore establishment. Additionally, service providers in the said Southeast Asian country typically absorb their clients’ overhead expenses.

• English proficiency

Offshore destinations like the Philippines and India are known for their English proficiency. The United States occupied the Philippines, while India was a former British colony, which accounts for their grasp of the language. This enables service providers in the said countries to overcome any potential language barrier issues.

• Flexible schedules

Employees are willing to adjust to the client’s time zone, with many working the night shift and adapting to rotating schedules to meet the account’s business requirements. Likewise, service providers offer incentives through night differentials and other perks to attract employees. Filipino workers prefer the night shift because of the faster, traffic-free commute.

• Expertise

The world’s leading outsourcing companies are in offshore locations like the Philippines, India, and China. The Philippines, in particular, has a thriving and saturated outsourcing industry that drives service providers to offer cost-effective solutions and support packages to remain competitive. Likewise, offshoring allows clients to hire industry veterans and new talent.

Offshoring discourages clients because they presume that the geographical distance, time difference, and cultural barrier will not give them enough control over outsourced processes. However, the Philippine call center is one location that can cover all bases. Its skilled workforce, mastery of the English language, robust outsourcing industry, and cultural affinity for Western countries let clients enjoy all the benefits of offshoring and none of the complications usually associated with it. The government provides a middle ground where clients can have a high yield with fewer business risks.

Now that we have discussed nearshoring and offshoring pros and cons, you can take a look and inquire for free what you can outsource to Magellan Solutions.

Magellan Solutions is one of the Philippines’ top outsourcing providers for SMEs. Contact us today, and let’s see how we can help you improve your business.