Outsourcing as a business practice has gained momentum over the last few decades. With the spread of globalization and digitization, companies in the US have been able to outsource certain functions to other countries. One of the more popular outsourcing models that has evolved in the recent past is the nearshore outsourcing model. Many companies benefit from the advantages of nearshore outsourcing. This has allowed them to focus their resources and attention on the core projects while reducing operational costs and streamlining their existing functions.
It essentially involves outsourcing job functions to a vendor in a country that is geographically close to the parent company’s location. For example, organizations in the US do nearshore outsourcing to countries like Canada, Mexico, and other Latin American nations. There are several advantages of nearshore outsourcing, like proximity of location, the similarity of culture, same time zones, etc.
In this article, let’s take a detailed look at these advantages of nearshore outsourcing and understand how companies can implement the model.
Advantages Of Nearshore Outsourcing
When it comes to nearshore outsourcing, especially of software development jobs, companies stand to gain a lot from the process. Some pertinent benefits of this model of outsourcing are as mentioned below.
1. Streamlined Operations
Outsourcing allows businesses to direct their resources towards their core functions. This means companies do not need to invest time and money in hiring and training software developers. Instead, they can rely on a consulting company to get their job done. Ultimately, this streamlines the operations and improves the bottom line.
2. Improved Collaboration
Since nearshore outsourcing involves two businesses operating in the same (or almost same) time zones, the collaboration between teams is better. There is usually a considerable overlap of business hours in this case. It helps people to communicate effectively without working at odd times.
3. Optimized Operating Timelines
Outsourcing jobs to nearshore contractors helps businesses to optimize their operating times. With outsourcing, companies can delegate certain jobs, thus saving time. This ultimately leads to a shorter time to market for products and services, and that is crucial for business success.
4. Focus on Core Competencies
As mentioned beforehand, when companies invest in nearshore outsourcing, they can better focus on their core competencies. This essentially means that businesses spend their valuable time, money, and energy on the necessary actionable items. The employees are not burdened with extra tasks, thus preventing them from suffering a burnout. Outsourcing, in a way, allows businesses to pay attention to what is important.
5. Resource Availability
One of the biggest challenges for companies in the software industry is finding the right talent. Outsourcing takes care of this problem by enabling companies to have access to the huge current global pool of talent.
Along with the right talent, businesses can also take advantage of the infrastructure and technological capabilities of other countries through nearshore outsourcing. This allows companies in the US to build robust and essential IT services and products without compromising on the quality.
6. Lower Engagement Costs
Quality resources are scarce when it comes to software development services. This, in turn, leads to a high cost. However, with the nearshore outsourcing model, companies gain access to the affordable global pool of resources. This ultimately allows businesses to effectively reduce their engagement costs and offer their products at a reasonable rate to their customers.
7. Cultural and Geographical Closeness
The pivotal feature of the nearshore outsourcing model is the geographical proximity to the parent company’s location. This essentially means that the teams operate with a lesser time zone difference. It makes it feasible for team members to collaborate easily and even travel, if at all necessary.
Another important advantage of nearshore outsourcing is that because the companies are usually in neighboring countries like Canada or Mexico (in case of US organizations), there is a certain cultural affinity. This results in similarities in language, working styles, and other cultural aspects, making the overall process more manageable.
8. Improved Communication Channels
The proximity of time zones and similarities of language offer open and effective communication channels between the company and its vendors. Easy communication is crucial for improved collaboration and development of products.
When companies outsource their services to a distant country through the offshoring model, they often face issues concerning cultural differences and language barriers. However, the nearshore outsourcing model takes care of these issues, thus providing a cohesive working environment.
9. Advanced Risk Management Systems
The age-old adage “don’t put all your eggs in one basket” holds true when it comes to risk management and mitigation in business. With the nearshore outsourcing model, companies essentially divide the job responsibilities. This means that all the capabilities are not put in the same hands. Thus, if anything goes wrong, it can be handled more effectively. Risk mitigation becomes much easier when dependencies are reduced by allocating tasks to different people or vendors.
10. Protection Under The USMCA
Companies in the US wanting to outsource some of their jobs functions like software development to countries like Canada and Mexico are protected under the USMCA.
The United States- Mexico- Canada Agreement, commonly known as the USMCA, is a free trade agreement among these three countries. This agreement offers certain protections to companies doing businesses across these locations and allows people to work on special visas. It also puts down strong standards for the protection of trade secrets and data management, issues that are pertinent when it comes to outsourcing to a vendor.
How Can Companies Implement Nearshore Outsourcing?
The nearshore outsourcing model is a cost-effective way for businesses to increase their capabilities without compromising on their service quality. However, the implementation of this model necessitates the careful hiring of the outsourcing vendor. Otherwise, there can be considerable risks involved in the process.
One of the most effective ways to implement the nearshore outsourcing model is to take the help of professional services and solutions. At ParallelStaff, we understand the needs of companies and create pertinent solutions that can help them with requirements regarding software development, retention, and acquisition of talent. Our Nearshore Solutions are specifically developed to help companies tap into America’s diverse and highly-skilled talent pool.
If you are looking to implement nearshore software development in your organization or want to know more about the model, then do not hesitate to contact us for more details.
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Nadiia ShevchukAugust 27, 2021
Dear Mike, thank you for such a valuable piece of information. I have also conducted profound research on this topic and would like to add that nearshore outsourcing is for sure an advantageous strategy to outsource the software. It is quite cost-effective, allows to mitigate the possible risks, and maintains effective communication. It is not much wonder that market leaders tend to choose this kind of software outsourcing more and more frequently!