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Offshore vs. Nearshore 101: The subtle, but serious difference.

I get this question often. “What’s the difference between offshore and nearshore? Isn’t one just closer?” In a word, Yes. But the impact of that proximity can have a major impact across a multitude of project delivery challenges. So here is a simple comparison that more and more buyers of these services are seeing first hand.

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In many industries, and quite recognizably in the tech world, the strategy of outsourcing is being implemented by moving resources abroad, allowing companies to save on overhead and labor costs while at the same time improving efficiency.

While both offshoring and nearshoring represent forms of outsourcing business operations to a different region or country, there are some significant differences between the two models. So today, a brief lesson (or refresher) on the different models to be considered.

Offshoring

Offshoring is an approach where a company moves all or some of its activities to another country, usually to take advantage of reduced labor and production costs, amongst other benefits like having greater availabilities in other time zones, or access to different skill-sets outside of their home country. For example, the US may turn to India or the Philippines as they have a high population of skilled, English-speaking professionals.

Lower labor costs and less regulated environments contribute to lower operating expenses, but for organizations that undergo offshoring process, a number of challenges, business interruptions and hidden costs become quickly apparent. For example, the processing lag of data and information is a familiar phenomenon, especially for employees that rely on frequent communications with their offshore partners. In today’s Agile development world, these challenges make daily “stand-up” an almost impossible task for the end client in the US who may be 9 hours behind.

Travel and training costs are other areas that can quickly eat up an allocated expense budget, especially when you factor in the resource commitment needed by existing onshore employees to train their offshore counterparts. Additionally, the compliance costs to satisfy the complexities of foreign legal and human resource requirements present yet another challenge when it comes to offshoring.

Offshoring is becoming less of a default outsourcing practice due to being further in proximity and the drawbacks that come with it, like dealing with longer lead times, complex cultural disconnects, and the difficulties in project management and expectation management that can cause. The alternative – nearshoring – offers more appealing benefits for companies who want to be closer – both geographically and culturally – to their production team.

Nearshoring

The nearshore approach is when companies decide to work with teams in countries located closer in proximity to their own; so the UK may nearshore operations to Spain, and the US to LatAm. In this case, this model offers more of a cultural and aesthetic affinity and alignment in time zone, not to mention the speed to market and ability to run agile projects without longer lag times due to differences in time zones.

A general rule of thumb is that with nearshoring, you can pick up your phone and reach your outsourcing counterpart at almost any hour outside a small window, during the standard business day. This makes video conferencing and other real-time communication platforms a defacto option for US based managers who are looking for the greatest insight to project velocity and overall status.

The Best of Both Worlds… In LaTam

While Eastern European nations are a nearshoring hotbed for the big players in the European market, organizations based in the United States and Canada are increasingly looking towards Latin America for their design and engineering resources.

LatAm is a natural nearshoring partner for North American businesses beyond the shared geographical proximity, and there are many differentiators that should put Latin American production companies at the forefront and top of your list when considering an outsource provider that go beyond the obvious. It has a booming tech industry and it’s home to a diverse range of growing world-class tech talent and expertise with rising education levels and a high English proficiency within the region.

With Zemoga’s headquarters in Bogota, Colombia, we’re situated in a city that’s of close proximity to our clients in the US with extremely similar – and sometimes even the same – time zones. We’ve been servicing clients with creative and production resources in the US for over 17 years, and we love what we do.

With us, you get all three: high quality, time to market, and cost efficiency. With a team of 160 staff across 4 offices, we tailor our service offering to each client depending on your needs. We work with your team, onsite or remotely. Not to mention that our team loves what they do, the clients they work for and where they work, proven by low turnover rate of 5% compared to the Tech industry’s 2018 average of 13.2%. And an average tenure of almost 6 years.

That’s just the intro, so drop us a note to ask us more about how we could work together – we’d love to help you build better.

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