Ever since the 1980s companies have been outsourcing in order to cut down on costs. Back then, places such as China and India were strong pulling points for call centers and customer service.
More recently, the trend has been to build broader, international teams by extending into developing countries, rather than the traditional model of outsourcing jobs and factories.
Yet this latest move has put the spotlight on practices of outsourcing and forced businesses to rethink their outsourcing strategies. That’s because collaborating with partners with a 13-hour time difference and language barriers prove quite difficult to foster teamwork and efficiency.
This has led to the increasing use of a particular type of outsourcing: nearshoring.
Nearshoring is a tactic that lets businesses move part of their processes or projects to a neighboring country or region. For companies based in Western Europe, this means working with nearshoring partners in Eastern Europe. For companies in North America, this means working with partners in Latin America, from Mexico to Argentina.
Nearshoring ensures closer cultural ties, similar time zones, higher likelihood of language proficiency, and greater potential for better collaboration while likely driving down on costs.
Is nearshoring the right fit?
With new businesses emerging faster than ever, they are likely not to have the expertise, relevant networks in place, nor the resources. As such, determining the answers to the following questions will help to determine whether nearshoring is the right fit.
1. Is it hard to discover local talent?
Nearshoring opens up the talent pool to make it seem more like an ocean. It is likely that businesses will save months on the recruitment process and also save on costs by discovering relevant workers in locations with lower costs of living.
2. Does the outsourced work have a clear expiration date?
If you’re wanting to augment staff due to a permanent increase in workload, then it’ll probably be better to onboard full-time employees. But if you have projects with specifically-defined ends, then staff augmentation using a nearshore partner should be considered.
3. Are you comfortable with digital project management?
Because nearshoring relies on a remote workforce and digital connectivity, businesses need to be comfortable with online communication and collaboration. For first-time companies, this factor signifies the importance of incorporating the digital space into the company culture.
For businesses that have decided on nearshoring as their strategy for expansion, there are a number of steps that you can take to ensure a smooth transition.
Define the goals of your business and then choose which country best fits these needs. Mexico may be the closest but there are other countries, such as Argentina, Colombia, and Brazil, that have growing talent pools of software developers.
Scout the talent pool, check the levels of expertise that you require, and determine how often teams ought to travel to visit nearshoring partners.
It’s common for nearshoring companies to be spread out across multiple towns and cities. So the second step would be to decide on a city within the country.
Compare providers of nearshoring talent and then drill down until you reach one provider. Ideally, you want to select a company that has prior experience working with businesses similar to yours. If you can, visit their headquarters and check out the physical company as well as their leadership and team, where you can get a feel for their culture, processes, and general vibe. Also, dig into their portfolio, and ask them about their previous clients, challenges, and if they have industry specialization.
Build up a relationship with the outsourcing company and dig into the specifics of what your goals are and how you want to achieve them. (Also ask them about their favorite local food, music, and hobbies – international business is no fun without sharing culture.)
As nearshoring expands and becomes more and more common, the better capabilities that US companies have to realize an international vision by bringing together talented software engineers and the latest tech under the same digital roof – wherever they are in the world.