Businesses need to know they can access appropriate talent when they need to outsource services. This guide can help decipher the difference between onshore, offshore, and nearshore and investigate the pros and cons of each model.

When it comes to outsourcing, companies are faced with three options: onshore, nearshore, or offshore. You may hear these terms thrown about without fully grasping the details of what it means to elect one option over the other. We have the rundown on what you need to know.

What exactly is onshore, offshore, and nearshore outsourcing?

Before you can make an educated decision, you’ll need to know your outsourcing options:

  • Onshore: This is a form of outsourcing that involves hiring domestically, pulling talent from firms within the United States.
  • Nearshore: Nearshore outsourcing is a practice where talent is sourced from Latin American countries, such as Mexico and Colombia.
  • Offshore: A popular outsourcing trend in the past, offshore outsourcing involves pulling from resources located in countries that don’t share a geographical border with the United States, traditionally India and China.

What you get with onshore outsourcing

Onshore outsourcing usually involves hiring an outside firm. This is often ideal for enterprise solutions that have tight time constraints.

  • Pros of onshore: Outsourcing to onshore resources can sometimes offer a timely advantage. The similar time zones and shared customs might also mean that you will receive higher quality because onshore companies usually have a firm grasp of your company’s business objectives.
  • Cons of onshore: Onshore outsourcing is often extremely expensive because firms employ staff at full time. In addition, it may be difficult to resource the right talent because outsourced firms often have to take on several projects simultaneously in order to justify the overhead of a full-time team.

What you get with offshore outsourcing

If you elect to go with offshore outsourcing, you will select a company that is located far from the origin of your home country. Popular choices for offshoring in the United States include China, India, and Eastern Europe. Traditionally, companies have chosen this option to offset costs.

  • Pros of offshoring: Offshoring offers services at a much lower cost to onshoring.
  • Cons of offshoring: Language barriers often lead to confusion or delays in projects. Also, opposite working schedules can cause issues with timely delivery. Without shared customs, business goals and objectives often do not align and this can cause problems with the quality of output.

What you get with nearshore outsourcing

When you choose nearshore outsourcing, your resources are located within close physical proximity of your home country. Due to the geography, nearshore firms often share time zones and cultural aspects with your country.

  • Pros of nearshoring: Shared time zones make nearshoring more timely than offshore outsourcing. Because nearshore firms often align culturally with the home country, you can expect a higher quality of work as it is easier to align business goals and objectives. The close proximity of nearshore firms also makes it easier to make onsite visits when necessary without incurring unreasonable travel expenses. You can feasibly travel to a nearshore firm at a comparable cost to traveling to a domestic outsourced company. Also, given that the cost of living is lower in nearshoring countries, you can access tech talent at a reduced cost to your business.
  • Cons of nearshoring: You need a passport for travel.

Which outsourcing model is best for your business?

Ultimately, the selection of an outsourcing model is a decision that should not be made lightly. Companies will need to evaluate their budgets, unique needs, and schedules to determine which model offers the most benefits. A close review of your outsourced firms should also be undertaken before making your choice.

Many companies find that nearshoring offers the most benefits with the least amount of drawbacks. Nearshoring allows companies to leverage an affordable talent pool while receiving a higher quality of work and limiting expenses due to travel and project delays.

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