Nearshoring is a business strategy in which companies employ remote workers or resources that are geographically close to them. This often involves hiring individuals from Latin America or Europe, allowing companies to access a large talent pool while maintaining work quality and communication.
What is the difference between nearshore and offshore?
While similar in theory, these practices are defined differently and, when put into practice, require distinct workforce planning strategies. The key defining factors of nearshoring, onshoring, and offshoring include:
- Nearshoring: This practice takes advantage of cost savings in neighboring countries while maintaining some cultural, language, and time zone similarity with the organization’s home country.
- Onshoring: A strategy that involves outsourcing certain business processes to a provider in the same country. It’s typically more expensive than other options but involves fewer language, communication, and time zone alignment complications.
- Offshoring: Usually the cheapest option, offshoring involves moving business operations to a foreign country to capitalize on low costs or favorable economic conditions. However, there are considerable risks of time zone misalignment and language issues.
How does nearshoring work?
Nearshoring strategies may be different for different companies based on their geographic location and the services they provide. However, establishing a nearshoring process involves several core steps organizations must take before dividing business operations. Generally, nearshoring involves these key steps:
- Determine which business functions are suitable for relocation, such as software development, customer service, or manufacturing.
- Assess potential nearshore locations based on cost efficiency, skilled labor availability, political stability, and cultural similarities. Prioritize countries within similar time zones or those offering favorable economic agreements or incentives.
- Establish operations by either building new facilities and hiring local staff or partnering with service providers. Due diligence is critical when selecting a partner to ensure they meet the company’s standards.
- Utilize modern communication tools and enterprise software to integrate and manage the operation. Ensure regular communication and routine visits to maintain strategic alignment between the core office and nearshore partner.
Nearshoring benefits
With nearshoring, your business gets the advantages of onshore and offshore outsourcing—companies gain closer cultural alignment and geographic proximity but at a more affordable cost. These advantages of nearshoring allow organizations to manage remote work initiatives more easily and maintain consistent product quality.
Reduced costs
For most companies, the top benefits of nearshoring are lower labor costs and access to a pool of top-level talent. Nearshore teams are typically more cost-effective than onshore and offshore teams, as they don’t have to factor in the expenses associated with extensive travel or a long supply chain. This helps to reduce the overall cost of projects while providing high-quality results.
Flexibility and scalability
Nearshoring provides the flexibility to scale as needed. Nearshore teams can be quickly scaled up or down as projects require, allowing businesses to avoid the costly process of hiring and training new onsite employees. Nearshore teams also provide access to the latest emerging and disruptive tech technology trends, which helps your projects remain competitive.
Better communication
Language barriers are often a significant challenge for offshoring projects. Nearshore teams, however, are typically proficient in the same language as your team and provide more efficient communication and collaboration with fewer disruptions. This ensures that product development is completed on time, as the nearshore workforce understands and meets customer requirements more effectively.
More control and influence
Compared to offshoring, nearshoring opportunities give businesses more control and influence. Nearshore teams stay in nearby countries, making them more accessible and responsive to customer needs. Nearshore teams also typically share the same cultural values as your company, which helps ensure that they complete projects with the same level of quality and efficiency as on-site teams.
Diversity and innovation
Nearshore talent often brings new perspectives to a project, which helps ensure that the final product meets stakeholder expectations and bolsters DEIB initiatives. This is particularly helpful for businesses looking to stay ahead of the competition, as nearshore employees often provide valuable insights into industry trends.
Expansion into new markets
Accessing a nearshore team in another country creates new opportunities for businesses. Nearshore teams provide expertise in local markets, allowing companies to expand quickly and easily. Moreover, expanding into a new market saves money and administrative effort, as you don't have to send personnel from your own country to manage the project.
Allows for frequent visits
Nearshore teams are geographically more accessible to core companies and involve lower transportation costs. This provides an in-depth understanding of the nearshore team’s work and ensures their workflows align with business objectives. It also makes adjustments more manageable, as teams can meet face-to-face and discuss projects in detail.
Similar time zones
Unlike offshoring, nearshore teams stay in nearby countries with similar time zones. This allows them to communicate more effectively and quickly as both teams work in the same time zone.
Cultural alignment
Differences in culture can make offshoring projects difficult. Nearshore teams, however, are typically located in fairly similar cultural hubs. This makes it easier to develop strong working relationships and better understand customer needs.
What are examples of nearshoring?
Companies use nearshoring for several different types of labor, though some are more popular than others, depending on the skill level of the neighboring workforce and the company's needs.
For instance, an American software development company may have difficulties finding affordable tech talent. With nearshoring, that company can hire time zone-aligned Brazilian developers who are equally skilled but, due to a lower cost of living, are more affordable than their American counterparts.
Another popular industry for nearshoring includes creative and digital services. Because of their English language proficiency and cultural fit, designers and content creators in places such as Canada, Mexico, and Europe have an understanding of U.S. companies and consumers.
Administrative services, such as payroll processing or accounting functions, are similarly nearshoring options in areas such as Latin America due to the need for strong English proficiency and similar work schedules. These services are popular in companies that act as either a professional employer organization (PEO) or an employer of record (EOR). Other popular industries for nearshoring include:
- Research and development
- Manufacturing and automotive assembly
- Customer support
- Legal compliance services
- Healthcare
Within days, Revelo’s end-to-end staffing solution matches you with highly skilled, pre-vetted tech talent who are time zone-aligned with your organization. After hiring from your personalized candidate shortlist, our talent management platform handles payroll, local compliance, benefits administration, and more. Work with our team and get your developer shortlist today.
