Once seen as a relatively new concept, outsourcing is now in a stage of maturity. Though many companies have yet to adopt it or begin to outsource functions, the model is now deeply entrenched in the business psyche. In fact, it is evolving far beyond simple cost savings through wage arbitrage and business gains through specialized partners, to deliver value that encompasses aspects like expert consultation and real leveraging of business intelligence. We are moving toward a model of collaborative partnering with outsourcing and shared services providers and this comes with a number of shifts in tactics.
One of the key factors that comes with this evolution is the tendency to opt for nearshoring instead of offshoring, i.e. choosing outsourcing partners who are geographically closer to home. While it may seem counterintuitive to contract a partner in an area with higher wages (outside of typical outsourcing hotspots), nearshoring has a great number of advantages closely tied into the continuous development of the general outsourcing model.
Language and Cultural Alignment
At its core, nearshoring (or inshoring or onshore outsourcing, if we’re talking about working with a provider in the same country) can make communication and cultural understanding much easier. Companies in the US, for example, work closely with BPO providers in Canada and Mexico, benefitting from common cultural denominators and finding it much easier to locate language proficient staff to manage the contracts and daily operations.
Geography is a vital element in a successful outsourcing strategy, but buyers now have a literal world of options, including those in neighboring countries and domestic labor markets. Being physically closer to critical operations is important, reducing the need for executive travel; which can be time-consuming and isn’t cost-effective. Having outsourcing operations nearby also allows companies to work in closer time zones, also contributing to efficient communication.
All things considered, nearshoring can still represent significant cost savings even if required wages are higher in markets with closer proximity. BPO service providers working with stronger economies can leverage operations in second-tier cities and those with less industry, to take advantage of domestic wage arbitrage.
Furthermore, as outsourcing and companies’ notion of the concept evolves, we are seeing that cost savings is only one driver of the decision to outsource. It plays its part but is considered alongside strategic benefit to businesses in terms of freeing up internal resources, accessing innovation and knowledge, and increasing speed and agility of services.
Access to Talent and Intellect
Studies find that utilizing outsourcing services in places with higher costs allows companies to access higher levels of expertise; with specialized knowledge that can’t be obtained in historically traditional outsourcing centers. Tapping into this innovation results in positive ROI, even if it is more costly to contract the services.
Businesses with any level of resistance to outsourcing, based on objections regarding the afore-mentioned potential for language and cultural barriers and prohibitive geographic factors, may find a smoother transition with nearshoring operations. Likewise, companies with experience in the outsourcing industry who have suffered from the downfalls of offshoring and wish to disentangle themselves from previous contracts can now take advantage of the efficiency of working with a nearshoring partner.
Business process outsourcing is now as complex as the world of business itself, with various components in motion and different factors for each company to consider. After the initial offshoring boom in places like India, China and Malaysia, companies can now consider partners in their own backyards that have a deeper return on investment; with fewer language and cultural barriers, less need for travel, reduced time differences and increased access to intellectual property. Firms that embrace nearshoring can effectively take advantage of the evolution of outsourcing and achieve a productive level of collaborative partnering with higher quality service providers.