In today’s global economy, many companies are looking for ways to expand their operations and reduce costs by outsourcing projects and operations outside of their own company. This often takes the form of onshoring, nearshoring, or offshoring. But… which one of these options represents right-shoring for your company?
Outsourcing is the practice of hiring an external company to handle technology business processes or functions that were, performed in-house or require staffing due to growing needs. This frees companies up to focus on core competencies and business expansion while they delegate other aspects of their business to experts, as well as generating cost savings and efficiencies. It also fills the “skills gap”for a lack of in-house expertise, or different reasons that point your company in the direction of outsourcing. In IT, examples abound: from delegating technical support to outsourcing software development operations, companies have been working under this structure for well over 25 years. The big question, for companies, is how do I select the right organization, business model and region to ensure my efforts create business value.
The most well-known varieties of outsourcing are onshoring, nearshoring, and offshoring, and they all have their own unique advantages and challenges. Choosing the right approach depends on a variety of factors, including the company’s goals and resources, and the type of workforce it needs. Let’s break down these concepts and discover their unique characteristics:
Onshoring
This practice takes tech business processes or functions outside of the company, to another external company that is located in the company’s home country. Its main advantage is greater control over the quality of the work, as well as shared culture, language and time zones. However, onshoring makes it challenging to create realistic cost savings, as well as effectively competing with the same general workforce. This limits value creation, especially in tech areas, and as a result can harm the scalability of companies. Some companies choose to onshore based on liabilities, scale, knowledge, legal and even financial reasons related to capital and operational expenses.
Offshoring
The opposite of onshoring, this practice involves moving business processes to another country, usually far away and with very different -even inverted- time zones. Some common locations for US offshoring are India, Philippines and Eastern Europe.
Its main advantage is cost reduction, but on the other hand it also involves significant upfront costs (sometimes associated with the size of the operation that is being outsourced and ramp-up costs). Some of the potential risks are communication, cultural differences, language barriers and legal compliance with labor laws as well as Intellectual Property protection, among others. To mitigate these risks, companies hiring this service might require their own teams to work in odd hours, stressing them and reducing employee engagement. All of these aspects might result in a loss of control over the final product or service that’s being delegated.
Nearshoring
This approach involves outsourcing tech business processes or functions to another country, geographically closer to the country of origin and with a more similar culture, domain of language, and close time zones. These aspects minimize risks and challenges, while still offering important cost efficiencies for companies. A prime example for the US is Latin America, a region of 650 million inhabitants that is quickly gaining a reputation for its technological skills and talent.
Nearshoring can also offer a “Goldilocks” solution that strikes a balance between the challenges and benefits of both offshoring and onshoring. It retains the cultural affinity of onshoring, while accessing the expanded talent pool that offshoring presents. Its closer time zones allow for real-time collaboration, while accessing specialized talent that helps the company scale up.
Arionkoder is a US-based, nearshoring tech partner with over 20 years of experience, ready to help you streamline and scale up your products and operations with our LatAm-based talent. As tech partners, we offer both Product Development and Staff Augmentation services designed to boost your company and help you reach your business goals. Our flexible teams adapt to demand and can work embedded into your existing teams or alone, and provide support for ongoing projects as well as taking the project into our own hands for a turnkey solution. We centralize and shield your company from the operational load of overseas recruiting, evaluating, hiring and managing, as well as dealing with legal and administrative aspects. Our talent is supported by an internal network of experts, designed to help your projects thrive. Arionkoder’s work is backed by tech leads and tribe leads, who build bridges with your companies to meet your definition of success, because when you succeed, so do we.
In conclusion, outsourcing might be a good fit for your company if you’re looking for efficiencies and talent that sets your business on track for success. When deciding what variety of outsourcing to choose from, it’s important to consider your goals, expectations, available resources and priorities. The right choice – or rightshoring – will depend on your needs.
Arionkoder’s proven framework of “Nearshoring by Design” eliminates risk in your project and optimizes key processes in the engagement to ensure value creation. We can help you make a decision that will make a difference for your business. If you want to learn more about “Nearshoring by Design” reach out to us at hello@arionkoder.com and explore the myriad of possibilities that our joint work can deliver!