Nearshore Outsourcing - The Twist in the Tale

>play a major role in boosting near-shore
outsourcing in the future if other probable
A few days back it was off-shore outsourcingdestinations like China and Philippines are not able
that was making the waves and now it isto come up with efficient labor solutions.
near-shore outsourcing. Not a very new5.) The need for geopolitical stability
phenomena except for the term; near-shoringGeo-political instability could create a major
involves shifting work to people in neighboringproblem for any organization. Near-shore locations
countries rather than to distant off-shoreare believed to provide a much stable
locations. Discussed in this article is the new trendatmosphere as compared to off-shore
of near-shore outsourcing and its futuredestinations. Although there has been no instance
implications.of instability in major outsourcing destinations like
The near-shore outsourcing trendIndia, in recent times; there are no guarantees as
To a large extend outsourcing meant shifting ofIndia has experienced such conditions in the past.
back-end operations to cheaper off-shoreIn addition to this many companies also feel the
destinations like India, Philippines and China. But theneed to set up additional outlets in near-shore
trend seems to be changing swiftly. Businessesdestinations as a back up measure to deal with
today look more concerned about security andany negative situation. One more factor, that
stability rather than mere cost savings and this isgives near-shoring a pat in the back.
why most of them are adapting to the newCountries that can benefit from Near shoring
wave of near-shore outsourcing. Proximity forNear-shoring will benefit most Eastern European
travel, cultural affinity and developingcourtiers like Romania, Czech Republic and
infrastructure are a few other reasons forSlovakia, that lie bordering UK. In addition to
near-shoring getting the boost. Relatively lesserEaster European countries, some destinations
known outsourcing destinations like Mexico,around USA like Mexico, Canada and Costa Rica
Canada, Costa Rica, Romania, Slovakia and Chezwill also benefit immensely.
republic have chances of emerging as majorAmong Eastern European countries Romania
winners of this new trend in the years to come.stands a major chance to come out as a winner.
Discussed below are the major factors that mayThis is because of the fact that the country has
be responsible creating this twist in the tale.advanced infrastructure, geographical proximity,
Major factors in aid of near-shore outsourcingcultural affinity to UK and an investment friendly
1.) Cultural Linkclimate. In addition to this Romania also has a
The cultural link factor is a major plus in aid ofgood pool of well educated and highly skilled youth
near-shore outsourcing. Countries located inready to take over. UK firms feel the cost of
near-by locations are likely to have a similaroperations in Romania will be much lower as
cultural background than off-shore countries andcompared to India which is currently the most
many businesses today find this to be anfavored outsourcing destination. Other Eastern
important factor. Most are of the opinion thatEuropean countries that are likely to benefit are
having a close cultural link helps in reducingMorocco, Hungary and the Czech Republic.
common problems and conflicts that can ariseIn the west it is Mexico that is calling the shots.
when teams having differing cultural backgroundsAs compared to other near-shore destinations to
work together.US like Canada and Costa Rica, Mexico is
2.) Proximity and time zonesconsidered much cheaper and close location. Many
Proximity is another big factor that favorsMexican towns are located in close proximity to
near-shoring. Business travel to neighboringthe US and can be reached by road. Mexico also
courtiers is much cheaper, quicker and can evenhas a stable atmosphere with good
eliminate the need for procuring visas or othercommunication and technological infrastructure.
documentations. Proximity also means better andCultural affinity to US and availability of cheap and
cheaper communications, faster work and betterwell educated English speaking youth are other
understanding. In addition as compared toplus factors that can act in favor of Mexico.
off-shore destinations the time zone in near-shoreThe future of near-shore outsourcing
countries will almost be the same which aids inAlthough the situation looks bright, there are
work coordination.some problems that can limit the pace of this
3.) Increasing costs in other off-shore destinationsevident and evolutionary progress. One major
Cost cutting was the major driving factor behindissue is the issue of local service providing
off-shore outsourcing. But most firms today feelcompanies. Thought countries like Romania have
that the cost of operation in off-shoreenough resources they lack the availability of
destinations like India and China is rising. Thiscertified companies who can cater to high-end
includes cost of communication, infrastructure andoutsourced projects. Also the projected growth
quality control among others. The per-headof near-shore outsourcing by some major
employee cost ratio in off-shore and in someresearch organizations is relatively small as
near-shore destinations also do not differcompared to the size of the off-shore market in
significantly. These factors will surely aidcountries like India. At present Eastern Europe and
near-shoring and help it gain more impetus.other near shore destinations seem right for firms
4.) Declining resourceswho plan to set up their own outlets rather than
India which currently occupies the number onemake use of services from local contractors. But
position as an outsourcing destination isthis situation can change in the near future.
experiencing a decline in its pool of educated andIf the near-shoring trend becomes successful and
capable employees. Many companies feel thatgenerates success stores it is sure to catch up
securing quality labor will be a problem in thesejust like off-shore outsourcing did. One does it and
countries in the times to come if not at present.others follow, because nobody likes to take
This factor though not seen as significant, canchances in the corporate world.