Nearshoring: All You Need to Know

July 4, 2022
4 min read
Nearshoring: All You Need to Know

When it comes to running a business, you’re often called to make difficult yet impactful decisions. One of the most important things you may have to consider is whether to outsource operations or not. Outsourcing and outstaffing can offer many benefits, but it is not a decision that should be taken lightly – especially when it comes to who you choose to partner with and where your partner of choice is located. However, a trend that has emerged in recent years presents an interesting alternative: nearshoring. It is a fascinating business approach worth learning more about. 

So, read more to discover why nearshoring has become so popular – and why it may be an excellent option for your company, too!

What Is Nearshoring?

Let’s start with the basics.

Nearshoring is a business strategy employed by companies in which they transfer business processes or jobs to a third-party company located in a neighboring country rather than one located further away.

For example, let’s think of a hypothetical European e-commerce company looking to develop its proprietary application. After some consideration, the company’s top outsourcing contenders are Company A, which is also based in the E.U., and Company B, which is located in another continent. If our hypothetical company ends up in business with Company A, it has opted to go nearshore.

Nearshoring vs.Offshoring & Outstaffing vs. Outsourcing

There are a few key differences between outsourcing, outstaffing, offshoring, and nearshoring. So first of all lets define Nearshoring & Offshoring:

  • Offshoring is when forwarding  jobs to another distinct country, which can be in a different time zones and cultures. 
  • Nearshoring is when you are having jobs done in another nearby country.

This decision usually made based on competitive labor costs per different countries, but just to keep in mind,  nearshoring typically leads to higher quality work output and better communication between all parties involved.

And now lets define Outstaffing & Outsourcing main differences: 

  • Outsourcing usually works on a project-based business model which means that most likely the client entrusts the outsourcing company the whole project from A to Z. 
  • Outstaffing usually works as a long-term but indirect employment contract, when employer is been managed directly by the client,  while employment contract is been signed with a contracting agency.

So basically, outsourcing & outstaffing can been defined by the required direct or indirect management.

Now that we’ve clarified let’s zoom in on the many benefits that come with nearshoring – including risk reduction and broader access to a skilled workforce.

Nearshoring Advantages

Lower Cash Flow Risk

Not all projects are made equal, and company revenues are subject to fluctuations, so ensuring that cash flow remains positive is among the top reasons to choose nearshoring.

On principle, the need to outsource certain business operations stems from lacking the appropriate know-how internally, and looking to recruit it externally without having to incur the costs of having to hire, train, and manage employees that eventually may or may not remain on board.

This means that nearshoring allows for a no-strings-attached approach to doing business which is exceptionally beneficial when a project needs to end swiftly or when budget cuts are necessary to stay afloat.

With an explicit nearshoring agreement in place, you can halt part of your operations without negatively impacting your company budget, including having to deal with added labor-related expenses.

This way, nearshoring essentially serves as a safety net against capital loss and gives you the freedom to remain flexible in the ever-changing global economic landscape.

Streamlined H.R. Search and Management

It’s no secret that headhunting is an expensive, competitive, and time-consuming task that comes with many hidden costs. Top talent is often hard to come by, while recruitment fees can soon begin to add up, to the point that you may quickly find yourself spending more than what you had budgeted for – before even getting your project started.

Enter nearshoring, where the recruitment process has already been done for you, and every aspect of employee administration is already set in stone. As a result, you won’t be called to develop any protocols of your own or have to expend considerable energy into searching for additional team members that you had not priorly accounted for and that need to be hired during the project.

Nearshoring’s advantage of presenting you with a pre-assembled team of professionals right at your doorstep ultimately allows you to divert your attention into other aspects of your business that you would like to grow but wouldn’t have had the time to do so if you had to undertake extra H.R. duties in-house.

Borderless Recruiting and Enhanced Cultural Awareness

Another benefit of nearshoring is that you gain the opportunity to expand your hiring pool. Free from location limits, you can tap into the candidate pool of your nearshore partnering country without incurring the costs of relocation or employee travel costs.

Furthermore, nearshoring can enhance cultural awareness and understanding between coworkers, allowing employees to learn about and experience different cultures first-hand. In addition, nearshoring can improve communication by providing a common language and culture that employees can use to communicate with one another. Finally, by bringing people from different countries and cultures together, nearshoring can help create a more diverse and inclusive workplace where employees gain social and interpersonal skills and exchange knowledge that can only happen by working side-by-side.

Less Internal Administration Work

It’s easy to understand how hiring new staff members entails additional administrative work for the respective company department. Should said department already operate at capacity, the additional strain may lead to an alarming decrease in productivity. That, in turn, would make expanding it with new hires essential, cutting the company budget.

Even when internal company administration is strong, extra work would surely take time off other priorities. That’s when the cost-benefit analysis comes into play and where nearshoring proves to be a smart solution that would take care of the demanding tasks associated with managing a separate employee team.

All in all, nearshoring’s compounding benefits simplify a host of operations and processes that could otherwise cause anything from moderate to severe upheaval if they were to be implemented in your company’s already cemented and fine-working structures. That makes nearshoring a very lucrative option and a far better choice than offshoring for expanding your business with little risk. 

Ready to Explore Nearshoring?

We believe that, with this article, we’ve managed to build a strong case for the advantages of nearshoring and why it’s the best outsourcing strategy that will allow you to yield a considerable return for your investment.

Whether you’re looking to get into nearshoring now or in the future, keep in mind that selecting a reliable partner will define your endeavors’ success. Make sure you do your due diligence and team up with an established company with a robust portfolio that showcases its capabilities.

If you want to find out more about outsourcing and outstaffing at a nearshore, contact us at [email protected]. We’ll be happy to talk with you about your projects and how we can help address your specific needs.

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