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Why US Companies Are Falling in Love with Nearshoring

by | Feb 15, 2016

Love is in the air! And while couples are making the most of Valentine’s Day, more and more US companies are making a beeline for the borders—and it’s not for roses or chocolates. Let’s face it, the benefits of outsourcing, such as reduced long-term costs, liability and overhead, can certainly make businesses fall head over heels. A recent and rapidly growing outsourcing trend, however, has been making waves in the US, where adjacent and nearby locations like Latin America are proving to be dominant players. Let’s say hello to ‘nearshoring’.

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The cost of living in the US is rising. So is the cost of doing business. These are the signs of the times. In order to lower operational costs and accommodate customer needs, many US companies are outsourcing to service providers in countries that are closer to home, otherwise known as nearshoring. But why go near rather than offshore? Because nearshoring allows US companies to realise greater productivity improvements, better morale and a stronger ROI.

A Glance at Nearshoring

Which trend is the new apple of North American businesses’ eyes?

Nearshoring is the practice of outsourcing business processes to third-party suppliers located in a nearby country. In most cases, the hiring company and the nearshore company share a border with the target country.

How is it different from offshoring? Think of it this way: offshore businesses operate in a country far from the hiring business’ location. Nearshore companies, on the other hand, are closer but not domestic. For example, a US-based business can nearshore their marketing operations to Latin American countries, like Colombia or Guatemala. These locations are relatively closer to the US, but not domestic regions.
Nearshoring is an appealing option for companies who want to outsource their business operations to a third-party company but on a smaller scale.

Why Businesses Say ‘Yes!’ to Nearshoring

More US firms are focused on protecting their intellectual property as international conflicts arise. To prevent compromising their IPs, they’d rather bring production closer to home or the point of use. By manufacturing close to where customers are, businesses don’t just benefit from protecting their intellectual property. They also benefit from the following:

Cost savings
Cost is, as ever, a main driver of outsourcing. Being closer to the service provider means lower travel costs and improved speed-to-market. More importantly, this erases the need for staff to work overtime or night time hours due to nearshore locations being within the same or similar time zone—this can dramatically lower the cost compared to offshoring.

Agility
Outsourcing to nearby locations is a logical way to maximise value and efficiency. Proximity (in terms of distance and time zone) of the client country to the nearshoring partner allows for faster and easier collaboration. Clients can visit and direct operations far more regularly, ensuring quality and consistency. Since both parties can operate in real-time instead of waiting a day to turn around a solution, there is greater productivity, as well as more steady and satisfied workforces.

Communication

Each country’s work culture affects how businesses communicate with one another. For example, misreading a message can result in disastrous misinterpretation. Miscommunication can lead to one company distrusting the credibility and ability of their partner, which negatively affects the development and direction of their partnership.

Sharing the same language is advantageous in a business partnership. If both companies understand each other, or at least possess knowledge of a shared language, then working together is easier. Nearshoring work to companies in regions that share your language guarantees fewer risks for miscommunication. It establishes better communication and coordination between two businesses that share similar cultural backgrounds.

Cultural affinity
Cultural affinity is key to effective collaboration and problem solving. And because Latin America shares an extensive border with North America, including a common history spanning more than 300 years, it is more familiar to the language and lifestyle of the nearshoring client. This translates into a more effective working environment, smoother business cooperation and financial synergy.

Talent
In the past, US companies have limited their offshore or nearshore functions to low wage and low responsibility jobs. The trend has begun to change, however, with higher-level jobs seeing an upsurge. The talent pool in geographically closer locations has been keeping up with this trend, with innovation hubs and technology popping up in the Caribbean and Latin America, making it more attractive for US companies to transfer even more complex work and responsibilities to its nearby shores.

How to Find the Love of Your Life (aka, a Nearshoring Provider)

When choosing a nearshore partner, keep the following in mind:
• Work with an experienced firm. Choose a partner that possesses experience in your chosen trade. Narrow down your choices by working with a firm that has been around for years. Their years of operation prove that they are have survived or are thriving in spite of challenges.
• Ask a potential partner to walk you through their projects. Don’t hesitate to ask the hard questions, particularly the technical ones. Let them show you how they did it through case studies or demos.
• Don’t just look at the price. If your processes require software capabilities, work with a technically capable provider. Make sure they have enough bandwidth and resources in case of technical breakdowns.

As market trends, the economy, technology, cost of oil and labor practices continue to change, nearshoring is proving to be the better alternative, which is why US companies are increasingly tweaking their outsourcing strategies around it. Look closer to home and capitalise on the benefits of our nearshore operations in the Dominican Republic https://acquirebpo.com/us/models/.

Acquire BPO has chosen the Dominican Republic as the ideal US nearshore location when factoring in a strong mix of performance and cost.

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