All You Need To Know About Nearshoring and How To Utilise It

You’re probably familiar with the term “offshoring.” It’s a common practice in which you transfer a part of your company’s operational process to another country. Whether we’re talking about manufacturing, support, or accounting, this practice can be used to lower operating costs or provide international expertise to businesses.

Nearshoring is a similar procedure, though there are some notable differences between the two. Plenty of companies prefer this option, as it provides some interesting benefits without adding too many downsides. Here’s how it works and why you should consider it.

What Is Nearshoring, Exactly?

As is the case with offshoring, nearshoring employs talent that isn’t located in the same country that the business operates in primarily. The key difference is that the individuals or companies involved are often in a nearby or bordering country.

The best way to explain it would be through an example. If your company operates in France, a good nearshoring location would be Spain or Italy, while offshoring would often imply cooperating with a country farther from France. While it seems like pretty much the same thing, there are benefits to nearshoring that incentivize businesses to choose it over offshoring.

What Are the Benefits of Nearshoring?

It’s clear that offshoring and nearshoring aren’t too different as concepts. The question is—why choose one over the other? In the case of nearshoring, a business can utilize various advantages when their remote teams are located so close by.

Lower operating costs

One of the primary goals of every business owner is to lower overall operating costs. As employee wages often make up a large percentage of these costs, choosing to host part of your operation in an area with lower wages is a solid choice.

In this regard, nearshoring is just as beneficial as offshoring, though this depends on the region your country and business operate in.

Better time zone compatibility

Distance from the parent company can have an enormous effect on a branch’s productivity. When it comes to distant regions, time zones make it difficult to keep work and communication in sync. There’s often a massive delay when it comes to the completion of projects and assignments, and managers have difficulties staying in touch with the remote branch or client.

Nearshoring implies that the country in question is relatively close by, meaning that time constraints and delays aren’t as noticeable. In most cases, they’re absent entirely. Moving the start of a project an hour earlier or later has no significant impact on productivity, so even minor distances are negligible.

Improved communication

As a nearshoring country is often bordered by the one the parent country operates in, language barriers are less of an issue in this scenario. There’s a higher likelihood that talent in both countries can communicate without issue. Even if the two countries don’t share similar languages, finding clients with bilingual employees is much easier than with offshoring.

We can observe this phenomenon in the case of U.S. companies nearshoring to Mexico. Plenty of professionals in the IT and engineering sector speak both Spanish and English, which makes it easier to cooperate with U.S. parent companies.

Increased cohesiveness

Culture can impact the process of offshoring and nearshoring significantly. Some parts of the world have different cultural values when it comes to work hours, productivity, and holidays. This can lead to clashes between the parent company and the offshore branch.

Choosing a nearby country for nearshoring alleviates these issues in most cases. Cultures are relatively similar and there are few differences when it comes to holidays. As a result, cohesiveness between branches remains intact.

How To Utilize Nearshoring for Your Business

Before you can enlist the help of a remote team, you have to evaluate their capabilities and see if they’re a good match for your project. The great thing about nearshoring locations is that you can more easily come into contact with clients, as well as learn more about their project history and notable achievements.

When it comes to choosing a nearshoring location, there are numerous factors to consider. Is there an adequate talent pool to choose from? Are the prospective teams close enough to facilitate simple and straightforward communication? Is the cost of living in the area lower than the country of the parent company, and does that imply that the costs of operation are lower as well? These are all questions you should ask before deciding to cooperate with a nearshoring team.

What Are Some Examples of Successful Nearshoring Businesses?

There’s no shortage of businesses that have benefited from nearshoring. You’ve probably heard of one of the biggest and most popular messaging services in the world, WhatsApp. The development process for this app was moved almost entirely to countries in Eastern Europe. Skype was also run by teams in Estonia, and it soon became one of the premier video conferencing applications for most of the world.

There are countless other examples, such as Mindspark, AppSumo, and even beloved business tools like Slack and Basecamp—all of which were created with the help of nearshoring. While the business ideas were good from the start, nearshoring helped these companies achieve even greater success by lowering operating costs and keeping teams cohesive and on-point.

Conclusion

There are plenty of reasons for businesses to outsource their work to another country, which is why this practice is so widespread. Whether a company is looking for talent or just wants to lower their overall costs, one thing’s certain—nearshoring provides enormous benefits while minimizing the downsides that come with moving operations.

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