Pros and Cons of Onshore, Nearshore and Offshore

When any company decides to outsource, one of the important decisions they need to make is where they wish to outsource. Some of the points to keep in mind while making this decision are:

• Cost Saving
• Cultural Difference
• Language Barriers
• Skill / Domain Expertise
• Manageability

Onshore:

In this, company outsources its operations in same country (or region).

As the services are outsourced to same location / region company faces no cultural, legal or language barriers; managing the work and even facility visit for monitoring is very easy and inexpensive. This option is preferred when company wishes to outsource highly sensitive service or product development to protect intellectual property.

On the flip side this option is not cost effective; also in some cases lack of required skillset also poses a problem and increases cost.

Nearshore:

In this, company outsources its operations to a country (or region) nearby.

As services are outsourced to nearby location, company faces minimum / negligible cultural, legal or language barriers;  managing the work and conducting frequent facility visits are easy and compared to offshore less expensive.

Though this option is more cost effective compared to onshore, it is not in par with cost saving offered by offshore. Not all nearshore destinations have developed skillset required by the companies; this may pose a problem when niche skillset is required.

Offshore:

In this, company outsources its operations to another country (or region) faraway.

As the services are outsources to faraway location, company has to overcome cultural, legal and language barriers; monitoring and managing work requires expensive trips.

On the good side, offshore locations have vast talent pool which can be hired at less cost. Some offshoring destinations which have been in this industry for considerable period of time have developed process and expertise to execute huge outsourcing projects and offer client in house system as part if the deal.

Another option which has gained momentum recently is opening captive centers in offshore locations. This offers companies to offshore work along with flexibility of selecting their own resources; implementing their work culture and ethics etc.

About Author:

Tina Nebhnani is consultant and part of Systems Plus Pvt. Ltd. She is a part of consulting team that delivers Sourcing and Vendor Management Office projects. She can be contacted at: tina.n@spluspl.com