Nearshore outsourcing: what is it, and how does It work?

Outsourcing is delegating specific business activities to a third party, such as an independent contractor or a business process outsourcing (BPO) company. In some industries, it’s common to outsource certain services such as software development or customer support that would either be difficult to manage in-house or are outside of the core competency of the business.

But the location of your outsourcing services can have a big impact on their delivery, cost, and convenience. With nearshore outsourcing, businesses benefit from geographic proximity, and in many cases, a similar time zone and language.

But are there trade-offs to obtaining services from a nearby country instead of within your own country or elsewhere in the world? Let’s take a look at the pros and cons of nearshore outsourcing and how it compares to other outsourcing methods.

What Is Nearshore Outsourcing?

In its simplest terms, nearshore outsourcing involves contracting with an individual or team from a nearby country rather than hiring an in-house team. It also contrasts with other types of outsourcing, onshore and offshore, which we’ll examine with more depth below.

For example, a business in the USA may work with a nearshore outsourcing company in Mexico, Honduras, or another part of Latin America. A company based in a Western European country might choose to hire a nearshore software development team in an Eastern European country like Romania.

The benefits of nearshore outsourcing include efficiency and cost reduction: It may be more cost-effective to find an outsourcing partner in a neighboring country than to hire a service provider to do the same job at home.

But another benefit is practicality: You can hire a nearshore team using a hiring software to take care of tasks that your own team doesn’t have the expertise or availability to handle, while still keeping operations within a shared geographical region.

That’s why many businesses turn to nearshore outsourcing for everything from customer support operations to software QA services. AI tools play a pivotal role in these areas, automating routine tasks and analyzing data to improve service quality and product testing

How Nearshore Outsourcing Works

Agents providing nearshore outsourcing

Nearshore outsourcing can take many different forms depending on your industry, so it’s important to start by identifying which work you want to outsource.

If you only need help with occasional tasks, such as fielding a low volume of customer support requests, you can contract with associates through an on-demand outsourcing model. This may result in lower labor costs and support seasonal staffing changes.

However, if you’re a growing startup or have complex outsourcing needs, you may want a dedicated team that only works with your business and can be closely integrated with your on-site staff. This ensures that your nearshore partners are available during your usual working hours and aren’t splitting their attention between multiple projects.

It’s important to ask questions before choosing an outsourcing vendor to find out how they hire candidates and assign them to your team. For some areas, like phone support, you may want to meet candidates first to ensure that they’re a good match for your organization. Additionally, consider utilizing a subcontractor agreement to clearly outline the terms and expectations of your partnership, ensuring a smooth and transparent collaboration.

Nearshore Outsourcing vs. Onshore Outsourcing

Nearshore outsourcing isn’t the only way to contract with service providers outside of your company. Sometimes, onshore outsourcing may be a better fit. For example, if you’re considering IT outsourcing, it may make more sense to hire an IT service provider in the same country to reduce travel time for on-site services.

Another reason to consider onshore outsourcing is if you need associates with a firm grasp of local customs and cultural differences within your country.

The rise of remote work during the pandemic means that many high-quality candidates have moved to parts of the country with a lower cost of living. Onshore outsourcing can expand your talent pool beyond major American cities, resulting in significant cost savings over hiring local employees.

On the other hand, the most popular nearshore destinations check many of the same boxes: They’ll often have an extensive talent pool with lower hourly rates and cultural similarities.

Nearshore Outsourcing vs. Offshore Outsourcing

If you’re considering service providers in a nearshore location, why not look even further abroad and consider offshore outsourcing? Whether or not this is the best move for your company depends on your priorities and needs.

Popular outsourcing hubs in Southeast Asia may have lower labor costs than nearshore locations like Brazil and Argentina. Additionally, having support agents across the globe can help you offer 24/7 customer service.

Time zone differences can make real-time collaboration a challenge. The Head of Support and trekking expert from Bookatrekking specializing in hiking in Portugal says that time zone differences can make real-time collaboration a challenge.

If you need an outsourcing partner that can work closely with your DevOps or software engineering team, you may want to choose a closer outsourcing destination.

When comparing nearshore and offshore outsourcing, consider how national intellectual property laws, protections for customer data, and internet connectivity may differ in your outsourcing destination. Of course, you can develop company policies and procure additional equipment, but it helps to prepare.

Is Nearshore Outsourcing Right for Your Business?

Deciding whether (and how) to outsource for the first time is a big decision for any business, so it’s important to carefully consider the benefits and drawbacks of nearshore outsourcing. 

Here are a few reasons why it might be time to look for nearshore outsourcing services:

You’ve Outgrown Your Office

One of the main reasons to consider outsourcing is because your company is growing and your existing infrastructure can’t keep up. With nearshore outsourcing, you won’t be restricted by the size of your office or even the amount of equipment you have.

The Local Talent Pool Is Limited

Maybe you have enough office space, but you’re struggling to find new recruits in your region. By outsourcing, you can scale up your team more quickly, while still partnering with top talent who can communicate with your local team in real-time.

You’re Outside of Your Comfort Zone

Unless you’re a massive company, it isn’t practical to create and maintain an in-house team for all aspects of your business.

Let’s say you’re a financial institution that wants to develop a mobile app. It might be possible to build a software QA services team from scratch, but it’ll probably be more cost effective to outsource the project to an experienced third-party.

However, if your team needs to collaborate regularly with your customer service provider (for example, to handle escalations within a strict SLA), it’s best if they’re onshore or nearshore. That makes real-time communication and even in-person meetings easier.

You Want to Scale Sustainably

Nearshore outsourcing makes it easy to expand your services without taking the risk of investing in new infrastructure.

By working with a reliable nearshore outsourcing partner, you can be confident that the infrastructure is already in place for your support needs so customers can quickly and efficiently use your communication channels.

Plus, instead of re-training existing employees, you can work with your outsourcing partner to add services in additional time zones or languages.

Choose PartnerHero for Your Outsourcing Needs

Entrepreneur reading about nearshore outsourcing

Nearshore outsourcing offers all the benefits of offshore outsourcing, including lower costs and access to a global talent pool, but without potential drawbacks such as major time zone differences. With nearshore outsourcing, you can work with a reliable partner to expand your services or scale up your team, knowing they’re just a short flight away.

At PartnerHero, we work with your team to develop the right outsourcing solution for your business. For example, our dedicated teams can be as small as two people or as large as 100s, while our on-demand teams offer flexible customer support services on 30-day rolling agreements.

All of our locations protect customer data by adhering to strict security standards, and our associates meet high English-language proficiency requirements so they can easily communicate with customers across multiple support channels.

Get in touch today to learn more about nearshore outsourcing and how we can help your company scale.