Nearshore Outsourcing Advantages with Sonatafy Technology
The push toward a more global market has resulted in more outsourcing, but it’s not always well-conducted. Complaints of poor quality, a lack of communication, and differing cultural standards have long dogged many outsourcers, particularly those serving the U.S. market from India and Southeast Asia. However, the cost savings are undeniable, and that still drives many businesses to consider outsourcing.
But there is a slightly different way that delivers great results: nearshore outsourcing.
What is the difference between offshoring and nearshoring outsourcing?
Offshoring refers to the act of outsourcing an international company that is not in close proximity to your business and don’t share the same or similar timezones, such as an US company outsourcing a software development company based in India.
Nearshoring refers to the act of outsourcing an international company that is close in proximity to your company and share the same or similar timezones, such as an US company outsourcing a software development company based in Mexico.
What is meant by nearshoring outsourcing?
This is a process where software companies outsource programming tasks, especially those which require programming languages not currently available in the USA or other western countries, in order to save on labor costs. For instance, if your business is based in the United States, you could hire programmers from Latin American, Central America or other nearshore countries sharing similar timezones to the US. Most American companies have large operations in states like Texas and Florida, they have difficulty finding people with the knowledge level and talent required to write code in these areas. This is where the outsourcing companies come into play. They purchase programming languages from companies in nearshore countries, so that programmers with a strong knowledge of English or other US-based cultures can be hired on.
Nowadays, many large companies outsource a significant part of their IT requirements to nearshore companies due to their low labor costs and high quality workers. One other way that this practice helps US companies is in the way that it provides them access to a talented pool of highly skilled developers. The programmers bring with them experiences and skills that the companies have long been unable to obtain on their own. This practice allows nearshore IT teams to tap into a pool of talented individuals, who have been trained in these specialized fields and can be applied to any number of projects.
What is example of nearshoring?
An establishment in the US that outsources software development to a nearshoring outsourcing IT company in Mexico. For example Boeing, an American aerospace company that builds its business around designing, manufacturing and selling products such as airplanes, satellites, rockets, telecommunication equipment, and missiles, outsourced some of its IT support to a company that operates in Mexico.
FREQUENTLY ASKED QUESTIONS (FAQ) ABOUT Nearshoring Outsourcing
What is offshoring, nearshoring and onshoring?
Offshoring refers to the act of outsourcing an international company that is not in close proximity to your business and don’t share the same or similar timezones, such as an US company outsourcing a software development company based in India.
Nearshoring refers to the act of outsourcing an international company that is close in proximity to your company and share the same or similar timezones, such as an US company outsourcing a software development company based in Mexico.
Onshoring refers to the act of outsourcing a company that is in the same country as your company and shares the same or similar timezones, depending on which state the company is based.
What are the stages of outsourcing?
The first stage is where you conduct a thorough analysis of what your company needs are, determine what you would want in terms of outsourcing services. In this stage, you must carefully decide whether you need your services to be provided by an external third party company. Or, choose to have an in-house internal team which will be responsible for developing and maintaining the software in your organization. If you choose to outsource, continue with the outsourcing process.
The second stage of outsourcing is the evaluation and selection of your chosen outsourcing software development company that meets your specific criteria. Deciding what type of outsourcing if best fit for your company either choosing to outsource to an offshore company, a nearshoring outsouring company that shares similar timezones or a company onshore to yours. During the evaluation and selection period, it is important for you to know the capabilities, experience, and cost of the company you are considering as well as its reputation and history in the industry.
The third stage of the outsourcing cycle involves contact development. During contact development, you will now work with your outsourcing partner to establish an idea of how you want your software to be. You will discuss the business requirements and specifications, timelines, technology, and cost requirements including contracts to your chosen outsourcing company or employees. It is important for you to ensure that you are comfortable with your outsourcing partner and the way they do business.
What are different types of outsourcing?
In the present scenario, US businesses have a number of options to choose from when it comes to outsourcing. These options have become so popular because they have served their common purpose of helping the US economy stay afloat and grow. The four types of outsourcing include; project outsourcing, IT outsourcing, software development and professional service outsourcing.
Out of these four, IT outsourcing is perhaps the most popular in the sense that many people outsource their computer programming requirements to offshore ad nearshore software development companies, which reduces costs and allows companies to grow with the help from international companies.
Another one of the four types of outsourcing, which has become very popular in the US, is that of professional outsourcing or business process outsourcing. The concept of professional outsourcing started when business process outsourcing (BPO) became extremely popular in countries like the United Kingdom. The idea behind this is that a company located in one country can outsource most of the business-related activities to a company located in a different country, thereby saving on costs, time and effort.
Project outsourcing is one of the most important types of outsourcing for US businesses. The main purpose behind outsourcing is the idea that a company can gain access to specialized or expert services or skills at a cheaper rate by contracting with an external provider.
Contract manufacturing involves the production of products by third-party companies. The items produced by these companies are sold on the basis of contracts, which specify the price and other terms. Outsourcing projects in the health care industry involve the production of medical equipment and devices, surgical instruments, pharmaceutical products and similar services.
Why do companies outsource?
Companies choose to outsource in order to move certain tasks to a third party or to an experienced company. According to Forbes, businesses move particular departments and activities to third party companies in order to gain more time to focus on the organizations most pressing tasks and areas of expertise. Outsourcing allows businesses to focus on their core competencies.
Companies from all kinds of industries consider outsourcing as a means to increase their operational efficiency, reduce their overhead expenses, improve their overall business performance, increase productivity, reduce your operating costs, increase your market share, improve your competitive advantage, increase your customer satisfaction, and even reduce your operational risk.
What is the outcome of outsourcing?
Outsourcing is a very common practice in the business arena where a company either can outsource some or all of the required works that are not considered as critical or do not match the skills level to complete the projects; such as IT , customer service, web development, manufacturing, and even market research. By outsourcing these tasks, an organization will have an opportunity to cut down on its overhead cost which may result to a higher profit for a company and use those funds to grow as a business. Spend more time on areas of the business that need more time and attention, such as product development, product design, marketing strategies, marketing campaigns and other ways to grow and expand as a business.
What is an example of offshore outsourcing?
WhatsApp, launched in 2009, a Californian communication app that allows for calls, messages and voice memos originally centered around status updates, used offshoring before being later bought out by Facebook. The company outsourced offshore software and app developers based in Russian to help build their tech company and focus on other tasks that were more aligned to their strengths.
What is the meaning of reshoring?
Reshoring refers to the act of returning manufacturing and other offshore or nearshore services back to the original country, such as the United States from overseas companies. According to Forbes in some industries this starting to become more prevalent as a means to increase jobs in America, balance trade and budget deficits, and develop a better skilled workforce.
What should you not Outsource?
In many ways, outsourcing is the last thing on your mind when you are trying to increase your market share, grow your business, expand into new markets, and grow your bottom line. Many companies view outsourcing as a means to cheaper labor costs, even if the resources they purchase are not of the best quality or if they are sub-par. Outsourcing is often viewed as the less expensive option than to hire in house employees – which can really cost a company a lot of money and time in the long run. In order to stay functioning in this very competitive industry, you must focus on building your company culture, understanding your core business functions, developing excellent customer service, providing a competitive advantage through specialization and innovation, maintaining an excellent work environment, and focusing on the future.
While you may have a need for some outsourcing, such as technical support or manufacturing, however, it is not necessary to outsource everything. Outsourcing is most effective when it is matched to your core competency, such as finance, human resources, accounting, or manufacturing. While it may be tempting to focus on only the outsourcing needs of your company, outsourcing only those tasks that do not help your company grow and expand or that do not directly impact your core business functions, will actually hurt your company in the long term.
What does outsourcing mean in business?
Outsourcing in business is the practice of passing on specific, specialized tasks or jobs to either a third-party service provider, another company or freelancer. The role of the outsourced company or worker to a business is to allow for better productivity across the business, or to introduce a higher skill level not already present in the business, a reduction in costs could be a factor and any other area where the business may need assistance. For example, an IT company may outsource database development, application development, or web design to a third party company. An entrepreneur may outsource marketing, web development, or graphic design to another company or freelancer. Outsourcing can literally save your business time, money and effort by hiring an expert to complete specified projects and jobs.
If you are wondering how outsourcing can improve your company’s productivity it can by, reducing costs, increasing company productivity, allowing better time management, allowing you to become more agile and flexible within your business processes, and ultimately increasing your company’s bottom line. Outsourcing removes the tediousness of maintaining in-house processes and products, while freeing up resources to focus on other priorities. Furthermore, Outsourcing is a cost-effective way to grow your business because it requires less start-up capital and less ongoing maintenance.
The process of Outsourcing is usually started by defining what services or products you want to outsource, then finding a qualified and trustworthy service provider, and finally negotiating the contract and fees with your outsourcing partner. Outsourcing can dramatically improve your company’s efficiency and overall bottom line.
What is the difference between onshore and offshore outsourcing?
Onshore refers to the act of outsourcing a company that is in the same country as your company and shares the same or similar timezones, depending on which state the company is based. Where as offshore outsourcing is when a business employs an international company that is not in close proximity to your business and don’t share the same or similar timezones, such as an US company outsourcing a software development company based in India.
What is the difference between offshore and onshore?
The different between offshore and onshore is based on where a company is situated. Offshore refers to when a company or third party service is based in another country to your business and doesn’t share the same or similar timezones and onshore refers to when a company or freelancer is based in the same country to you business and does share the same or similar timezones, depending on which state and city they are based in.
Which is the last stage of outsourcing?
The last stage of outsourcing is the process of governance and repatriation. Governing the outsourced company is one of the longest stages as its duration is dependant on the length of the contract. It involved carefully managing and maintaining a smooth working relationship with both your business and the outsourced company, which is providing the services needed by the business. Managing the business at this stage will also involve taking decisions related to the transfer of resources and responsibilities of an outsourced firm, when nearing to the tail end of the contract. The decision related to the resources and responsibilities will involve both parties who are involved in the process of outsourcing. This stage is also known as the closing stage or the last stage because it is the final stage before the service provider transfers all the remaining assets and end up closing their doors.
However, this doesn’t mean that the outsourcing companies would suddenly transfer all the jobs or even all the data related to the business. For one, many companies would only transfer the ownership of the assets but would not transfer the ownership or the data related to the processes and the technology. Outsourcing is more of a transfer of technological expertise on the part of the client company. This doesn’t necessarily mean that the company would be absorbed by the outsourcing company but it simply means that the client outsourcing company would assume ownership of everything that is necessary in order for the business to operate and become successful.
What are the advantages of outsourcing?
Outsourcing is the process of contracting a company to perform a business function which will allow your business to operate smoothly and improve grow in a company. Other advantages to outsourcing include; reduced costs by employing an offshore or nearshore company to perform specific tasks as well as saving expenses on training and high wages. This will save your company time and money and in turn transport those finances and energy on other aspects of your business that need valuable attention.
Other areas include improving your level of quality. The company will invest more on improving its production output and management systems, providing customers and clients with high quality products and services, which will help grow your business and reputation.
The first stage of outsourcing is strategic thinking, the process where you conduct a thorough analysis of what your company needs are, determine what you would want in terms of outsourcing services and if delegating to another service provider would align with your philosophies, policies and processes as a company. Once you have thoroughly exhausted all possible options and conclude that outsourcing is the right decision to help your company grow, then you can proceed to the next stage of outsourcing.
The second stage of outsourcing is the evaluation and selection phase. In this stage, you must carefully decide evaluate which area of your business requires an outsourced provider and evaluate what type of outsourcing if the best fit for your company. Whether you need your services to be provided by an external third party company or a freelancer and if outsourcing to a company onshore, nearshore of offshore best suits your business needs. Once that’s been explored, your next step is selecting your chosen outsourcing software development company that meets your specific criteria. Deciding what type of outsourcing if best fit for your company either choosing to outsource to an offshore company, a nearshore software development company that shares similar timezones or a company onshore to yours or if you prefer to go with a company of freelancer that is onshore. During the evaluation and selection period, it is important for you to know the capabilities, experience, and cost of the company you are considering as well as its reputation and history in the industry.
The third stage of the outsourcing cycle involves contact development. During contact development, you will now work with your outsourcing partner to establish an idea of how you want your software to be. You will discuss the business requirements and specifications, timelines, technology, and cost requirements including contracts to your chosen outsourcing company or employees. It is important for you to ensure that you are comfortable with your outsourcing partner and the way they do business.
The final stage of the outsourcing process is governance and repatriation. Governing the outsourced company is one of the longest stages as its duration is dependant on the length of the contract. It involved carefully managing and maintaining a smooth working relationship with both your business and the outsourced company, which is providing the services needed by the business. Managing the business at this stage will also involve taking decisions related to the transfer of resources and responsibilities of an outsourced firm, when nearing to the tail end of the contract. The decision related to the resources and responsibilities will involve both parties who are involved in the process of outsourcing. This stage is also known as the closing stage or the last stage because it is the final stage before the service provider transfers all the remaining assets and end up closing their doors.
What are the features of outsourcing?
One of the most important features of nearshoring outsourcing companies, is its ability to have a lower risk plan. In today’s current economic environment, businesses have to be extremely careful in how they spend their money. One area that is often overlooked when analyzing the financial health of a company is its back-office, which refers to the business processes such as internal business functions including anything not client facing such as administration, IT services and maintenance. After all, it is the back-office what glues the company together in order to function cohesively and efficiently. If that work is performed in an inefficient manner, then it will result in lost revenue for the business. Therefore outsourcing to a nearshore company that excels in IT services, will positively impact on the current and future operations of your business.
Another feature of outsourcing is its ability to have higher throughput speeds. Faster processes and equipped productivity results in more revenues and profits for the business, thus translating to faster turn-around times for contracts and projects. For that reason, many businesses look towards knowledge process outsourcing as a way to boost their revenue streams by hiring skills outside the company. As a result, looking to nearshore or other forms of outsourcing that are not only cost effective but elevate your business through a high level of skill, expertise, experience and knowledge.
What are the outsourcing strategies?
Outsourcing strategies can be employed by reducing costs through hiring a third party company, for instance using a nearshore company in Mexico to complete a software development project. Even though the workers in Mexico are highly educated and skilled, their service costs are much lower than if you were to hire someone from the United States. Other strategies for outsourcing include, flexibility for the duration of the specific project or job, increased productivity, reduced overall operational costs including the elimination of training and hiring in your own country, improved time management, and increased intellectual capital. All these advantages result in increased business competitiveness, increased profits, and enhanced performance.
What are typically outsourced activities processes tasks?
The typical outsourcing project includes the IT solutions such as software engineering, web development, graphic designing, app development as well as marketing and customer service tasks. For example, hiring a web developer that specializes in UIUX design, will look at your companies website more holistically in terms of the users experience and interaction using psychology to determine how to best optimize their time on your interface and ultimately persuade them to take action, including purchasing a service or product etc.
What should be practiced for best outsourcing?
One of the biggest challenges for all organisations, is prioritising the best and most appropriate outsourcing practices. To achieve optimal results across the board your company should focus on establishing clear objectives and deliverables. This avoids any negative results such as missed deadlines, expectations or capabilities, causing damage to the overall reputation of both entities, thereby negating any chance of a positive outcome.
Communication is one of the most important skills when collaborating with a nearshore company and determines the overall success or failure of a project. For this reason it is critical that you thoroughly complete the four step outsourcing processes including strategic planning, evaluating and selecting, contact development and finally and most importantly governing the nearshore company to succeed.
It is therefore recommended that you establish regular contact, either by phone or through a regular written communication, so that there is a level of flexibility in how these topics are handled. In addition, it is important that the lines of communication are regularly monitored, to see whether there are any problems developing and to identify whether progress is being made. If there are problems, then it is possible to renegotiate the best outsourcing practices with your outsourcing provider to establish mutually beneficial ground rules.
What company uses nearshoring outsourcing?
More and more tech company’s are using nearshore software development companies, including What’s App, Google, Amazon and more.
What is better offshore or onshore?
When choosing the best outsourcing method for your company and taking specific business objectives into account, there’s not an overriding answer if offshore or onshore is better.
Outsourcing to an offshore or nearshore company certainly has its advantages when it comes to the subject of costs. The lower costs involved may be a driving factor to seek an overseas company to complete specific tasks, however in order for a project or a company to thrive it needs to not skim on high-quality products/ services and retain effective communication both to clients as well as to all staff members including those outsourced offshore or nearshore.
Where as onshore outsourcing allows you to be in the same country as the company, but depending on where they are situated, if they are remote it may be very similar operations when dealing with a nearshore company. The final conclusion will be dictated by your specific objectives, company philosophies, job requirements including skills, expertise, time and budget.
To conclude when your business decides to look at the option of outsourcing, don’t assume that nearshore companies are simply just for financial benefits. Hiring a nearshore worker or workers can positively add to your organization through their highly skilled and qualified professionals that help your business to grow and expand with their unique perspective, work ethic and cultural background which is a service to be celebrated and not ignored.
