Why Nearshoring? – Part I

Why Nearshoring? – Part I

When doing project implementation work or even systems support models, the cost benefits of nearshoring have been revealed.  Over a decade ago we saw many IT organizations sending their operations to India in an effort to provide substantial cost savings over there US-high cost counterparts.

I myself can remember bidding on a project in 2011 where we lost due to the finance officer stating that our per hour cost -not overall cost of the project- was too high compared to an Indian firm.  When this happened, it caused me to do a fair amount of research into the benefits of offshore to see if my company too could leverage this model.

I had been part of many offshored teams in my consulting days, but always felt there was something lacking. It seemed that communication, mostly nonverbal, was often misunderstood.  Also, there was a tendency to understate deliverable times to satisfy project management.  Last, there was the obvious time zone gap.  After looking at this and several studies showing the rising rates and attrition in India, I decided to evaluate the possibility of nearshoring.

Nearshoring provides a lot of the advantages once thought to be received in the offshore model.  Many Latin American countries have highly educated people who speak both English and Spanish.  This is becoming increasingly popular in the US due to the recent influx of Spanish speaking people.  Also, the difference in time zone is often none or a few hours.  Last, wages are on par with that of those in India and there is a higher retention rate due to inherent organizational loyalty.

The evaluation I conducted with the help of an outside consultant, resulted in 4 possible locations – Mexico, Colombia, Brazil and Costa Rica.

 

  • Posted by Doug Erb
  • On November 26, 2014