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Onshore, Offshore, or Near Shore What is the Difference?

June 27, 2012 Jim Iyoob

Companies may choose to meet operational needs by outsourcing their contact center operations to onshore, offshore, or near shore locations.They base their decisions, in part, on cost comparisons, proximity to their business location, and language or cultural considerations. It would be helpful to begin by defining the terms “onshore”, “offshore” and “near shore”.

Onshore Outsourcing: Outsourcing operations of the company to another company located in the home country or region. Companies can reduce labor costs somewhat and benefit from highly skilled labor with little or no language or cultural barrier, but the cost of such operations is high compared to offshore or near shore locations.

Offshore Outsourcing: Outsourcing the operations of the company to other companies that are located in a foreign country, and most likely have a different language and culture. Offshore outsourcing offers benefits like higher cost savings and access to highly skilled labor.

Near Shore Outsourcing: Outsourcing the operations of the company toan adjacent or nearby country having similar culture and language skills.  Near shore outsourcing offers some cost savings over onshore and has the added benefit of proximity for more frequent site visits, while retaining a highly skilled labor pool.
 
Comparative Aspects of Onshore, Offshore and Near Shore Outsourcing:

Cost-Savings:

One of the most important reasons for companies to consider outsourcing all or someof their operations to other companies is cost savings. The direct labor costs of offshore locations can be much less thanonshore locations. Other aspects,such as travel costs, can be efficiently managed by the companies to improve the bottom line. However, some companies may consider near shore options due to other benefits, such as similar culture and easier travel to near shore locations. But with depreciation of currencies in some offshore countries, companies are largely considering offshore outsourcing.
 
Speed of Execution:

The speed of execution depends upon the complexity of the campaign and the firm handling the outsourcing project.The availability of resources and the ability to define requirements clearly are also two key dimensions that can affect the speed of execution.  Due to lower direct labor costs, offshore firms have greater flexibility in piling on resources in advance of a project, and in beginning implementation more quickly than an onshore firm; onshore firms cannot afford to maintain idle resources and they must hire and train agents for new project implementation. Onshore firms tend to be more efficient in requirements collection and definition due to a lack of language and cultural barriers. Offshore firms can also handle requirements communication, but they must work to overcome language and culture barriers.
 
Quality and Expertise

At most contact center locations, whether onshore, offshore or near shore, there is an abundance of high quality professionals with domain-specific expertise. While language and cultural barriers can impact the quality of service provided, this gap can be closed through specialization and quality control.
 

Execution Risk

Every outsourcing project faces execution risk. This risk is increased when projects are outsourced to near shore or offshore locations. However, execution risks can be mitigated and greatly reduced through both a risk management plan, and an effective management plan.
 
Businesses contemplating outsourcing their project to onshore, near shore, or offshore firms must make a decision after comparing all of the benefits offered. The choice made by the businesses will depend completely upon their own unique needs and goals.