Nearshoring vs Offshoring – which to choose?

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Outsourcing can be the secret sauce of digital success for many companies in form of nearshoring or offshoring. However, to harness the value of outsourcing to its fullest extent, one should know what and when to outsource well.

What is Offshoring? 

Offshoring is the practice of relocating business processes to another country that is further away than the countries in nearshoring. This type of outsourcing is the best fit for entities that seek quick business growth through cost reduction.

The Pros And Cons of Offshoring 

When you feel that your current staff can’t handle the workload, it seems logical to hire more dedicated in-house employees. But, usually, hiring an in-house team is more expensive than some companies can afford. That’s when they turn to offshoring. 

What are other benefits except for lower costs? Are there any hidden pitfalls? Let’s have a closer look at the benefits and drawbacks you may encounter. 


· Low-cost labor. Companies can offshore professionals in a bid to reduce their operational costs. By hiring labor in distant markets, medium and large-sized enterprises can save on labor expenses or augment their staff without increasing labor costs. 

· Large talent pool. Offshored teams are no less educated than talents living within your area.  

· Tax advantage. Offshoring lets business owners pay less in taxes by running part of their business overseas and thereby increase their income. 


· Communication problems. Distant teams have another cultural background which may be a hurdle to clear and effective communication. Thus, it is necessary for you to be fluent in their language and familiar with their customs, or you should look for someone who knows your cultural values well. 

· Security risks. Sharing confidential information and documentation is risky, but it is an essential part of the outsourcing process. You should think of data security and how you will maintain transparency in your partnership. 

What is Nearshoring?

Nearshoring is a variant of offshoring that takes place in an area that is within three time zones of your office at most. The need for nearshoring comes from a business’s desire to get support from a partner in close proximity. As opposed to offshoring, nearshoring enables an effective connection between an outsourcing firm and the client as they both are faced with fewer time-zone difficulties. 

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The Pros And Cons of Nearshoring 

If you run a startup or a small company and want to give outsourcing a try, before breaking into offshoring, you might like the idea of nearshoring. 


· Close time zone. Geographical proximity allows businesses to hold face-to-face meetings as necessary and build effective working relations through continuous communication. 

· Cultural compatibility. Nearshoring minimizes the risk of cultural and language barriers and provides a favorable environment for productive interaction. 


· Higher costs. Compared to offshoring, nearshoring services can be a bit more expensive, especially if you are interested in the latest innovations in the industry. 

· Poor selection. Not every location is rich in talents. While some countries are gaining recognition as the most suitable countries for the search of qualified and affordable staff, other places can be limited in talents and thus undesirable for nearshoring activities. 

What should you choose: Offshoring or Nearshoring? 

At first, it may seem like the difference between offshoring and nearshoring is only the distance. But in our digital world, territorial proximity shouldn’t be your key factor when deciding which of these outsourcing approaches to consider. First, you must set your priorities straight and define what you’re trying to achieve by adding new blood to your team. What do you expect? Is it the lowest cost, the least fuss, or a balance of everything? 

Only when you have a clear vision of the responsibilities, the duties, and the required skills of your future employees, you can decide which approach to go for. And if you still have questions related to outsourcing, don’t hesitate to contact us for more info. 

Resources: skelia, computools.

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