The Differences Between Onshore, Offshore, and Nearshore Outsourcing

Exploring differences in cost-savings, speed, and quality and why offshoring is often the best option

Key takeaways:

  • Global outsourcing continues to grow and was estimated to be worth USD $92.5 billion in 2019.

  • Business Process Outsourcing (BPO) involves the hiring of third-party companies to perform non-core functions in your organization.

  • There are three types of BPOs: Offshore, nearshore, and onshore.

  • Offshore BPO companies are the most cost-efficient of the three types.

  • Nearshore BPOs work well if you need similar cultures or time zones.

  • Onshore BPOs have little cost savings but have faster project execution time.

Most people are familiar with outsourcing business processes in organizations. Not many understand the categories of Business Process Outsourcing (BPO), however. They might not know how different BPOs can add value to their business

It is now estimated that the market size of services outsourced globally was USD $92.5 billion in 2019. With businesses moving to the global frontier, successful organizations need efficient ways to adapt and solve the challenges they face. 

Finding innovative solutions to a company’s problems is the first key to success. It is, however, equally important for companies to streamline their business processes even before they start experiencing problems. One way to achieve this is through BPO. BPOs are effective at helping businesses achieve exponential growth. We outline the three types of BPOs and highlight the best categories for your business. 

What are BPOs?

Business process outsourcing is simply recruiting another specialized company to perform non-primary functions for your organization. You would be hiring a third-party company to carry out some of the operations that your business needs. A third-party source can often handle certain tasks more efficiently than in-house staff. 

BPOs also offer other added benefits such as lowering operational costs, time-savings, fast turnaround, efficiency, and the ability to augment a team with skilled workers. Some of the popular processes that you can outsource include accounting, customer support, human resource management, and marketing, among others.

The three categories of BPOs

Most people only think about offshoring when it comes to BPOs. There are, however, different categories of BPOs depending on the location of the companies. These three categories include:

Onshore BPOs

Also known as domestic outsourcing, onshore BPOs involve outsourcing your business processes within your country. For example, you may outsource the customer support department to a company in a different city. One reason for doing this is that the process may require skills that are only available in a certain region where it’s less expensive.  

Nearshore BPOs

This is the outsourcing of your business processes to a company that’s close to your geographical location and most likely has the same language and similar culture. So, if you live in the United States, nearshore outsourcing would be to a country such as Canada. This is often utilized when you need to work with companies that are in your time zone or that have a similar culture and/or speak your language.

Offshore BPOs

Offshoring is quite popular due to globalization and there are many good reasons to work with a foreign company. You will often find low labor costs and tax savings when you choose to contract an overseas company. 

Other reasons that prompt managers to offshore their processes include the availability of qualified talent, political stability, and the lack of language barriers. A company that decides to offshore its customer support call center to an overseas company will most likely see a reduction in overhead costs. Consequently, they can lower their prices, which is beneficial to their clients. 

A quick comparison of the three types of BPOs

Each type of BPO offers benefits and risks. You must consider some or all of these factors when choosing.

Expenses

The need to save on expenses is arguably the biggest reason companies decide to outsource their business processes. This is because labor costs vary from place to place. It can be much more cost-effective to hire someone from an offshore location than get a full-time staff member in your organization. Offshore outsourcing is often more economical than both onshore and nearshore outsourcing. 

Availability of skilled labor

Businesses thrive on quality skilled labor. You are likely to find people with the right skills regardless of the category of BPO used. This means that you can find the right mix of talent when you choose offshore, onshore, and nearshore outsourcing. Of course, culture and language barriers may affect the quality of output that you get. A BPO firm that conducts proper screening and proprietary talent matching during hiring will mitigate this. 

Execution of projects

Are you looking for speedy execution of your projects? The time it takes will depend on the complexity of the project, of course. It is important for businesses that outsource to ensure that they offer clear requirements and deliver resources. Onshore BPOs may execute projects faster than the other types of BPOs because of similar time zone and language. Properly chosen talent in another company, however, can work just as quickly. 

Communication

We cannot understate the importance of communication in any project. Process optimization achieves this goal. Through tools like time tracking and process mapping (using RPA technology), Doxa 7 will bring visibility into process bottlenecks and task costing. We also find, filter, and endorse highly skilled candidates that will get projects done on time. 

DOXA can help you with your offshoring needs

Outsourcing is a great way to optimize your business. It allows you to focus on your core business activity while still ensuring everything in your organization runs smoothly. 

There are several benefits to working with a BPO including cost-saving, proprietary talent matching, and process optimization. Offshore BPOs often offer these benefits at the highest value.

The professionals at Doxa7 are here to help you set up a working relationship with offshore workers and ensure everything runs smoothly. We have the right mix of knowledge and experience to help you with your offshoring needs. Contact us today for a free consultation.

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