There are more options today than ever before when it comes to outsourcing. The two main ones are onshoring and offshoring, with “nearshore” options providing a newer alternative that can marry the best of both. If you’re trying to decide on onshore vs offshore, you’ve come to the right place.
Now, unless you’ve been hanging out in a bunker for the past few decades, chance are you’ve heard the term “outsourcing” used here and there. Perhaps it was in reference to a business decision, or a political opinion from one side of the fence or the other. Maybe you’ve considered it for your company, but can’t decide whether to outsource or not.
It’s not necessarily an easy decision, and it varies from industry to industry—of which there are many that might utilize this technology. Banking and finance often outsource their duties, especially customer service. Pharmaceuticals, software & IT, retail and manufacturing all commonly do so as well.
Companies can choose to outsource any number of business activities, such as lead generation, inbound & outbound calling, and technical support to name a few. There exist a huge number of companies that offer BPO, or business process outsourcing, either on US soil or in a foreign country.
Outsourcing–whether onshore or offshore–provides tons of business benefits. Business owners may decide to do it for cost savings, or because they know they can get high-quality services that meet their needs without having to hire in-house. Often, it’s cheaper to get these services in developing economies, or at least international economies.
This article will cover the differences between onshoring and offshoring, along with their respective advantages and disadvantages, so you can make the right decision for your business today.
Onshore outsourcing is the act of obtaining services from a provider who works outside of your own company. The “onshore” part of the phrase indicates that while they don’t work in-house, they do work within the same nation as you.
For U.S.-based companies, onshore outsourcing requires partnering only with another U.S.-based outsourcing company, and you can find services for almost any industry. Most companies require many of the same functions, no matter what they do. Those that are common to any business include:
… as well as many more. If you need a service, chances are there’s a specialized company that can handle it for you. And chances are, moreover, that there’s one in the U.S. The latest figures put the number of BPO businesses in the nation at more than a quarter-million, with the number growing at nearly 5 percent per year between 2017 and 2022.
While California, Florida, and Texas have more of these businesses than any other state, they together account for only about 23,000 of them, meaning there are likely plenty of U.S.-based call centers in your neck of the woods.
So, you’ve got options. Now the question becomes, should you outsource inside the United States?
There are a number of very valid reasons that companies decide to outsource at home. These include:
When you outsouce work to others within your own country, it is significantly easier to manage your outsourced teams, pay quick visits, provide in-person training, and so forth. You simply don’t have the same barriers to those physical aspects of management when you work with onshore companies in your home country.
Farming out your business services at home means you don’t have to rely on foreign politics and economic events affecting your business. For instance, partnering with a manufacturing plant in China will provide incredible cost savings, but those profits would be affected by any sanctions placed against the Chinese government. Worse, your products may stop reaching the shelves at all if there’s a total halt on international distribution.
Partners in the same or very similar time zones can respond and react to your messages and instructions quickly, because they receive them in the moment or shortly after you send them.
Time zone differences, on the other hand, can create confusion and delay. While it’s not a dealbreaker by any means, this is a main distinguisher between onshore vs offshore outsourcing companies.
There are fewer language differences for call centers in the United States because both customers and phone-based service providers are more likely to speak the same native language. The same is true for written and oral communication alike.
It also breaks down language barriers onsite at your business, such as between personal assistants or IT teams and the outsourcing center.
A shared business culture will also minimize misunderstandings and maximize a seamless workflow. This holds true for your company and your BPO provider alike, as well as anyone who calls into them from your client or customer base.
Keeping business at home helps to support your local economy. This is a feel-good promotional point as well; many companies have found that their customers prefer products that are made in their own country... and this goes for support and business process services, as well.
Your outsourcing partner may already know your brand very well and may require minimal training. That also makes a difference when deciding between onshore vs offshore.
There are also a few downsides to keeping your business here at home.
For one thing, onshoring can be more expensive than outsourcing to a foreign country. Your labor costs, tax rates, and general costs will all be higher on home soil, which keeps savings to a minimum (and may even make you consider starting your own in-house call center).
While onshore outsourcing is growing and becoming a bit easier to get started than it used to be, it can still take a while. Once all of the paperwork and legal documents are signed and finalized, onshore partners will get you a start date based on their agents’ availability. Meanwhile, offshoring partnerships can sometimes be agreed upon and started in a matter of days.
If you have business functions that benefit from a round-the-clock schedule—like customer service, for example—you’ll have to hire second- and third-shift employees (often at a premium) when working with U.S.-based partners. This becomes much easier when supplementing your onsite daytime customer service team with an offshore partner to handle late-night calls, since their time zones and normal working hours are so vastly different from our own.
Offshore outsourcing is the act of exporting your IT-related, call center services, and other business processes to another country for services. The speed of the internet means a lot of these processes can take place anywhere, while the low cost of other economies means U.S.-based companies can leverage significant cost savings by doing so.
If you’re in the United States, then offshore outsourcing involves partnering with any company that is not based in the U.S. While ‘offshoring’ technically refers to any other country, it has come to mean those that are farther away (think India or Bangladesh), while nearshoring usually refers to countries closer to home and in similar time zones, such as Mexico, Costa Rica or even Chile.
While nearshoring can take myriad forms, the most common are still IT services, software development, customer service, and payroll processing.
Outsourcing your business processes to offshore jurisdictions can be very profitable if you do it right.
While you may not already have high brand recognition in offshore locations, offshoring can help that. By using offshore or nearshore outsourcing, more people will become aware of your company, possibly helping with global expansion.
Perhaps the single most compelling point in favor of offshoring or nearshoring is the cost savings—i.e. you’ll get high-quality labor for a lower cost. Offshore companies in India, the Czech Republic, and the Philippines, for example, are cost-effective and reliable.
You know what’s a grand feeling? The ability to assign work at 5 p.m. U.S. time, then return to the office the next day to find the work completed by your offshore development team. Turns out what was overnight to you was a productive workday to them!
Of course, as with anything good, there are a few downsides to offshore outsourcing.
Though time zone differences come with their own set of benefits, as mentioned above, they can sometimes make it harder to communicate and receive a fast response during your own company’s standard work hours. (However, as discussed, it’s not necessary to work in different time zones when you utilize nearshore outsourcing.)
Using nations other than your home country may involve some language barriers for customers. This is more important for tasks like customer service than it is for a software development team, though, which wouldn’t have to speak with your customer base.
When outsourcing, you may need to show more trust and patience while your offshore team gets started. You may also need to be more detailed and prescriptive in your brand guidelines, and help management in other countries learn the ropes more than you would at home in the U.S.
There may also be cultural barriers when you work with countries very different than your own.
For instance, in cultures that have a long midday siesta built into the workday, what will you do? Will you structure the work you offer so that it accommodates this period? If the offshore development team is building software, you may not care. But if your outsourced partner is running your call center, you very well might.
There are other cultural differences, too, such as politeness, ways of greeting, hierarchical issues, and so forth. It’s important to be aware of such differences and learn how to avoid complications due to misinterpretations.
So, now you’ve got a good look at the differences of onshoring vs offshoring. While onshoring brings you cultural understanding, time zone convenience, and brand recognition, it will typically cost more. On the other hand, offshoring will bring you cost savings, but might require more in terms of support, brand-building, and overcoming barriers. The right choice will vary for each company, based on their priorities and preferences. No matter what your business activities, though, there is a BPO service company for you.
Whether they want onshore or offshore outsourcing, business owners who work with TDS Global Solutions get what they need, from inbound and outbound call center outsourcing to executive recruitment services.
Not only do we help match you up with the perfect outsourcing company, we’ll talk you through the entire decision-making process beforehand. TDSGS has decades of experience finding and pairing companies with ideal-fit outsourcing partners, and is a leader in the growing nearshoring industry. Our extensive list of happy clients is a testament to the success of our model, and we’d love to offer you the satisfaction of a great outsourcing partner next.
Schedule a call with TDS Global Solutions to learn more about how we can help you find that perfect partner!