Is Nearshore outsourcing better than Offshore?

During the past few years I have heard a question come up as often as my need for coffee (which happens several times a day!). I am exaggerating a bit, but the number of times I have heard this come up is still staggering. So, is nearshore better than offshore? I decided to share my view in our first blog entry on the topic of nearshore.

The short answer is “no”. No option is better than the other, because the devil lies in the details, and you can’t decide the answer until you have a specific project or workload defined.

Even when facing similar requirements, the acceptable risk for an organization will different to that of another company, and that means that a cost analysis (risk-adjusted cost of global delivery options, or TCE according to our own methodology) will provide different answer for each company.

But supposing that risks were the same for every company, the answer would still be “no”. Each company has a unique culture, and a preferred way of doing things. While a company might prefer doing agile development, another would opt for a waterfall approach…even if the application functionality in there minds where to be the same.

But the statement that neither option is better than the other also seems lacking. The question, if rephrased, can shed light into the nearshore vs offshore equation. And a more productive question might be: what can nearshore provide that offshore cannot?

  1. Convenient time zones means that your teams are working during your business hours, and you can always reach them over the phone while at work
  2. More frequent face-to-face interactions, as team members can usually just catch a flight and be at your office by night if you request it early morning.
  3. Specific skillsets not available at cheaper, large volume offshore locations.
  4. The possibility of spreading delivery risks across different continents, decreasing the risk associated with India-centric offshore strategies.
  5. Access to different markets, as many times the same partners that can deliver services can also accelerate a local market presence for the buyer.
  6. Different providers that can offer a different value and cost propositions.

This last point is important. Not all providers deliver from all locations. Sometimes, the best provider might be located onshore; some other times it might be located nearshore or offshore.

Moreover, even rates are some times not fairly assessed. Frances Karamouzis highlights in her blog post titled “China vs India” that it’s not too uncommon for buyers to find themselves comparing rates from Tier 1 providers in one country (rates that typically feature mature contingency plans and disaster recovery provisions) vis a vis rates of tier 3 (or even tier 4) providers located is some other geography. 

This is the part of the post where I become positive. And redress my “no” answer positively. Any outsourcing strategy, offshore development roadmap or strategic sourcing plan should ideally regard nearshore as a component in their overall strategy, along with onsite, onshore and offshore. Only in the context of a master plan can the right blend of delivery options be fairly assessed. And in all those cases, some components would add more value if done offshore, while some others would add more value if done  nearshore.