Land Ho! The Ins and Outs of Nearshoring Explained

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Offshoring operations to other countries has long been considered a solution to rising labor costs and an opportunity to free up internal resources. But before moving business processes to a distant location, companies may want to consider a closer option: nearshoring. While offshoring continues to be a cost-effective way for many companies to increase output, certain circumstances and needs could make nearshoring the better option. I’ll explore those reasons and how to reap the benefits of nearshoring here.

Similar Culture for Less
Nearshoring can offer an alternative or complement to onshore and offshore support. It combines the cultural similarities of the home brand with the cost efficiencies of another country. In other words, associates who are in the same (or nearly the same) time zone can provide more accent-neutral customer support with greater brand awareness. Canada, for example, has a very similar culture to the United States, but the cost of doing business is typically lower in Canada.

Notably though, labor wage rates have been rising in Canada. Two of the largest provinces, Ontario and Quebec, have recently increased their minimum wage rates. In fact, Ontario Premier Kathleen Wynne has announced a plan to increase the provincial minimum wage to $15 an hour by January 1, 2019. Coupled with our strengthening currency, these developments could reduce Canada’s nearshore appeal. Expect companies to keep an eye on wage increases in Canada and possibly explore opportunities in nearby Latin American countries.

Small is Just Right
Nearshoring countries often offer limited scale and resources, which can be a deal breaker for some companies. For example, New Zealand’s population of 4.7 million offers a small labor pool from which to hire, making it a challenge for companies looking for a large outsourced staff. But not all organizations are looking for large-scale operations. Instead, some may prefer countries that offer niche services as a differentiator. In that case, nearshoring to a small, controllable team could sit very well with some companies.

Testing the Waters
Nearshoring is also a good way to test the offshore waters. Using a phased approach that moves some operations to a nearshore facility can help organizations get accustomed to outsourcing tasks. Companies can monitor operational efficiency and customer satisfaction to identify pain points before committing to a larger offshore operation.

How can I tell if nearshoring makes sense for my company?
Business leaders should ask themselves a few questions before jumping into nearshoring. Is the company’s customer journey map well defined and easily duplicated? Is there extensive documentation of business processes so that it can be transitioned to another market? Will it be easy for outsourced associates to learn about the company’s products?

Also, what type of support is needed? If back office or non-voice support with very little customer interaction is needed, perhaps offshoring is a better fit. On the other hand, if associates are expected to speak regularly with customers, nearshoring might be a better choice, whereas email, chat, or text-based transactions can be handled by nearshore or offshore associates.

For certain business needs and objectives, nearshoring can be a highly beneficial practice for both employees and customers. At the same time, outsourcing can take many forms and nearshoring is just one of them. Find out more about nearshoring and other outsourcing options in the TTEC e-book, “Outsourcing: Which Shore is Right for You?”