Offshore vs. Nearshore vs. Onshore: What’s the Difference?

Author: Cheryl Coppens

Whether you require staff augmentation or want to improve your customer experience, outsourcing offers a proven solution. However, before you dive into finding the right partner, understanding the differences between offshore vs nearshore vs onshore will be critical to your overall strategy.  

According to the Business Process Outsourcing (BPO) Market report from Maximize Market Research, the BPO market revenue is expected to increase at a CAGR of 7.09% between 2022 and 2029, reaching almost 293 billion USD.  

With BPO being a rapidly growing market, companies have many options when considering outsourcing.  

Let’s look at the differences, advantages, and disadvantages of offshore vs. nearshore vs. onshore and when to consider each of these options.  

Why Consider BPO? 

The pandemic fundamentally changed how we do business, including customer experience and the CX environment.

Many companies experienced various business challenges, from increased costs and decreased availability of skilled labor to customers demanding better, faster, and more accurate support.  

While the pandemic has faded away, the impacts haven’t, making it mission-critical to address cost, labor and CX concerns.

Outsourcing offers a way to address all of these challenges, but not all solutions are the same. As a result, it’s important to understand the differences between offshore vs. nearshore vs. onshore outsourcing options. 

For many organizations, CX outsourcing represents a missed opportunity. While many companies haven’t considered how outsourcing could support their overall CX strategy, other companies already using BPO may not have fully optimized their current strategy.

By understanding the differences between offshoring, nearshoring, or onshoring, you’ll be well-positioned to make the right decision for your company, whether you’re considering outsourcing or it’s time to revisit your strategy.

Going Offshore: The Ins and Outs  

Offshoring is focused on relocating business processes from one geographical location to another. This usually focuses on moving operations to lower-cost locations, with some of the more common destinations being India, the Philippines, China, Poland, South Africa and Malaysia. 

This type of staff augmentation has been around for decades and is particularly popular with tech startups and enterprise-level contact center facilities.  

One of the biggest reasons companies go offshore for staff augmentation is the substantial cost savings.  Professionals in these locations can be hired for a lower wage than in the originating country. In turn, this can allow the company to maximize hours of operation, scale up more quickly, improve employee satisfaction, and provide an overall better customer experience.  

Another significant benefit of offshoring is language support — many companies specializing in offshoring offer services in a long list of languages, opening up opportunities for you to provide your customers with multilingual support.   

A key drawback to offshoring may be the significant time zone gaps. Many offshoring companies operate within a five to 12-hour difference from the US market, meaning work schedules may need to be adjusted to accommodate each other. It also may be difficult for companies to visit their offshore partners due to distance, cost, and time.   

Choosing Nearshore 

Nearshoring is a term used to refer to a close-proximity outsourcing situation. 

In nearshoring, your company outsources to another country that’s not as far away as offshoring. It’s a subset of offshoring and typically refers to outsourcing to a partner that’s within one to three time zones.

The most significant benefits of nearshoring are that it costs less than onshoring, is closer in proximity than offshoring, and there tend to be fewer barriers than with offshore countries.  

Nearshoring can also offer companies improved quality control. With regular site visits being more feasible, building a solid working relationship that ensures standards are met is much easier.  

The key disadvantage is that while substantially less than onshore rates, nearshoring is usually more expensive than offshore talent. 

Some countries that US companies leverage for nearshore talent include Brazil, Mexico, Argentina, Costa Rica and Chile.   

Staying Onshore

Onshoring is when you outsource but within your home country. It’s definitely worth exploring as part of the conversation about offshore vs. nearshore vs. onshore.

With onshoring, you can take advantage of skilled workers in your country while keeping your business relevant to local customers. An added benefit is that you can provide regional support with work-at-home agents in that same geography. That way your clients feel taken care of by someone who understands any colloquialisms and specifics related to where they live. 

Recently, more businesses have been choosing this option over outsourcing or nearshoring because it enables them to stay close to their customers and eliminate any tax or legal implications of operating outside the US. 

When looking at the pros and cons of offshore vs. nearshore vs. nearshore, it should be no surprise that onshore talent will cost the most. However, reasonable rates are available in the Midwest and the South outside major metropolitan areas.    

Is CX Outsourcing Right for Your Company?  

While most companies with CX operations are good candidates for outsourcing, specific triggers can help you identify if outsourcing is something to consider in the near term. 

Here are six key factors to look at: 

#1. High internal attrition rate or difficulty finding skilled labor 

Many companies are currently feeling the effects of the labor shortage, and finding candidates may be more challenging than it used to be. Outsourcing can help you backfill the necessary positions.  

#2. Operating costs are skyrocketing 

The cost of goods and services continues to increase, and to continually offer a high-level CX — and keep your ESAT in check for existing employees — BPO can help improve efficiency and keep costs on budget.   

#3. You need to scale up or down quickly or seasonally  

Outsourcing can be ideal when your business model needs some flexibility to scale. Whether for seasonal reasons, for overall growth or as a cost-cutting measure, outsourcing can add a layer of agility you won’t necessarily have in-house.   

#4. Issues with customer experience  

Customers being satisfied can make or break a business. If you’re struggling with service levels, staffing, or training, your customers may feel the brunt, causing their overall satisfaction with your business to decrease. Working with the right outsourcing partner can help ensure service and customer experience consistency.   

#5. Challenges covering unusual or difficult hours of operation

Staffing on a 24/7 schedule or operating during non-peak or typical hours can be incredibly challenging. One of the biggest appeals of BPO is that most offer 24/7 coverage, making it easy for your business to run around the clock.   

#6. Need for additional support languages

If you’re operating in the US, your access to labor with specific language skills may be limited. Depending on your customer base, providing services in additional languages may be necessary.  

Most outsourcing partners offer multilingual services, making it easy to ensure your customers can communicate with them more easily (which also helps your customer experience!).  

Offshore vs. Nearshore vs. Onshore: Get the Support You Need by Outsourcing  

Where you land between offshore vs. nearshore vs. onshore will depend on the specific needs of your organization. 

By understanding how you can best leverage a CX outsourcing partner to improve your operations, address staff shortages and increase overall customer satisfaction, you’re setting your company up to thrive. 

At BridgepointeCX, we have extensive knowledge of most BPOs across global regions and have helped hundreds of big and small companies successfully select, deploy, and operate their outsourcing programs.

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