During the great outsourcing migration at the start of the millennium, it seemed every company wanted to be first on the bandwagon to source technical development and quality assurance teams from Eastern Europe and Southeast Asia. It was relatively easy to find teams with specialized skillsets, such as expertise in developing touchscreen apps or natural-user interfaces. The low overhead promised massive savings over hiring domestically, but with few exceptions, outsourcing so far offshore failed to manifest the piles of money companies were expecting. Nowhere in the world was there as skilled a workforce working for lower wages — so what went wrong?
Many companies fail to realize the hidden costs of offshore outsourcing. Comparing the wages of an outsourced worker and a domestic hire is only one part of the story. When all factors are considered, the outsourced worker can be even more expensive than hiring someone locally in the first place.
Hidden Costs of Offshore Outsourcing
- Time Zones: Having an outsourced team of employees on the other side of the world means shifting all business to do with that team to the early morning or late evenings. It means having as much as a 12-hour gap between consultations with team members, and that equals a huge cut in productivity. If problems arise offshore and the team needs to consult someone in the home office, there is often nothing that can be done for several hours.
- Cultural Gap: Language barriers and cultural divides are real issues. Miscommunications are a constant danger in any business, but they can be especially frequent with team members lacking a common language and cultural context. Additionally, offshore outsourced workers do not always learn a task the same way it is taught domestically, leading to very different ideas of how a project should be completed or when it can be considered finished.
- Travel Costs: Few outsourced teams can work on their own indefinitely with no face-to-face contact with the hiring company. Meetings and visitations to the offshore location are bound to happen, and sending people across the world is expensive and exhausting. It costs money in pure expense, and it costs money in productivity lost by tired employees.
A better, more cost-effective solution to offshore outsourcing is going to nearshore outsourcing. Rather than sending work across the world, consider outsourcing projects to skilled teams able to work more cheaply than a domestic U.S. worker, but with far fewer of the hidden effective costs attached.
Nearshore outsourcing means:
- Similar time zones. By remaining nearshore, the business hours will be very similar or the same. It is much easier for teams to contact one another and get timely responses when work hours are similar.
- Smaller cultural divide. Most nearshore countries have friendly ties with the U.S. With the prominence of trade and tourism between the two countries, there is more familiarity with each other’s culture and language barriers—while still present—are less common.
- Easy travel. Most U.S. airports have direct flights to the best nearshore locations, such as Costa Rica. Instead of spending most of a day or two on a plane, travel takes only a few hours for face-to-face meetings.
There is no doubt that outsourcing, when handled correctly, can help support growth, improve enterprise efficiency and provide significant cost savings. For many companies in the U.S., these goals are best met through nearshore outsourcing. Whether you do not have the staff to handle your project, your staff lacks the necessary skills or you just need staff members to focus on other priorities, nearshoring can be the an excellent way to meet your needs. If you would like to learn more, you can download our whitepaper to help you determine whether your enterprise is ready to embrace nearshore outsourcing and if so, how to select a technology partner for your outsourced project.