The Case for Nearshore vs. Offshore Outsourcing

October 2023

Historically, offshore locations such as India and the Philippines were considered the ‘go-to’ outsourcing destinations due to their comparatively low-cost offering and large labor pools. However, economic and political factors, infrastructure issues, over-saturation, and general ease of doing business have begun to dissuade North American enterprise purchasers. With increased demand for quality bilingual solutions and a greater need to relate and communicate effectively to the U.S. consumer, attention is being turned closer to home.

As nearshore continues to champion its benefits as low-cost, high-quality destinations for native English-speaking, high-quality bilingual, and even multilingual campaigns, the traditional industry offshore choices are losing ground. The desire to de-risk from these locations has increased as more diverse, cost-desirable solutions become prevalent closer to home, and the offshore landscape is deemed too remote and inefficient to meet the current demands of discerning outsourcing clients.

Key Offshore Disadvantages

Offshore outsourcing has been popular for several decades due to the cost advantages and the large pool of skilled workers. However, there are challenges and drawbacks associated with offshore outsourcing that have led to an increasing interest in nearshore alternatives. Here we look at some of those common drawbacks:

Economic & Political Factors
Economic or political instability has long been a concern in the offshore outsourcing sector and can impact the stability and predictability of the offshore outsourcing industry as a whole. Leading to disruptions in operations and posing risks to the continuity and reliability of services, these challenges can be triggered by both local and global factors and may require additional investments in security and contingency planning.

Infrastructure Issues
Offshore outsourcing operations are often faced with infrastructure challenges. Physical infrastructure such as power supply, telecommunications, and internet connectivity can be insufficient and unreliable, disrupting operations and hindering communications. Similarly, regulatory infrastructure such as Data Protection and Compliance can pose challenges as legal requirements in different jurisdictions can differ.

Communication & Cultural Barriers
When working with teams who mostly speak English as a second language, even with high proficiency rates, effective communication can still be a challenge. Cultural disparities can also lead to misunderstandings in communication, and conflicting holidays and cultural events can fragment calendars and impact productivity.

Distance and Time-Zone Issues
While the significant time difference with North America can be advantageous for 24/7 operations, proximity and accessibility issues have long been the bugbear of outsourcing offshore. The unfavorable time difference and cost/time component of long-haul travel for in-person site visits lead to challenges in real-time communication, response, and collaboration.

Third Shift Syndrome
The third shift, also known as the night or graveyard shift, presents unique challenges. The extensive time gap between the U.S. and India or the Philippines means both volume and quality of customer engagement during U.S. peak hours are severely impacted by this less desirable shift pattern for higher-caliber agents.
This also results in higher absenteeism and attrition in these locations.

Key Nearshore Advantages

The shift towards nearshore outsourcing could be attributed to a combination of factors, including cost considerations, ease of access, communication, and cultural alignment. Companies are finding that nearshore partners can offer a balance of cost-effectiveness, better quality, and ease of collaboration – vital for the success of outsourcing projects.

Ease of Access
With top-tier nearshore locations in the Caribbean and Latin America, the ability to get direct, short flights from major hubs in the United States has become a game-changer when compared to the costly and time-consuming long-haul required for offshore alternatives. And most nearshore locations are places you would want to vacation and have plenty of appeal outside of the office!

Affordability
Nearshore is typically over 50% less cost than an onshore alternative in the United States and is increasingly competitive or better than in many offshore locations when you take into account the improved flexibility, productivity, and performance that nearshore offers, not to mention the improvements in brand loyalty driven by the higher standard of customer interactions.

Excellent English Skills
Access to English-speaking labor is one of the main factors for nearshore success. In the Caribbean, for example, English is the primary language in most islands and is spoken with a neutral accent. In Latin America, English proficiency is necessary for business and international communication, so learning is mandatory in schools from a young age, and English immersion schools are also prevalent.

Bilingual & Multilingual Options
In 2023, approximately 57 million people in the United States speak Spanish at home, and this number is growing year on year. As such, the demand for English/Spanish bilingual outsourcing services is perpetually on the rise. But nearshore also gives you access to other language options, such as Portuguese and French, which are also becoming increasingly attractive to customer experience buyers.

Diverse Employee Skillsets
Due to the high education standards in the Caribbean and Latin America, the capability to perform higher-end activities such as software/technical, health, finance, and accounting tasks is more readily available, allowing nearshore bpos to broaden their service offerings and attract clients from more diverse verticals.

Cultural Empathy and Alignment
Cultural empathy and alignment are essential components that directly impact the effectiveness, efficiency, and success of the agent/customer relationship. Nearshore locations offer talent pools that are fully immersed in U.S. culture through music, media, and consumption and are fully exposed to U.S. norms through the service and tourism sectors.

With nearshore outsourcing offering the perfect blend of proximity, cultural affinity, and logistical ease, it’s easy to see why it’s an increasingly appealing option for many companies. As we see a higher demand for more diverse service offerings, bilingual options, and a greater emphasis on reliability and continuity, companies such as KM² Solutions, with a proven track record in nearshore and an increasingly attractive geographically diverse model, will continue to turn the heads of U.S. enterprise buyers seeking ease of business and more bang for their buck.

About KM² Solutions

KM² Solutions ( KM2 Solutions ) operates contact centers throughout the Caribbean and Latin America, providing outsourced inbound and outbound customer service contact services for voice, chat, email, and mobile. KM² Solutions provides these services to clients in financial services, multi-unit healthcare, insurance services, travel & hospitality, eCommerce, technology & telecommunications, home services, and other sectors. The company provides clients with a host of solutions, including customer support and care, telesales & retention, claims management & processing, appointment setting & schedule management, loan origination & verifications, back-office processing, and technical support. KM² Solutions maintains PCI DSS compliance, completes a SOC 2 audit annually, and has a Compliance Management System that meets the FDIC standards.