See also
Look up nearshore#English in Wiktionary, the free dictionary.
Nearshoring is the outsourcing of business processes, especially information technology processes, to companies in a nearby country, often sharing a border with the target country. [1] Both parties expect to benefit from one or more of the following dimensions of proximity: geographic, temporal (time zone), cultural, social, linguistic, economic, political, or historical linkages. [2]
Nearshoring is a type of outsourcing where a given company seeks a development partner in a different country or region. However, what distinguishes nearshoring from other types of outsourcing is the fact that the development partner is still in close proximity. Since companies are usually in the same time zone, this facilitates communication and allows for frequent visits. [3]
Offshoring involves shifting work to a foreign, distant organization in order to reduce production costs. Offshoring is subject to several different constraints, however, such as time lag between the parties, differences in local employment laws and practices, and oversight. [4] A Western European IT company, say, might outsource software writing to a company in India, which specialises in such work, [5] to take advantage of low cost, and skilled labour with a common language, but the distance between the two means reduced face contact, therefore less control of the project, and greater vulnerability to threats such as intellectual property theft and fraud. [4]
In Europe, nearshoring relationships are between clients in larger European economies and various providers in smaller European nations. Major centers are in Spain [ citation needed ], Czech Republic, Hungary, Portugal, Poland, Slovakia, Romania, Bulgaria, Belarus and the Baltic. There are also nearshore centers in larger markets, such as Russia and Ukraine. These destinations are attractive because they are low-cost, have skilled labor forces, and a less stringent regulatory environment, but crucially they allow for more day to day physical oversight. They also have strong cultural ties to the major economic centers in Europe. [6] For example, Bulgaria is now considered to be a viable outsourcing destination for such companies as German software company SAP, where labor costs are low, and the skills available, but which is also closer to home. [5] In 2009, the Central-Eastern European Outsourcing Association (CEEOA) published research estimating that the Eastern European region has over 95,000 IT specialists involved in the industry, working for close to 5000 companies. [7]
In the USA, American clients nearshore to Canada [1] and Mexico, [4] [8] or both, [9] as well as to many other nations in Central and South America, like Argentina, Brazil, Costa Rica or Colombia, and the Caribbean, to the Dominican Republic, Guyana, Jamaica, and the U.S. Virgin Islands.
A popular type of nearshoring is in software development, with the main benefit being many skilled developers available at low cost. [10] Call centers, shared services centers, and BPO (Business Process Outsourcing) are also common choices for nearshoring, as the value of offshore outsourcing hotbeds like Philippines lowers. [11]
The complexity of offshoring stems from different languages and cultures, long distances and different time zones, spending more time and effort on establishing trust and long-term relationships, overriding communication barriers and activities of that kind. Many nearshore providers attempted to circumvent communication and project management barriers by developing new ways to align organizations. As a result, concepts such as remote insourcing were created to give clients more control in managing their own projects. Despite recent developments, nearshoring does not necessarily overcome all of the barriers, but the proximity allows more flexibility to align organizations. [4]
Nearshoring has become a differentiator for those nations and providers who wish to set themselves apart from sourcing centers in Asia, especially the dominant India, which itself is seeing a sharp decline in BPO job growth. [12]
The English language is the cornerstone of any Nearshore BPO or IT services operation, and has become a sought-after skill as companies strive to capture a larger chunk of the US market. With the triple helix of university, industry, and government all collaborating to develop the language further, the hunt for skilled, English-speaking talent is slowly becoming easier. [13]
The term “Near Shore” was patented by the Mexican IT firm Softtek in 1997, [14] seeking to enter the U.S. market with a differentiated approach to outsourcing. [15] This coincided with the rising demand for offshoring in the late 1990s, [16] served primarily by established Indian IT vendors. [15] Rather than competing directly with those firms, Softtek positioned nearshoring as a complementary option for companies interested in diversifying their sourcing portfolios and managing operational risk. [17]
This new model established the firm as a near-shore alternative, [17] leveraging Mexico’s proximity to the United States, shared time zones, and cultural similarities as key competitive advantages. [15] To facilitate cross-border operations, Softtek leveraged NAFTA-enabled travel and visa advantages, aligned its holiday schedules with those of the U.S., and collaborated with local universities to cultivate a skilled workforce suited to international client needs. [18] Establishing rigorous quality standards also became essential to compete with traditional offshore providers, with Softtek demonstrating that high levels of process maturity, like CMMI Level 5 and Six Sigma certifications, were achievable outside of India. [17]
Credited with inventing the nearshore concept [19] through its Near Shore model, Softtek bore much of the responsibility for educating the market on its benefits and distinctions from traditional offshoring. [20] This challenge led to the development of the Total Cost of Engagement (TCE) model in 2005, [21] a framework designed to assess not only direct costs but also the broader expenses associated with outsourcing, thus demonstrating the long-term value nearshoring could offer beyond hourly rates. [16] The TCE model helped position nearshore services as a cost-effective alternative that could achieve comparable savings to offshore providers while addressing additional aspects like operational alignment and risk management. [20]
In 2023, Nuevo León Governor Samuel García acknowledged Softtek's pioneering role in nearshoring, noting that the concept had contributed to Mexico's economic growth and increased foreign direct investment. [22]
Outsourcing is a business practice in which companies use external providers to carry out business processes, that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another.
Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored.
Convergys Corporation was a corporation based in Cincinnati, Ohio, that sold customer management and information management products, primarily to large corporations. Customer management products included agent assisted, self-service and care software tailored to the communications, financial services, technology, retail, healthcare and government markets. Information management provided convergent billing and business support system (BSS) products and services including revenue management, product and order management, and customer care management to telecom, utilities, and cable/satellite/broadband service providers. They had approximately 130,000 employees across 33 countries.
Business Process Outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a second-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.
Knowledge process outsourcing (KPO) describes the outsourcing of core information-related business activities which are competitively important or form an integral part of a company's value chain. KPO requires advanced analytical and technical skills as well as a high degree of specialist expertise.
One of the most dynamic and fastest growing sectors in the Philippines is the information technology–business process outsourcing (IT-BPO) industry. The industry is composed of eight sub-sectors, namely, knowledge process outsourcing and back offices, animation, call centers, software development, game development, engineering design, and medical transcription. The IT-BPO industry plays a major role in the country's growth and development.
Business process outsourcing to India refers to the business process outsourcing services in the outsourcing industry in India, catering mainly to Western operations of multinational corporations (MNCs).
Genpact Ltd. is an American multinational information technology services, consulting, and outsourcing company headquartered in New York City, New York. Founded in Gurgaon, India, and legally domiciled in Bermuda, Genpact currently employs more than 125,000 people and provides services to clients in over 30 countries worldwide. Genpact is listed on the NYSE and generated revenues of US$4.48 billion in 2023.
On-demand outsourcing is a trend in outsourcing wherein major internal operations processes of a company are being shifted to a provider that is paid for by the number of transactions involved. The business transferring the services pays for the quality, special skills and the competence of the service provider's employees. There has been an expansion of the outsourcing concept to include on-demand outsourcing. This refers to the process undertaken by business managers to adopt an outsourcing policy that ensures that the specific business and supplies including technical manpower are accessed as the need arises. It focuses a business strategy to improve its goods and services and to drive a business towards quality improvement.
In software engineering, offshore custom software development consists in offshoring the software development process in a country where production costs are lower, thus decreasing budget spending.
Softtek is a Mexico-based information technology company, operating in North America, Latin America, Europe and Asia. Headquartered in Monterrey, Mexico, the company has 15,000 associates in Mexico and abroad and is the largest private IT vendor in Latin America. The company offers application software development, testing, security and support; business process outsourcing (BPO); and IT infrastructure management, security and support to more than 400 corporations in more than 20 countries. It also acts as a value added reseller (VAR) for SAP, Microsoft, Blue Yonder, AWS and other software products. The company has trademarked the term "nearshoring" to describe the provision of outsourced services to customers in other countries that are in proximity.
Body shopping is the practice of consultancy firms recruiting workers in order to contract their services out on a tactical short- to mid-term basis. IT services companies that practice body shopping assert that they provide real services rather than the "sham" of merely farming out professionals to overseas companies.
Dalian Software Park, also called DLSP, is an industrial zone, created in 1998 in the western suburbs of Dalian City, Liaoning Province, China, where many of the world's large and medium-sized IT-related companies have set up shop to do software development and information services. It is part of Dalian Hi-tech Zone in the broader sense. While American and European companies typically have gone to Bangalore and other cities in India because of the English language capability, Japanese companies have gone to Dalian and other cities in China due to the Japanese language capability.
Software Testing Outsourcing is software testing carried out by an independent company or a group of people not directly involved in the process of software development.
Levi9 IT Services is a European provider of nearshore software engineering services with development and delivery centers across Serbia, Ukraine and Romania and headquarters in Amsterdam.
Impact sourcing, also known as socially responsible outsourcing, refers to an arm of the business process outsourcing (BPO) industry. It employs people at the base of the pyramid or socioeconomically disadvantaged individuals as principal workers in BPO centers to provide high-quality, information-based services to domestic and international clients. The traditional BPO sector is typically associated with high-end, high-contact functions like call centers, which require significant education and language literacy levels. The impact sourcing sector focuses on utilizing workers from poor and vulnerable communities to perform functions with lower and moderate skill requirements such as scanning documents, data-entry work, data verification and cleaning, video tagging, and microwork.
Endava PLC is a British public-listed software development company, founded in 2000 in London, United Kingdom. It provides digital transformation consulting, agile software development services and various automation solutions.
Robotic process automation (RPA) is a form of business process automation that is based on software robots (bots) or artificial intelligence (AI) agents. RPA should not be confused with artificial intelligence as it is based on automotive technology following a predefined workflow. It is sometimes referred to as software robotics.
Acquire Business Process Outsourcing is an Australian based global business process outsourcing firm that specializes in back office support, customer acquisition, customer service, technical support, lead generation and software development.
Blanca Avelina Treviño de Vega is president and executive director of Softtek, a Mexican information and communication technologies company, the largest independent service provider in Latin America.
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