Nearshore versus offshore outsourcing

Monday, March 9, 2009

In one of the online forum, I found an interesting discussion about growth of nearshore outsourcing Vs offshore outsouring. For those of you, who would like to know what nearshore and offshore means.

If a client is US provides oursourcing contract to Indian IT company then its considered as "Offshoring" and if the same client provided a outsourcing contract to a company in Argentina or any LATAM country then it is considered as "nearshoring". There are additional benefits in "nearshore" outsourcing , they are, mostly in same time zone, there is lesser cultural difference and quicker travel to client location when required.

Most of the prominent IT service provider has already set or in the process of setting near shore centre, so the question is that whether there would be higher growth to these "nearshore" centre compared to "offshore" centre in future?. If the growth happens in "nearshore" centre then it could impact Indian IT industry in the future.

Regionwise, for US market Latin American countries are considered for nearshore centres, for Europe - eastern Europe\ Ukraine are consider near shore and for countries like Japan, Hong kong - China is considered as near shore centre.

As these "near shore" centre become more mature there would be an increased competition to "Offshore" (Indian) centres.

Its a) Price and b) Quality of deliverables within the defined scope & schedule of the projects are the driving factors for offshoring. If the nearshore center can provide their business in comparable terms (cost & quality) then , the client would definetely prefer nearshore center (for project deliverables) because of the added facility the customer can enjoy like same timezone, culture and in some case even language to an extent.

Hence, apart from the general slow down in IT sector now, this is going to be an additional challenge in the near future for Indian software consultants and Indian IT companies, particularly the companies which does not have presence in these "near shore" countries.

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