We keep being told that everything is very different and changing more rapidly than during any other time in the history of mankind. The question that arises is how to keep the fast pace and align organizational structures to increase workforce productivity and process improvement.
In the light of the ever-changing societies, today companies are increasingly asking which of their value chain activities are best performed within their own company and which may be outsourced: nearshored or offshored.
This article serves as an introduction for explaining these terms: nearshoring and offshoring, and for emphasizing their importance for the company’s development.
Nearshoring: outsourcing of a company’s business processes to geographically closer companies in different countries, which allows the business to move their operations to a more cost-effective location with fewer time zone differences, cultural discrepancies, and a greater level of control in the decision-making processes.
Offshoring: Outsourcing to companies across national borders with a greater discrepancy in the geographical location, most likely operating in a different economic environment and time zone.
Originally implemented as a cost-cutting measure, nearshoring and offshoring have been used by many companies across the world in a vast span of industries as a main resource for freeing up internal resources. Following this trend, the potential of nearshoring and offshoring has been discovered, and these measures became more capability-sourcing than cost-cutting measures.
Today, nearshoring and offshoring emerged as measures for strengthening the strategic capabilities of the companies in many ways:
- To tap into the global talent
- Overcome talent shortage and reduce resources for recruitment.
- Process and management done better
- Focusing on core business processes and disrupting traditional business models
- Lower infrastructure investments
- Accelerate migration to new technology
- Lowering risks
- Taking control of all operations
- Innovation and cultural diversity
- Safer intellectual property
- Enhanced risk management
Considering all of the advantages, companies are nearshoring and offshoring even their R&D to different nations and external providers. The same enables them to manage closer connections, better client services and engaging in multifaceted and collaborative innovations. In today’s positive business climate, the adoption of a strategic view of capability sourcing and not only cost-cutting sourcing, isn’t an option but an imperative for competitiveness on the market.