Offshoring and Nearshoring: What’s the Difference?

The outsourcing industry is really gathering pace, exceeding US$250 billion globally for the first time in 2022 and is expected to exhibit a compound annual growth rate of 9.1% between now and 2030. In real terms, this means increasing numbers of businesses are waking up to the benefits of business process outsourcing (BPO) and are leveraging the benefits of remote work within their operational models.

But outsourcing is not uniform, and in fact, there are different types of BPO approaches. Two of the main categories are offshoring and nearshoring, but what’s the difference here, and which one is the best bet for your organisation?

Defining Offshoring and Nearshoring

The key difference between offshoring and nearshoring is the distance involved. As you may expect, an offshoring opportunity will generally be located far away from your business premises, perhaps even on the other side of the world. This means your offshore staff will be operating on a completely different continent from your in-house teams.

Conversely, nearshoring BPO teams are deployed not quite so far away. They will still be operating in a different country to your own, but may be located much closer to your base of operations. For example, an offshoring strategy for an American business might involve working with teams in the Philippines or Indonesia, while their nearshoring strategy may include teams from neighbouring Mexico.

But it’s not just distance that needs to be taken into account — time is also important. With offshoring, remote work teams are likely to be located in a very different time zone from your in-house teams. In the above example, Manila is 12 hours ahead of New York on the United States East Coast and 15 hours ahead of San Francisco on the West Coast. Teams in Mexico or Brazil, however, are likely to be in the same — or not so different — time zone, and these would be considered nearshore locations.

In Australia, Sydney is only two hours ahead of Manila, while Auckland in New Zealand is only four hours ahead of the Philippine capital. Even though Australia and New Zealand are both located a considerable distance from the Philippines, Filipino teams could still be considered as nearshore options due to the similarities in time.

Choosing a Strategy

With offshoring and nearshoring now defined, it’s time to think about which strategy is best for you. Both nearshoring and offshoring have their own advantages and disadvantages.

Pros and Cons of Offshoring

Offshoring Pros

  • Offshoring may be more cost-effective in some cases. For example, labour costs in the Philippines tend to be lower than those in Brazil, making offshoring a cheaper option for companies in North America.
  • Major disparities in operating hours can be an advantage, particularly for businesses seeking to offer 24-hour support to customers and other users.

Offshoring Cons

  • Some businesses may struggle with the lack of alignment in terms of working hours.
  • Business practices may be radically different — for example, a British firm may find it easier to work with a team from the Czech Republic compared to a team from Indonesia, due to differences in corporate culture.

Pros and Cons of Nearshoring

Nearshoring Pros

  • There is more alignment in terms of working hours, making it easier to achieve effective collaboration and communication.
  • Business practices may be more compatible in a nearshore arrangement than in an offshore arrangement.

Nearshoring Cons

  • Depending on your business’s location, nearshoring can be more expensive than offshoring. Businesses seeking to offer 24-hour support or other round-the-clock services may not be able to achieve this with a nearshore partner.

The Philippines as an Offshore/Nearshore BPO Hybrid

The nearshore staff vs offshore staff debate doesn’t need to be a binary choice. In many ways, the Philippines offers the best of both worlds for global businesses looking to leverage the power of BPO in a way that suits them. Take a look at why the Southeast Asian nation represents a strong choice for an offshore/nearshore outsourcing hybrid strategy.

  • The Philippines aligns with time zones in locations such as Australia and New Zealand with only a few hours’ difference.
  • The nation is well positioned for delivering opposite-hour services in locations like the United States and Western Europe.
  • Outsourced staff in the Philippines have a high level of English communication skills, eliminating many of the collaboration difficulties associated with offshoring.
  • The country has a well-developed outsourcing market, with the educational and technological infrastructure to provide high-quality services on a seamless basis.
  • The business culture of the Philippines aligns with those in locations such as Australia and New Zealand, Western Europe, and North America, further breaking down barriers between BPO partners.

Discover More About the Potential of Outsourcing to the Philippines

Here at enablesGroup, we are the experts when it comes to connecting businesses with high-quality outsourcing opportunities in the Philippines. Browse our site to discover more about the numerous BPO options available, or reach out to our team directly to discuss your needs.