My business is in helping other companies staff to scale their teams. As I speak with potential clients about how nearshore outsourcing can benefit their small business, I often am met with confusion, because many companies don’t understand the difference between outsourcing and offshoring — and they often have negative perceptions of these terms as well. So, before I can convince a potential client how their small business stands to benefit from my services, I must educate them on the nature of my business.
Outsourcing and offshoring are not new concepts. Business and corporations have been using them for many years. Outsourcing is when one company hires another company to be responsible for an activity or function, such as accounting and designing. Offshoring is when one company expands its team, with the help of another company, to take advantage of the talent, wages and dollar value in another part of the world.
The first big wave in the use of both business models started in 1970. Offshoring at first was only available for top corporations, as they had to have great telecommunications systems and a team in place in the country they were offshoring to manage the workers. It started with corporations offshoring their facilities to third-world countries to take advantage of the lower wages and dollar value. The next big wave was of companies outsourcing or offshoring their call centers for the same principle. Offshoring and outsourcing used to be viewed poorly, as most big corporations did it just to take advantage of lower costs while sacrificing quality. Indeed, the employees were often not even trained, or the company completely delegated the operations to another company that did not meet their quality standards —and customers noticed.
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After seeing this trend of offshoring, many companies, mostly in India, established what was called offshore outsourcing, where companies help small businesses offshore their staff by handling all the HR and legal compliance, providing office space and staffing in the offshoring country. This started mostly with IT as India became an IT capital. Offshore outsourcing created the offshoring revolution for small business and startups. In 1982, a company in Mexico called Softtek was built; by 2010, it was the largest private IT vendor for the USA in Latin America. They popularized the team nearshoring, which is the same as offshoring – but instead of going to India or the Philippines, companies turned to neighboring countries to be able to have the same time zone and similar culture.
With the advancements in technologies as well as the changes in how small businesses and startups work, working remotely became available for everyone. With the current technologies, any business can work efficiently with remote workers. Companies now are not only offshoring developers and call centers, but many other functions as well, such as product designers, executive assistants, business developers — and the list goes on.
Just a couple years ago, many small businesses were still reluctant or afraid to work remotely, but Covid-19 forced them to adopt this way of working. These companies are now seeing that they had nothing to be afraid of. Indeed, many have told me they have become more productive as their team loses less time in traffic and their office expenses have gone down, including rent space. Many are seeking to stay this way or work in a hybrid model.
Now, with current technologies, small businesses cannot afford to overlook all the benefits remote work, but I would take that a step further. If your local team works well remotely, why wouldn’t a nearshore team work just as well? You may want to consider building a team – or at least part of one – remotely in countries that have excellent talent while generating huge savings for your company. Some of the principal benefits are savings, less time spending on HR transactions, no HR paperwork, and being able to scale faster. With a company to assist you with HR, legal compliance, and staffing, you will have more time to focus and grow your company.
I urge you to consider nearshore outsourcing for your small business. But it has to be done the right way. In my next post, I will share some do’s and don’ts of nearshoring.
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