During the last ten years, more and more companies have moved to outsource models as a strategy that may answer the escalating expectations from their customers as a way to reduce costs and be more competitive, especially in digital businesses.
No matter the motives to dabble into outsourcing models, it is vital to acknowledge two basic concepts around these practices. For instance, do you know the difference between nearshore outsourcing and offshoring outsourcing?
Offshoring outsourcing is a model in which a company’s allies with a group installed in a country typically in a different continent, generally operated in countries like India, China, Philippines, Russia, Romania, or Kenya.
Even though this model tends to be affordable, it has several disadvantages, like significant cultural differences, time zone incompatibilities, language barriers, and in some cases, complex collaboration dynamics. All these conditions may lead to low quality of work.
Just as offshoring, nearshoring outsourcing is a model in which a company allies with a team in a different continent. But in this case, this team’s workers are located in nearby countries.
Talking about the US, nearshore outsourcing tends to happen within alliances in countries like Mexico, Brazil, Costa Rica, Colombia, or Argentina.
There are multiple advantages in choosing this type of outsourcing, and in practical terms, very few disadvantages.
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In the last 15 years, companies have moved from offshoring models to nearshore outsourcing. One of the reasons for this change has to do with the distance between working teams.
When a company uses offshoring models, there is a time gap of up to 12 hours in advance from US time zones. This may cause to have less control over the quality and workflows within teams, as well as confusing deadlines.
When companies ally with nearby teams, time zones are minimal, allowing teams to be very synchronized.
In most cases, cultural barriers and complex communications between languages cancel the benefits of outsourcing models.
With nearshore outsourcing, these inconveniences are minimal because language and culture are similar traits of both teams.
But good synchrony between a company and its allies in another company goes beyond speaking the same language and lifestyles. Outsourcing alliances work best when there’s a cultural affinity between both teams.
The US shares a strong cultural alignment with Latin America. That’s why within the last decade, they have strengthened the outsourcing relationships between US companies and Latin American teams.
One of the most significant benefits of working with a nearshore web development firm is that there’s a vast expert pool with all kinds of technologies, from Java, Python, .NET to React, Angular, or PHP.
One of the main reasons to outsource development projects is to spare costs. While most offshore firms offer lower rates, nearshore companies tend to have better quality standards.
With higher quality, there tend to be fewer working hours, and deadlines are efficiently delivered. All these may cause to reduce general costs to each project.
Colombia is a trend in terms of countries that offer quality alliances of nearshore outsourcing with the US. For instance, this country has a strong workforce skilled in the English language for the call-centers sector.
Living costs and wages in Colombia are relatively similar to those in Pacific Asia (a common offshore destination). In contrast, this country offers the extra benefit of being much near the US, having highly skilled English speakers, and similar time zones.
Countries like Colombia have the same time zones all year long. This is why half a year, Colombia has the same central hour in the US, and the other half is aligned with the west coast time, which may be very convenient for allied clients in the US.
Colombia has a vast talent pool that grows year by year.
The main cities, Bogota and Medellin, hold the biggest and better engineers in the country.
But the growth in professionals has been within the whole country, thanks to several education government programs, high-quality schools, and NPO that seek better access to development education, especially for those with limited resources and for all kinds of educational backgrounds.
Most of the Latinamerican countries, like Colombia, share cultural bonds with the US. There are multiple international companies already located in Colombia that have experience working with American clients, so Colombian teams understand the US’s specifics of working culture.
For many years, Mexico has been upfront in the list of optimal countries to make alliances in terms of nearshore outsourcing from the US.
Within the main reasons for this choice is its proximity: as they are neighbor countries, Mexico shares time zones with the US and that is why they have the same labor hours all year long for most of the country. This helps to arrange conference calls and travels from and to locations.
Even if outsourcing and teams are separated by miles away, they are most of all members of the overall team within a company. This is why it is so important to have cultural alignment between both teams.
When US companies ally with teams in China or India, it is difficult to find teams that have the same cultural proximity that’s ideal to optimal workflows. Mexico has a very familiar cultural history shared with the US, they are close and their cultural, political, and artistic culture are very much aligned.
In general, wages and living costs are much lower in Mexico than in the US. This means that in terms of web or app development, companies can accomplish up to three projects in Mexico for the same price as a single project in the US. And this doesn’t mean that they must subtract effectivity or quality.
In terms of education in IT areas, Mexico ranked number 8 in the top 50 Digital Nations ranking in 2019. This excellent position is due to government efforts to invest annually in STEM education. Mexico has more than 120 universities and each year, 65,000 students graduate in IT careers, much more than in the US.
Costa Rica is one of the main Latin American countries in IT services exportation. According to the Costa Rican Investment Promotion Agency, IT service exports represent 6.2% of the Gross Domestic Product.
To illustrate this, just imagine, in 2018 Costa Rica exported 3,3 billion dollars in services related to information technologies.
To date, more than 20 firms included in Fortune’s 100, and more than 250 multinationals, have selected Costa Rica as their ally to outsource. Among them, we may name Microsoft, Intel, Hewlett Packard, IBM, NBC, Google, and Amazon.
Plus, English language skills are one of the strengths amongst the Costa Rican workers. The 2019 TOEFL’s ranking places Costa Rica in second place in the region, coming only after Trinidad and Tobago.
The local government has promoted English learning education with a program called Alliance for Bilingualism, which purpose is to get more than 15,000 low-income students to reach a B2 level in English by 2022.
On top of that, Costa Rica offers a significant tax relief package to foreign companies that invest in the country.