Nearshore, offshore and blended-shore: understanding your outsourcing options.

Many firms today are evaluating outsourcing options and measuring the cost-savings potential. The choices can be confusing when companies look at their options: there are nearshore providers, offshore providers and a new category of blended-shore firms. How can companies decide? The basic rules of choosing any vendor apply: carefully define your needs, and then match them to the capabilities of the providers. While price is an important consideration, the best outsourcing relationships deliver the right combination of services, languages, customer satisfaction and value.

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Defining The Shores

Today's outsourcing environment uses a variety of terms to define the outsourcer's scope of operations. The following describes how each type of outsourcer delivers services.

Backyard outsourcing goes back to where IT outsourcing all started--a service that was intended to be transparent to internal or external customers. With the advent of global expansion, low-cost labor regions and advances in technology, outsourcing options increased greatly. Over time, we have experienced a wave of movement toward offshore, which has resulted in both positive and negative impacts on service, cost and customer satisfaction. There are a number of companies that have the capacity and capabilities to provide the local feel and transparency of the initial goal of outsourcing--to be an extension of the company technically and culturally.

Offshore outsourcing requires choosing a partner to deliver your IT support from a country outside of your primary region. Offshore outsourcing has been equated with lower support costs, primarily delivered from Indian companies, but that only tells part of the story. Companies choose offshore outsourcers for the same reasons they consider outsourcing in general: to focus on their core business, to improve scale, to deliver more services, as well as to achieve cost savings. And there are more shores than just India--outsourcing providers are located in Eastern Europe, Asia and South America as well, each with its own advantages and offerings.

Nearshore outsourcing is very similar to offshore outsourcing, except that the outsourcing firms generally are located in close proximity with a corporation's border. In the case of the United States, this generally means either Canada or Mexico--shores that are near ours. The objective is to capture the lower prices afforded by these countries while still maintaining a close geographical relationship. Because travel times are minimized, some companies feel that nearshore partners are easier to manage and evaluate. Because the U.S. has established business relations with countries such as Canada and Mexico, particularly via the NAFTA treaty, it can be less challenging to develop contractual relationships with nearshore providers than doing so with those in emerging countries.