Nearshoring is the practice of hiring a service provider located in a country neighboring one’s own for reduced costs and greater service quality and efficiency.
What is nearshore outsourcing?
The mid-range outsourcing solution in costs, nearshoring utilizes teams located in a country neighboring one’s own to leverage similarities in culture, language, and time zones. In business process outsourcing, organizations choose to hire staff based in onshore, nearshore, or offshore locations to align qualifications, hours of operations, and skills with organizational needs.
Benefits of nearshore outsourcing
Advantages of nearshoring include improvements in customer and employee experiences, operational costs, service quality, speed of service, and compliance.
- CX/EX: Dedicated nearshore agents and internal teams can devote time to their core competencies, reducing overwhelm and improving retention through personalized care.
- Costs: While onshoring is typically the most expensive outsourcing model and offshoring the least expensive, nearshoring is in the middle range, allowing for more flexibility in staffing.
- Quality: Outsourcing experts implement best practices for improving performance, such as standardizing benchmarks, developing scripts, and providing personalized coaching for continuous improvement.
- Speed: Nearshore teams can improve speed of answer through streamlined processes and working in time zones most relevant to customers.
- Compliance: Nearshore agents are familiar with local laws and regulations, reducing risk through demonstrated and continuous compliance adherence.
Factors that influence nearshoring
Nearshoring strategies should be customized to the needs of the audience and the business. These factors can influence the choice to outsource in nearshore locations and ensuing strategies:
- Seasonality: Nearshoring is ideal for businesses experiencing seasonal surges or lulls. Often with bilingual capabilities and in similar time zones, nearshore agents can adapt to fluctuating demand patterns with peak operational efficiency.
- Staffing: The mid-range pricing of nearshore outsourcing enables companies to hire more agents at affordable prices.
- Policy and compliance: Nearshore agents may have familiarity with relevant laws and regulations but should undergo rigorous continuous training for strict adherence to PCI, HIPAA, GDPR, and TCPA, as applicable.
Nearshore outsourcing example
The challenge
In 2023, a jewelry brand required technological support for managing in-store equipment. The previous provider couldn’t resolve issues, leaving a high number of tickets unanswered and negatively impacting store functionality, operational efficiency, and customer satisfaction.
The solution
The jewelry brand turned to Global Response, who hired 7 nearshore IT agents in Mexico capable of supporting 25 to 35 stores each. Global Response provided the brand with a direct vendor integration to resolve equipment issues Monday through Sunday and holidays.
The result
The dedicated support reduced turnaround time from weeks to hours. Tailored training and open inter-department communication effectively resolved issues, reducing abandonment rate to under 10% and raising first-call resolution to 80%.
Onshore vs. nearshore vs. offshore outsourcing
Service provider based in the same country as the company | Service provider based in a neighboring country | Service provider based in a distant country |
Culture and language alignment | Similar cultures, strong bilingual capabilities | Potential cultural or language gaps, multilingual capabilities |
Same time zone as company | Similar time zones | Different time zones |
Deep understanding of laws and region-specific jargon | Familiarity with laws and jargon | Rules-based training, scripts ensure peak performance |
Higher costs with additional languages or hours covered | Bilingual support built into pricing | Seamless multilingual support after business hours |
Highest costs | Mid-range costs | Most affordable costs |
Risks, limitations, and compliance notes of nearshore outsourcing
Failing to implement outsourcing best practices will cause companies to lose out on the benefits of nearshoring, meaning reduced efficiency and potential raised costs. These risks and misuses can affect nearshoring effectiveness:
- Supply chain inefficiencies
- Unaddressed cultural and language barriers
- Political or economic instabilities
- Underestimated setup costs
- Misinterpreted or misunderstood data privacy and regulatory adherence
- Insufficient performance
Companies should take these measures to mitigate risks:
- Establish mature supply chain relationships, streamlined by automations, clear communication, and transparent processes.
- Train agents in brand culture and continuous language improvement. Implement voice conversion technologies to remove background noise or improve understanding.
- Understand the local landscape and regulatory changes. Diversify suppliers and agent pool. Regularly assess risks, making contingency plans and contractual safeguards to address risks. Build strong relationships to navigate challenges.
- Clearly communicate setup costs and potential financial and quality gains.
- Continuously train agents on data privacy and compliance regulations. Implement AI-powered tools to flag potential issues for reduced risk.
- Brand immersion to understand culture, clear standards, scripts, and regular performance evaluations and coaching.
Nearshoring FAQs
What is nearshoring?
Nearshoring is when an organization hires a third-party service provider to handle essential business functions via teams based in a country that neighbors the company’s headquarters. Nearshoring is often seen as the best of both worlds in outsourcing for its mid-range pricing and similar time zones, languages, and cultures as the company and its audience.
What is an example of nearshoring?
An example of nearshoring is when a company based in the US hires a customer support team based in Mexico for their bilingual capabilities and understanding of US culture and regulatory knowledge.
What is nearshoring vs offshoring?
Nearshoring and offshoring are two outsourcing models that vary in where the operational team is located. Nearshoring utilizes agents based in a country that neighbors the company, while offshoring hires agents based in a distant country, often with larger gaps in culture, language, and time zones. Offshoring is usually the least-expensive outsourcing model, with onshoring being the most expensive and nearshoring offering mid-range prices.
What is a good benchmark for nearshore outsourcing?
Measuring performance of nearshore teams should start with establishing a clear Service Level Agreement spelling out performance metrics to be tracked. Expert BPOs use internal high performers to set benchmarks for success. Teams track quality often through speed of answer, average handle time, first-call resolution rates, conversion rates, and customer satisfaction scores.