If a business is to attain a competitive edge in the market, it must make prudent decisions that will cut down cost over-heads and optimize the profits. It is about being ahead of peers in doing business. One of the most viable and sustainable ways of doing this is through outsourcing. There are three main categories of outsourcing: nearshoring, onshoring, and offshoring.
Nearshore Software Development Outsourcing
The term nearshoring refers to a situation where a company seeks labor from countries in geographical proximity, where labor is cheaper, for instance, a US company outsourcing labor to job applicants located in Mexico.
There are numerous benefits of nearshoring. To start with, nearshore services help a company to save on the cost of recruitment and salaries. This is because it hires from nearby countries, countries that enjoy a lower standard of living. Outsourcing often comes with the need to work in different time zones. With nearshoring, team members are able to work in near similar time zones.
Like the other options, nearshoring has its share of weaknesses. If your business requires the use of specialized hires, then you might want to think of other options and not nearshoring. Again, if you are to use nearshoring, you must have a digital culture, otherwise, this model is not going to be compatible with your organizational culture.
Onshoring is the set of operations and production processes within the national borders. By choosing onshoring, a country is boosting its own economy by ensuring that salaries are paid to nationals, who will, in turn, spend it nationally. Onshoring makes it easy for companies to meet the quality and acceptable standards in any country. It should be noted that the supply chain, as it applies in onshoring, is simplified, and does not experience major disruption.
The greatest problem with onshoring is that the talent pool can be very narrow and seeking the right talent may not be easy. Therefore, if a business wants to use this strategy in order to outsource, then, it is very important that one is patient.
Again, with onshoring, it might be very difficult or impossible to cut down on the cost of labor. Basically, the new hires will be paid almost the same amount as what you are paying. If there are any possible savings, then that is very little.
Offshoring is outsourcing business activities to countries that are based overseas, and far from the host country. The greatest advantage with this option is that a company can hire staff who can accept a lower amount of pay, and a substantial low pay for that matter.
However, offshoring comes with a number of barriers, Cultural and linguistic barriers are the most common. In addition to that, because of the distance involved, companies may have to invest in more supervision. Lastly, teams may not communicate in real-time with each other due to the time difference.
Benefits of Outsourcing
Sam Darwish, writing for Forbes, states that outsourcing helps your business to grow more quickly, retain flexibility, benefit from top talent, maintain the focus of the company, and increase brand loyalty.
Strategic outsourcing leads to a bigger pool of specialists, who comes in handy in turning around the fortunes of the company. It should be noted that companies which outsource are likely to experience very few cases of a general strike thereby diversifying the risks. Overall, outsourcing helps the company to concentrate on its core competencies thereby optimizing production outcomes.
The type of outsourcing that one chooses depends on the specific needs of the company. Again, the direction of the company can determine the type of outsourcing to be chosen. For instance, if a company plans massive expansion and the future hiring of many more employees, then the choice of offshoring could be more prudent. Factors to consider when choosing outsourcing companies include cost, resources, technology, and the ability to meet deadlines. It is important to choose a company that will require minimal supervision.
Still, if a business is not able to make an informed decision, then the best thing is to seek the services of a consultant or the professional. The professionals have the right training and vast experience to help companies to make the most consequential decisions.