As part of Solutions Review’s Premium Content Series—a collection of contributed columns written by industry experts in maturing software categories—Andres Garzon, the CEO of Jobsity, shares some insights on nearshore vs. offshore staffing to help businesses select the best strategy for their needs.
Behind every great company is a great talent strategy. There’s always a focus on how CEOs and C-level leadership influence a company’s performance, but it’s the rank-and-file employees who perform the day-to-day functions of a company. As a result, choosing the right talent has a massive influence on a company’s success and the mark they leave on the world.
U.S. technology talent is incredibly scarce, so hiring and retention strategies require novel and creative approaches to secure the best employees. One option is to expand the search beyond the team’s current location and consider candidates outside the U.S. borders. However, this framework has strategic choices—some with substantial determining factors—at play. In this article, let’s examine the discussion of nearshore vs. offshore staffing and identify some of the factors businesses should consider.
How to Decide Between Nearshore vs. Offshore Staffing
While each staffing strategy is designed to provide companies or projects with the best employee at the right time, each niche and need requires a specific framework for selecting the right solution.
The idea of an offshore worker stems from the early days of globalization when manufacturers sought to move factories outside the U.S. to lower overhead, provide more affordable salaries, and increase profit. When making things like cars, worker location doesn’t matter very much since the offshore workers don’t need to interact with the home team.
In tech, for example, offshore workers frequently receive the same I.T. and software development tasks as in-house U.S. teams. However, companies that want to implement talent augmentation strategies may encounter new challenges. While “going offshore” can provide access to an ever-expanding talent pool and bring substantial cost savings, it often causes noticeable difficulties when the offshore team and the in-house team are required to integrate and work together as one company.
Enter nearshore staff augmentation. When offshore was born, it sought to solve one central problem: how to run a business with less overhead. It wasn’t a lack of local talent which drove companies offshore—but today, that is the driving issue. In the U.S. alone, it’s estimated that there will soon be a shortage of 1.4 million software developers, but only 400,000 local software developer graduates for those roles. The nearshore strategy is about filling positions that could be filled with local workers but for whom local talent is challenging to find.
Nearshore, like offshore, seeks to augment a company with foreign-living talent. But unlike offshore, nearshore aims to do this with teammates from neighboring countries throughout North and South America—hence the use of the word “near”—shores. Strategically, nearshore was born due to the changing nature of the work that augmented staff members are asked to do. As company integration became the norm, teammates sharing similar working outlooks, home cultures, time zones, and linguistic familiarity became more attractive.
These simple metrics are helpful guidelines for companies considering nearshore augmentation.
Will your augmented teammates be working alongside your in-house team? If your business requires live collaboration, then nearshore—where teammates share at least a 3-5 hour work overlap per day—may prevail. If no overlap is required, and a “night shift/day shift” working structure is ideal, offshore might be better. Time zones can play a significant role in nearshore or offshore teammates feeling like cohesive “members” of your company instead of a seemingly invisible contractor. When deciding, ask yourself what impact you want this teammate to have and how visible you want them to be to your team.
Suppose your remote and local teams need to interact on an ongoing, collaborative, or iterative basis. In that case, communication will be a significant factor in deciding which strategy to employ. Communication can involve language, working style, and collaboration technology tools like Slack. Nearshore teams tend to share educational models with the U.S. and have a linguistic link to North American teams. In contrast, offshore teams have various home cultures and education standards. It’s worth investigating the specifics of your needs and the standards of the target talent when deciding upon a strategy.
Last but certainly not least is the cost of augmenting staff with one of these strategies. One great advantage of nearshore vs. offshore teams is the reduced cost per employee. However, this difference can vary significantly in where you hire. For example, in less developed South Asian countries like Pakistan or Bangladesh, prices per hour for an offshore teammate can be pretty low.
For example, this average increases in India, where the market is more competitive. However, the average costs of workers can rise for nearshore teams based on the skill level of the workers, as a significant number of high-skill workers reside in this region. Either option substantially reduces spending because many nearshore firms exist that pay benefits and retirement, so you don’t have to. Significant savings can be had by hiring offshore and nearshore, but each comes with a cost-benefit balance.
All-in-all, great talent is distributed worldwide, and seeking out and hiring talent anywhere is a strategic advantage for any firm struggling to find the best and brightest. The question of the ‘where’ to find talent becomes less relevant than the ‘how’ to integrate into your company. It is a crucial decision that businesses must approach mindfully, as it will have an outsized influence on your company, its performance, and your bottom line. Because at the end of the day, this talent is your company.
- How Companies Can Decide on Nearshore vs. Offshore Staffing - April 20, 2022