Choosing Between Offshore, Nearshore and Onshore Outsourcing for Your Business


PUBLISHED: March 27, 2024
Laptop with a map on it exemplifying offshore nearshore or onshore outsourcing practices

Sourcing employees is one of the most important aspects of running a business, especially when considering overhead costs and inefficiencies. You can outsource practically any part of a business, from customer service to data entry to fractional CMOs.

While hiring from elsewhere can be helpful, it isn’t a one-time decision. Once you decide to pass off a task to a third party, you have to choose who that will be. One of the complexities of choosing a partner comes from selecting between offshore, nearshore and onshore outsourcing, as each of these key options come with certain advantages and disadvantages.

The pros and cons of hiring offshore employees

Hiring offshore employees is the process of hiring an individual or organization from anywhere in the world to help you complete a task. The obvious benefit here is that you have a massive talent pool. You can find the most experienced or talented group—as well as the most affordable one.<

However, the primary issue with offshoring is that it can lead you far afield since you might end up working with a company that is half a world away. This can lead to inefficiencies and challenges across different areas of your business—from basic hiring and payroll to communication, language, time zones and more. Fortunately, there are many solutions to these concerns in a 21st-century work environment.

For example, you can use a global employment platform like Oyster to address compliance and regulatory concerns when hiring internationally. Project management tools, such as Slack and Asana, can keep teams closely knit and collaborating smoothly. Adopting a remote-first, asynchronous work model can also ameliorate time-zone concerns.

Though there are solutions to the barriers to entry for offshoring, you should keep its challenges in mind if you want to pursue the benefits of a truly global workforce.

The pros and cons of nearshoring

Nearshore hiring, or “nearshoring,” is similar to global hiring, but it takes place much closer to home, as the name implies.

For instance, if an American company works with a Chinese manufacturer on the other side of the Pacific Ocean, it is offshoring. If it shifts those manufacturing duties to a new partner in Mexico or Canada, it is nearshoring.

For the most part, the benefits of nearshoring are similar to offshoring. You can take advantage of lower operational costs and access a larger, more diverse talent pool. But there are two major differences—one positive and the other negative.

On the one hand, nearshoring can restrict the number of options you have available. You may face greater competition with other brands from your local area who are also interested in internationally contracting closer to home.

On the other hand, nearshoring can give you access to a labor force that is likely much more in line with your own work culture. Geographic proximity makes it easier to coordinate things like language and time zones while still tapping into the cost savings of recruiting from a neighboring country.

The pros and cons of hiring domestically

Hiring domestically goes by multiple names, such as onshoring or domestic contracting. When you choose to onshore, you look for more affordable and effective solutions to operational needs outside of the four walls of your business but still within your own country.

Right off the bat, onshore outsourcing offers several benefits. Working with professionals from your own country and culture makes communication easier—both from a cultural perspective as well as a literal one. It also eliminates the need to worry about jumping through hoops to meet (and keep up with) the compliance and regulatory requirements of multiple governmental structures.

Onshoring also allows you to oversee quality control and even meet face-to-face with contracted teams. Additionally, subtle things, like protecting intellectual property rights, are easier to manage when your entire workforce is located within one country.

With that said, there are still some downsides to consider with this option. One of the simplest is the fact that efficiency and affordability can diminish when you outsource within your own country. If your cost of living is the same, chances are that third-party suppliers will still be able to offer cost savings—just not one as desirable as an overseas alternative.

Another factor to consider is that though you eliminate things like cultural and time-zone barriers, communication and collaboration can still be limited. You won’t have the same oversight as you do over your own employees, and you have little to no say regarding how a domestic third-party individual or organization operates.

Choosing the best option

Understanding the nuances between different hiring models is the first step in choosing which one is best for you. While there is no one-size-fits-all answer, this knowledge can help you identify your best option.

The next step is asking the question: What are your priorities?

Is it more important to cut costs, or is the goal to outsource a part of your business that you’re unable to properly deliver on? Do you value communication and collaboration the most? What about workplace culture? How important is maintaining a certain degree of quality with your products and services?

Getting your priorities in order can help you decide which option is best. From there, you can choose between offshoring, nearshoring or onshoring with confidence, knowing you’re making the best choice to answer your specific needs and foster efficiency and success for your organization.

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