Like a giant wave to break, the business practice of nearshoring is about to come crashing down on American companies, positively impacting those businesses that adopt this new form of IT outsourcing. Nearshoring is also taking a big bite out of the offshoring industry and quickly washing away this outdated model of outsourcing.

“Nearshoring is also taking a big bite out of the offshoring industry.”

Since 2005, offshoring has been in steady decline for a number of reasons. Increased costs, management problems, lag times, political instability overseas, less reliable civil infrastructure, exchange rate volatility, undeveloped legal and regulatory systems and a lack of quality control have all contributed to offshoring’s retreat. Instead of cost reductions and operating efficiency, offshoring IT services to faraway lands has translated into headaches and problems for business managers and their customers. Even a cursory comparison between nearshoring and offshoring is proving to be no contest between the two competing forms of outsourcing.

Proximity & Time Zone

The first major difference that jumps out between offshoring and nearshoring is geographic proximity and time zone differences – here the clear advantage goes to nearshoring. With a lag time of up to 12 hours in some cases, offshoring “overseas” will inevitably take its toll on the control of projects and erode effective management and communications, which are next to impossible when half of your team is wide awake and working hard, while the other half is asleep halfway around the world. In contrast, nearshoring allows all the business stakeholders to work in the same or neighboring time zones. Mexico, for example, falls in the central time, which is why more and more U.S. companies are making the switch to this emerging IT resource. Nearshoring allows remote development teams to more easily collaborate, avoiding delays and inefficiencies. This stability inherent in nearshoring also leads to more satisfied and stable workforces.

Today, IT development is more advanced and changing faster than ever. Such tasks often come with liability and risk management issues. This requires careful consideration, clear and effective communications, and often times, the practical need for face-to-face interaction. In both money and time invested, there is a significant difference between a two-day trip to China and taking an hour and thirty-minute flight to the Yucatan Peninsula.

By nearshoring to Mexico, U.S. companies can also benefit from the North American Free Trade Agreement or NAFTA. This agreement between Canada, Mexico and the U.S. involves VISA benefits granted to individuals from the NAFTA countries entering the U.S. as well as flexible work arrangements for Mexican professionals coming to the U.S. to work for long periods of time.

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