International: Nearshoring, an interesting alternative for outsourcing businesses
Yesterday we introduced this week’s theme of IT and services with a technological focus, therefore, it is fitting to discuss a more IT service-oriented theme today. Nearshoring is a concept that many of us are still unfamiliar with, which makes it all the more important to discuss. If the pandemic has taught us anything, this is to say, transcending the realm of medicine and social environments and more to do with business, it is that economic contractions are possible at any time, and they can be critically damaging to enterprises taking place across borders.
Nearshoring is closely related to outsourcing, so this is a good place to start for context. In manufacturing and IT, many corporations operating out of Europe and the United States encounter issues when trying to manufacture or manage their products and services in their country of origin, therefore, many of them look overseas where opportunities are greater, and costs are lower. Yet, referring back to the pandemic and also introducing the theme of geopolitics, distance becomes a crucial factor, and coincidentally is also where nearshoring comes into play. Essentially, the cross-border companies take into consideration a number of factors yet the one that underlies all of them is the proximity, this is to say, the new manufacturing or outsourcing location is much closer to the country of headquarters which leads to a number of other benefits.
The idea of benefits stemming from relocating manufacturing and service hubs for cross-border businesses means that nearshoring has the potential to be an extremely lucrative opportunity for companies the world over, below we will outline some of these in more detail:
Time Zones: Now for IT this is particularly important, technical operations rely on clear communication, and if we look at common outsourcing locations like China, time differences make any kind of troubleshooting or urgent communication dependent on small windows of opportunity. Whereas, on the other hand, nearshoring facilitates more constant flows of communication the likes of which permit IT services to maintain their fluidity and reduce the knock-on effects in the headquarters country.
Innovation: Politics and trade tariffs in the United States upon China have meant that new opportunity is desperately needed for outsourcing businesses. Latin America proved to be a reliable alternative, and we already have an article on this on our blog. However, with regards to nearshoring, it is reported that the industry could be worth US$72 billion to the Latin American economy, and this stems from the technological innovation taking place in the region and allowing certain nations to prove themselves as competition on the global stage. Couple this with Free Trade Zones, Latin American innovation and its proximity with the US demonstrates an alternative angle to nearshoring, as for businesses, it opens the door to benefits previously overlooked by historic ties of interdependence.
Costs: Arguably the most significant factor to nearshoring behind proximity, the decreased cost of freight shipping and communication leaves more money to inject into other aspects of the business, such as staff training or fortifying connections with the nation where the nearshoring is taking place, maybe by traveling more often to the country to meet with employees and maintain high standards and morale amongst the team.
So, if you are interested in finding out more, get in touch with us today! At Creimerman, we are a team of global citizens, working with each client and providing a tailor-made service in order to help make their cross-border ventures a success, and we would love you to be the next.