In today’s world, most organisations no longer limit themselves to the city, country, or even part of the world they are based in. They frequently decide to transfer one or more of their business operations (software development, customer care, human resources, for example) to a different country. By doing so they’re outsourcing.
While a few years ago, organisations preferred offshoring mainly to cut costs, lately it is becoming less profitable to implement offshoring services. Nearshoring is starting to be seen as a strategically beneficial option to improve project cost and management. Nearshore partners often provide better services and there are less risks and uncertainties involved when comparing to working with an offshore partner.
Near / Off / On / Far + shoring
Outsourcing refers to the process of hiring an entity outside the organisation for a task that used to or could be performed by an employee or team within the organisation. Depending if a company chooses to outsource to a far away or to a nearby country, outsourcing can take a different name — onshoring, offshoring, farshoring and nearshoring.
Onshoring is when outsourcing takes place within the same country. Offshoring is when outsourcing takes place across national boarders. Companies choose to offshore their operating activities because it’s usually much cheaper than working with companies in local markets or nearby countries.
Despite the attractive advantage of minimising expenses, offshoring also has a few downsides. Longer travelling hours to offshore locations, difficulty in maintaining regular contact across different time zones, large cultural discrepancies and language barriers, legal and tax issues can be real challenges, and ultimately influence business relationships and work efficiency.
Those disadvantages can make organisations choose to transfer work to companies that are still less expensive (when comparing to their local market) and geographically closer — nearshoring.
Nearshoring is a great option for companies who want constant, real-time collaboration with their in-house staff. By transferring one or more of their business operations to a nearby country, organisations will maximise profits and minimise expenses.
Benefits of nearshoring
Closer geographical proximity — Travel expenses will be significantly lower when comparing to visiting an offshore location half way across the world.
Fewer time zone differences — Business hours will be very similar making teams communication much easier and responses more timely.
Smaller cultural gap — Most nearshore countries have friendly ties and more familiarity with each other’s culture and language barriers are possibly less common.
Cost-efficiency — Companies providing nearshore teams are based in countries with lower hourly rates, thus reducing costs for the hiring company.
Skilled-team leading to higher quality products — Partnering with a nearshoring company means hiring a high-quality team with employees that are usually better educated and trained.
Move forward with a pair of fresh new eyes — Hiring an experienced nearshore partner will bring a new look at old problems, providing innovative solutions and addressing unforeseen complications on-time and efficiently.
Data and legal security — When a company decides to nearshore, it’s more likely that they work with countries who have similar laws.
Portugal as a nearshoring destination
Over the past decade, Portugal has become a prime destination for nearshoring and offshoring services. The operating costs are some of the lowest in Europe, without compromising quality and level of service. These are some of the reasons why Portugal has become a popular nearshoring services provider in Europe:
Attractive communications and technological infrastructures — Portugal stands out when it comes to broadband coverage and new generation networks.
Linguistic abilities — According to the National Institute of Statistics more than 70% of the Portuguese population knows at least one foreign language, being English the most common one (59,6%), followed by French (21,5%) and Spanish (14,8%).
Great talent — The quality of higher education and the high level of education of the population builds up the ground for a workforce of skilled, creative and flexible professionals.
Easy travel and communication — Portugal time zone is GMT which makes it easier to communicate with other countries, specially European ones (with only a 1 or 2 hour difference).
Stability and security — Portugal is a country with a stable political, economic and social situation. The quality of life is also a competitiveness factor, assuring a stable service, team performance and client relationship.
Great cost-benefit ratio — Nearshoring in Portugal provides access to skilled people at a lower cost in a country with political and social stability.
Although a farshoring approach is generally more cost-effective than a nearshoring one, the chances of experiencing difficulties concerning communication and cultural diferences are higher. Nearshoring seems to be the best business model for companies that want to save time and money without compromising quality.
Nearshoring is starting to be seen as a strategically beneficial option to improve project cost and management.
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