Offshore vs. Nearshore 2020

Offshore vs. Nearshore

The case for site selection in a post-pandemic era

September 1st, 2020

India and the Philippines have traditionally been considered the ‘go-to’ destinations for business process outsourcing. But with increased political uncertainty, talent and retention problems caused by over-saturation, increased demand for bilingual solutions, and an inability to adapt in a post-COVID era, North American enterprise purchasers have turned their attention closer to home.

In last year’s Global Location Trends report, IBM researchers wrote that the recent decline in investment levels in the Philippines “may also reflect a perceived greater risk and uncertainty about the country’s political environment.”

As Nearshore continues to champion its benefits as low-cost, high-quality destinations for native English-speaking, high-quality bilingual, and even multilingual campaigns; the traditional industry offshore choices are losing ground. The desire to de-risk from these locations has increased as more diverse, cost-desirable solutions become prevalent closer to home, and the offshore landscape is deemed too remote and inefficient to meet the current demands of outsourcing clients.

Nearshore Americas estimates that between 20,000 and 25,000 full-time equivalent positions will migrate from the Philippines to the Americas – both the domestic US and through various third-party channels in the Nearshore – during the next 18 months.

KEY OFFSHORE DISADVANTAGES

POOR LOCAL INFRASTRUCTURE: In the wake of COVID-19, the ability to quickly and successfully pivot to work-from-home models became key to maintaining business continuity. Conditions for many workers in traditional offshore locations are not conducive to a WFH model. Low performing internet infrastructure, overcrowding, and noise pollution being significant factors. “The main problem with WFH is the internet connection is not reliable, so it affects the availability and productivity of the employees,” said Mylene Cabalona, President of the BPO Industry Employees Network (BIEN).

LANGUAGE & CULTURAL DIFFERENCES: When working with teams who are mostly speaking English as a second language, even with high proficiency rates, effective communication can still be a challenge versus communicating with someone who is a native speaker. Combine that with differing cultural and social practices, holidays that don’t coincide or occur in excess compared to the US can fragment calendars and impact productivity.

DISTANCE AND TIME-ZONE ISSUES: Proximity and accessibility issues have long been the bugbear of outsourcing offshore. The ability to engage with offshore teams remotely is severely hampered by the unfavorable time difference and cost/time component of long-haul travel for in-person site visits. An increased lack of appetite for non-essential travel will only detract from the desire to outsource offshore.

THIRD SHIFT SYNDROME:

The third shift, also known as the night shift or graveyard shift also presents unique challenges. The extensive time gap between the US and India or the Philippines means both volume and quality of customer engagement during US peak hours are severely impacted by this less desirable shift pattern for higher-caliber agents. This also results in higher absenteeism and attrition in these locations.

KEY NEARSHORE ADVANTAGES

Latin America and Caribbean regions are now becoming leading destinations for call center and shared service center operations. This increased interest from US buyers is driven by a proven business model, the value of investment, and high-quality options for both voice and non-voice operations.

EXCELLENT ENGLISH SKILLS: Access to English speaking labor is one of the main factors for nearshore success. In the Caribbean for example, English is the primary language in most of the islands. In Latin America, English proficiency is increasingly necessary for business and international communication, and as such, learning is mandatory in schools. English emersion schools are common in these countries.

EASE OF ACCESS: The ability to get direct, short flights from major hubs in the United States has become an important factor as companies realize the time and expense required to run a nearshore geography versus an offshore location like India or the Philippines.

AFFORDABILITY: You will typically find costs to be 50% to 75% lower than in the United States and increasingly competitive or better than in many offshore locations for a higher standard of interactions.

BILINGUAL & MULTILINGUAL OPTIONS:

An estimated 41 million US residents or 13.5% of the population now speak Spanish at home in the US. With high standards of education in Latin American markets, the ease and fluency of bilingual skills, even multilingual skills, coupled with cultural empathy, and diverse location options are increasingly attractive to customer experience buyers.

An estimated 41 million US residents, or 13.5% of the population, speak Spanish at home.
CNN Editorial Research – March 6, 2020

DIVERSE EMPLOYEE SKILLSETS: Due to the high standards of education in the Caribbean and Latin America, the capability to perform higher-end activities such as software/technical, health, finance, and accounting are prevalent.

CULTURAL EMPATHY & ALIGNMENT: Through common media consumption and a cultural familiarity through exposure to US norms in the service and tourism sectors, empathy and alignment are evident in every interaction.

RELIABILITY: As we’ve seen from the successful shift to Work-From-Home models, nearshore locations possess advanced telecommunications and otherwise reliable local infrastructure, and stable political and economic environments.

As we enter a post-pandemic era of business process outsourcing, we expect a higher demand for more diverse service offerings, bilingual options, and a greater emphasis on reliability and continuity. Companies such as KM2 Solutions, with a proven track record in nearshore, and an increasingly attractive geographically diverse model, will continue to turn the heads of US enterprise buyers seeking ease and business, and more bang for their buck.

About KM² Solutions

KM² Solutions ( KM2 Solutions ) operates contact centers throughout the Caribbean and Latin America, providing outsourced inbound and outbound customer service contact services for voice, chat, email, and mobile. KM² Solutions provides these services to clients in financial services, multi-unit healthcare, insurance services, travel & hospitality, eCommerce, technology & telecommunications, home services, and other sectors. The company provides clients with a host of solutions, including customer support and care, telesales & retention, claims management & processing, appointment setting & schedule management, loan origination & verifications, back-office processing, and technical support. KM² Solutions maintains PCI DSS compliance, completes a SOC 2 audit annually, and has a Compliance Management System that meets the FDIC standards.

Offshore vs. Nearshore

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