Nearshore vs Offshore: What Is The Difference?

Often, accounting and finance firms struggle to meet their human resources requirements locally or find that hiring specialists in their region is prohibitively costly in a, honestly, shrinking job market. As a result, many are choosing to outsource.

Outsourced accountants and financial teams can be found abroad, usually on the other side of the ocean, as they offer more benefits than hiring in-house. But when faced with the decision, two options arise:

• Offshore means you hire talent from another country with a different time zone.
• Nearshore means you hire forms a neighboring country that is a shorter distance away.

Let’s see which one is more convenient for you.

Unraveling the Concepts: Nearshore vs Offshore

We are talking obviously about the location and geographic proximity of outsourced services in relation to your own business. Both nearshore and offshore outsourcing models offer significant cost savings for businesses. This comes from leveraging economies where the cost of labor is considerably lower than in the home country.

Also, considering the talent pool is virtually endless, businesses can focus on scouting through skills and experiences to draw upon rather than committing to what they can find nearby. This flexibility can be particularly beneficial during peak periods or for project-specific work. It also allows businesses to respond more effectively to changes in market conditions, ensuring they have the right resources when they need them at a more efficient cost.

Offshore Outsourcing

Offshore outsourcing involves contracting talent from a country that is geographically distant. For example, a company in the U.S. might engage a service provider in India or the Philippines to find accountants and financial professionals. While this method offers cost-saving benefits due to lower wage rates, it can also pose challenges, such as different time zones, potential cultural barriers, and communication difficulties.

Nearshore Outsourcing

Nearshore outsourcing fills the gap between onshore and offshore outsourcing. It involves hiring talent from countries that are geographically closer to your home country. For American businesses, nearshore outsourcing often involves contracting services to South American countries such as Argentina, Colombia, or Brazil.

These countries provide the advantage of being in a similar time zone, offering a compatible cultural context, and often boasting a high standard of English proficiency. These factors combine to form a nearshore talent solution that provides cost advantages without the operational difficulties associated with offshore outsourcing.

While nearshore outsourcing may not match the low hourly rates typically offered by offshore companies, its advantages cannot be overstated. The benefits of operating in the same or close time zone, coupled with reduced travel time for in-person visits, make for not just cost savings but also a less stressful experience for you and your organization. Additionally, these factors contribute to a more streamlined and enriched development process.

The Nearshore Advantage: A Closer Look

Time Zone Compatibility

One of the significant benefits of nearshore outsourcing is the synchronicity of work schedules, thanks to the minimal time zone differences. For instance, Buenos Aires is only four hours ahead of Los Angeles and merely an hour ahead of New York. This slight variance facilitates a shared, conventional business hours schedule between your company and the nearshore team. Consequently, real-time communication, quick response times, and enhanced collaboration between your in-house team and your outsourced talent.

Cultural Compatibility and Language Proficiency

Sharing a similar cultural context leads to better understanding and communication, which can significantly enhance service delivery. Additionally, countries such as Argentina and Colombia have a strong English language education system, producing professionals with a high level of English proficiency.

Cost-Effective Talent Solution

Nearshore outsourcing offers a financially beneficial alternative to onshore outsourcing, as it provides access to a large pool of skilled professionals at a lower cost. As such, it allows businesses to maintain a high standard of work while optimizing operational expenses.

Why South America Is a Preferred Nearshore Area

One of the regions gaining traction as a popular nearshore area is South America. Countries such as Argentina, Colombia, and Brazil offer unique advantages for businesses seeking nearshore talent solutions.

Argentina: High Proficiency in English and Compatible Time Zone

Argentina stands out as a country with high English proficiency, as per the EF English Proficiency Index. Furthermore, Argentina's time zone aligns closely with North America, allowing for real-time communication during standard business hours. The country is also known for its robust educational system, particularly in areas such as finance and IT, ensuring a steady stream of highly qualified professionals.

Colombia: Rapidly Growing IT Industry and Talented Workforce

Colombia has seen significant growth in its IT industry, making it an attractive destination for businesses seeking nearshore talent solutions. The country has also invested heavily in education, resulting in a skilled workforce. Combined with a time zone compatible with North America and a high degree of English proficiency, Colombia offers a compelling option for nearshore outsourcing.

Brazil: Large Talent Pool and Strong IT Industry

Brazil is the largest economy in South America and offers a considerable pool of talent, particularly in the IT sector. The country has made significant strides in improving English proficiency and offers a time zone compatible with North American businesses. The combination of these factors makes Brazil an attractive nearshore outsourcing option.

Offshore vs Nearshore, what is the best option then?

The best choice between offshore and nearshore outsourcing heavily relies on what's most important to your business. Yet, one choice often overlooked, which typically falls under the nearshore umbrella, deserves deeper consideration.

• If you're aiming for the most affordable hourly rate, offshore outsourcing indisputably offers the most competitive labor costs. However, be aware that unforeseen costs may arise due to communication issues, high travel expenses, and production hold-ups.
• If working with a domestic team is un-negotiable then you can’t escape onshore hiring. However, this approach comes with a heftier price tag and the challenge of availability with a local job market constantly shrinking.
• Nearshore development provides a middle ground, combining the advantages of both onshore and offshore. It allows cost reduction while offering some of the benefits of onshore outsourcing, such as seamless communication during business hours. Although the typical hourly rate may exceed that of offshore outsourcing, savings are regained through improved communication efficiency and reduced travel expenses.

Kevin Mitchell, CPA

Senior Manager and CPA with over 20 years of experience in accounting and financial services, specializing in risk management and regulatory compliance. Skilled in managing audits and leading teams to deliver exceptional services. Proud father of two.

🔗 Kevin Mitchell | LinkedIn