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What is Nearshore Outsourcing?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 01 December 2016
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Nearshore outsourcing or nearshoring is a practice applied to business outsourcing, which has been adapted from fishing industries. The idea of creating jobs that were near the shore, for people not of the country where a business was located, is an old practice. Lately though, nearshore outsourcing has less to do with the shore and waters, and is more commonly the practice of businesses that create jobs in countries that border or are in close proximity to their own.

There are both benefits and disadvantages to nearshore outsourcing. For businesses, some of the benefits include being able to hire employees that will work for lower wages than would workers in their primary country of business. Additionally, the closeness of the company to which work is outsourced can save money on travel to that country. If employees of the company must travel frequently to oversee outsourced sectors of the company, these savings can be considerable.

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It’s not always the case that nearshore outsourcing saves money for companies. American companies that outsource jobs to Canada may pay about the same as they would for American workers. The benefits in this case may be primarily that they open up trade between the two countries, creating Canadian demand for American products and vice versa. More often, companies that employ this method tend to do so with countries where wages will be lower. This may not be as beneficial to trade, since such countries may not be able to afford the price of American products, but companies argue that nearshore outsourcing to poorer countries allows them to confer lower prices to American consumers.

The other side to nearshore outsourcing is the financial picture for job seekers in the country where the business is located. This has been a common complaint of US workers, especially as more technical jobs, like information technology jobs, are outsourced. Nearshore outsourcing of this type can lead to fewer job opportunities for US workers, and also a lower pay scale, since they are not only competing with American workers, but with foreign workers who will perform work more cheaply. Not all companies that outsource employ nearshoring, and all companies that do tend to receive criticism from workers in fields where jobs have disappeared, such as steel working, information technology, help lines for companies, auto building and the like.

Some companies take a middle of the road approach to nearshore outsourcing. They outsource some jobs to countries nearby to save some money and to boost the economy of neighboring countries, which may encourage more trade. Such companies also maintain an active workforce within their own country. Yet there remain concerns and critiques of even this approach.

For instance, some worry about the security of their information when it is passed to people of other countries. A telephone operator in another country may not be as scrupulous about protecting credit card information as would a fellow citizen (though this is clearly not always the case). Another viable concern for companies that outsource major technologies is the potential for copyright and patent violation in a neighboring country, where copyrights and patents may be difficult to enforce.

A recent move in the American approach to any type of outsourcing is the recommendation that companies that keep jobs in the US ought to be given financial incentives via tax breaks. This line of thought suggests further that companies that outsource jobs that could legitimately be held by American workers might be subject to higher taxes, nullifying the benefits of outsourcing. Those opposed to this tactic argue this would only accomplish raising prices on many goods and services offered to Americans and would ultimately be detrimental to the consumer. Proponents of this plan counter that it is very difficult to be a consumer if you cannot find a job in your field.

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candyquilt
Post 3

I think that nearshore outsourcing works for companies because they are working with people of the same geography and culture. I think that makes us feel that the companies we are working with are more dependable and trustworthy.

I do agree with the disadvantages of nearshore outsourcing to home country mentioned in the article. I wish we didn't have to outsource, but we do. American companies didn't have to oursource before because they were smaller and had less costs to deal with. Now we have grown too big for our own good. The costs are so high that companies look to outsourcing to save production costs.

burcinc
Post 2

I don't know about insourcing, but I think that nearshore outsourcing is a much better alternative to offshore outsourcing.

I would personally prefer that my neighbors benefit from employment opportunities and economic prosperity than really far away countries. I also think that if a country is doing better economically, it is going to be less likely to experience political instability. What I learned from political science courses is that you want neighbors who are stable, otherwise it might affect you as well.

Of course none of these things should happen if it means that my country and my people are going to suffer. But if our economy is doing well and people have jobs, then nearshore outsourcing should be preferred to offshore outsourcing.

ddljohn
Post 1

Maybe we should limit nearshore outsourcing to specific fields? I was just thinking of IT services and customer services. These are not fields where company employers would have to travel often, nor would it provide unique data or technologies that might be stolen or taken advantage of. Plus, what is being sold is a service and not material products.

I think these fields are perfect for nearshore outsourcing. I don't think that it will have such a negative effect on US economy or employment. Am I wrong?

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