The Difference Between Outsourcing, Offshoring, and Nearshoring

From the time that it emerged in the late 1980s until today of the first quarter of 2021, outsourcing customer service has become the pillar of many businesses worldwide. Several companies, especially startups, have benefited a lot from this business strategy. Outsource customer service turned more relevant in 2020 when the COVID-19 pandemic paralyzed the whole world as almost 90% of the businesses were critically affected. Some have chosen to shut down temporarily. Some were forced to downsize employees, and others didn’t have a choice, but to declare permanent closure. Fortunately, many are still surviving with the help of outsourcing.

Two similar business strategies are interrelated to outsourcing: offshoring and nearshoring. Most of the time, these three words were misinterpreted as similar. But in truth, though the main function is the same — transferring business processes to external providers– they have their own objectives.

Let’s define outsourcing, offshoring, and nearshoring:

Outsourcing — in general definition, it is a business process where companies hire an outside party to perform services instead of doing them in-house. This practice became popular as companies discovered how it could cut-cost their expenses favorably. It is an increasingly popular process in which a company agrees to a contract with another company to manage services it needs, but that doesn’t want to provide itself. Small, medium and big entrepreneurs can take advantage of the outsourcing customer service. The outsourcing firm provides for office equipment and recruitment. Through outsourcing, they can acquire highly-skilled workers from different countries. They can obtain goods and services that are not available in their localities. In addition to that, with outsourcing customer service 24/7, they can provide good customer care for their customers, which is essential to increase sales and keep customer loyalty.

A good example is outsource customer support in the Philippines. The number of companies from other countries that continue to outsource customer service is increasing. Currently, there are 1.2 million BPO employees in the country and 788 BPO companies from different countries all over the world.

Offshoring — is the process of transferring a business or business process to foreign countries. It is almost similar to outsourcing which the main goal is to reduce the cost of labor and operational expenses. Normally, international clients hire these offshore companies because their country environments allow them to manufacture products economically or provide the required service at a lower cost. Through offshoring, you can also make your business operations open 24 hours and seven days a week. Take an example when you offshore your online customer service to the Philippines while your business is in the United States. You can still serve your customers from different time zones.

Nearshoring — is a process where companies transfer their services to their neighboring countries. In this method, both parties could benefit from one or more of the following dimensions of proximity, such as geographic locations, time zones, culture, language, and economy. Nearshoring is the opposite of offshoring.

A perfect example to describe nearshoring is Australian companies transfer some of their business process in the Philippines. Aside from the 3 hours time difference, they speak the same language, English — Australia’s official language and the Philippines’ second and official language.

Outsourcing customer service is best done through OnlineFactory.