With the dramatic growth of global outsourcing, the distinction between nearshore and offshore should be quite clear. But too many people are still referring to all work outsourced outside of the U.S. as 'offshore,' which is incorrect. Outsourcing is often mislabeled as 'offshoring' even at the highest levels of business and government.
It is essential to distinguish offshore and nearshore as two completely distinct outsourcing regions. Offshore and nearshore are not only geographically far apart, but each consists of different costs, labor pools, countries, culture, size, history, languages, agent skills, service delivery, market maturity, and saturation.
The most concerning problem resulting from confusing the two geos is the assumption that offshore and nearshore should be priced similarly, or the same, and net the same level of performance.
Over the years, brands have approached us seeking white-glove nearshore business process outsourcing (BPO) call center vendors at an offshore price. Stakeholders assume that there isn’t a demarcation between offshore and nearshore. This colossal misperception can lead to false expectations, faulty planning and budgeting, misdirected resources, and incorrect vendor selection.
In this article, we address the concerns, benefits, and risks associated with nearshoring and offshoring, as well as the differences and similarities between the two regions.
Nearshoring has been around for as long as offshoring. We define a 'nearshore' call center as a physical call center space or work-at-home operation in geographic proximity to the U.S. When considering nearshore BPO call centers, brands should expect the following:
The nearshore region includes Mexico, Central America, and the Caribbean, as well as several South American countries with a burgeoning BPO industry, such as Colombia and Guyana. However, the benefit of geographic proximity wanes deeper into South America (i.e., south of Colombia), as does the comparable availability of scalable English-speaking agents.
We refer to 'offshore' or 'farshore' as a physical call center space or work-at-home operation in countries not in geographic proximity to the U.S. and further away compared to nearshore. When considering offshore call centers, most brands are seeking the following or should set expectations accordingly:
Well-known offshore outsourcing countries include the Philippines, India, Egypt and South Africa. Dozens of other countries represent the offshore landscape in the Asia-Pacific (APAC) region, South America, Europe, the Middle East and Africa, also known as the EMEA region.
There are valid arguments for and against outsourcing outside of the U.S., and all available data must be considered. That said, the following is a comparison chart of key variables when deciding between nearshore, offshore, and even onshore call center vendor services. Please note that the bill rates reflect tier 1 call center BPOs—high-quality operations, not lower-grade BPOs with a narrow focus on below-market pricing.
| KEY VARIABLE | ONSHORE U.S. | NEARSHORE | OFFSHORE |
|
Cost - Bill Rates *Bill rates based on productive hour pricing and average complexity outsourcing programs |
Average bill rate of $35-$45 per hour or $5600 - $7200 per full-time agent per month |
Average bill rate of $14 - $19 per hour or $2,240 – $3,040 per full-time (English) agent per month *Bill rates are lower if Spanish only |
Average bill rate of $10 - $14 per hour or $1,600 - $2,240 per full-time (English) agent *North Africa and Eastern Europe bill rates for English are higher *Mutilingual bill rates $16 - $24 per productive hour depending on the country and agent skill set |
| Pricing Models | Production hour, staffed hour, per FTE, per minute, per call, outcome-based, per incident, hybrids | Production hour, staffed hour, per FTE, per minute, per call, outcome-based, per incident, hybrids | Production hour, staffed hour, per FTE, per minute, per call, outcome-based, per incident, hybrids |
| Accents, English Aptitude Comprehension | Generally strong | Strong to moderate depending on client’s skill set preferences based on the CEFR* scale | Strong to moderate depending on the client’s skill set preference based on the CEFR* scale |
| Labor Market Quality | Concerns due to staffing shortages, rising wages and costs, declining interest in call center jobs | Strong to moderate depending on country and market saturation | Moderate to weak in saturated markets; very strong in unsaturated regions |
| U.S. Cultural Affinity | Strongest | Strong due to geo proximity | Strong to moderate based on vendor, country, and region |
| Expatriate Agents | N/A | Strongest – available in many nearshore operations | Minimal – due to geographic distance from the U.S. |
| Multilingual Services | Strong but at a very high price | Average to strong; Spanish is readily available in most nearshore markets; Portuguese, French, and other language capabilities are growing in some markets | Strongest availability of native and near-native multilingual availability in dozens of languages |
| Proximity to U.S. / Travel Distance | N/A | Strong – average 2-to-6 hour flight times from most major U.S. airports to leading nearshore countries | Weakest – long travel times to-from the U.S. to the Philippines, South Africa, and other offshore markets |
| Time Zones | N/A | Strongest – generally, most nearshore countries are within North American time zones | Weakest in Asia– overnight shifts required to cover U.S. peak time zones; stronger in Europe and Africa (6 to 8 hour time difference vs. U.S. Eastern Standard Time) |
| Agent Attrition | Very high and trending higher | Stable in less-saturated labor markets; trending higher in saturated labor markets but still lower than U.S. attrition | Very high in saturated markets like the Philippines; lower in emerging offshore markets such as South Africa |
| Safety and Security | Strongest | Generally strong depending on country; occasional elevated threat levels and COVID-19-related travel restrictions | Generally strong depending on country; occasional elevated threat levels, geopolitical concerns, and COVID-19 restrictions |
| Overall Risk | Low to moderate | Low to average | Low to average |
| Weather-Related Concerns |
Average to moderate, work-at-home helps to mitigate weather-related interruptions |
Average to moderate concerns (hurricanes) depending on country and site location | Average to moderate depending on country and site location |
| Data Security | Strong to average | Strong to average; data generally resides in the U.S. | Strong to average; data generally resides in the U.S. |
| Scalability (for English) | Average due to high wage demands, rising costs, staffing shortages, low unemployment rate | Strong – smaller markets in comparison to onshore U.S. and offshore but still scalable | Strong to average but agent turnover rising in saturated markets |
Your success rate in any geographic destination, U.S. or otherwise, correlates directly to your selected vendor(s)' quality. We strongly prefer tier 1 vendors, defined by us as elite class, highest quality, highest compliance, mature, low-risk, highly experienced teams, financially stable, major U.S. brand experience, and transformational, not commodity.
When all things are equal, cost is a key factor in choosing an outsourcing destination especially now, during challenging economic times with staffing shortages in the U.S., soaring inflation and rising costs. Even so, a successful vendor relationship requires you to carefully and meticulously vet your options to ensure the highest performance standards and no degradation in quality and customer experience. Lower costs proffered by nearshoring and offshoring are an added benefit of outsourcing outside of the U.S., not a license for BPOs to cut corners.
Too many companies that use outsourcers have learned the hard way that the wrong types of vendors will render your geographic selection entirely superfluous. Selecting a mediocre onshore vendor can be riskier for your company than selecting superior nearshore or offshore vendors. Whether outsourcing transactional, complex, voice or non-voice work, 'shore' and 'vendor' selection are intertwined.
Stakeholders should be well informed about the difference in cost and value, across all outsourcing destinations being considered. Meeting a customer’s idea of great customer service is critical as loyalty and long term-value creation are influenced by great experiences which often start and end with the front-line call center agent. Well-matched vendor partnerships will bring the efficiencies and quality service delivery expected from outsourcing.