- November 14, 2019
- Posted by: Phillip W. Duff
- Categories: Business plans, Business plans, International, Opinions
Global outsourcing has been around for many years and the BPO (Business Process Outsourcing) model has evolved in recent years to include many different delivery methods but the driving force is always better labor at cheaper costs. In recent years the trend is to nearshore VS offshore due to many factors.
What is Nearshore?
Nearshore is defined as within a few hours of the US via a plane which is usually defined as Latin America and the Caribbean. The definition also includes language skills of the country specifically English and the maturity of the BPO market there. Costs are the primary driving force and bilingual services are also considered.
Nearshore Market Share
2.8B in BPO revenue
1.3B in BPO revenue
750M in BPO revenue
600M in BPO revenue
400M in BPO revenue
368M in BPO revenue
Why is Nearshore so Hot?
The main reason is the decline of quality labor in the US, Canada and the UK. The maturity of call centers like in Jamaica has been a driving force to the US company looking for quality outsourcing. Proximity has also driven companies to nearshore as the time and expense to visit the offshore locations is immense.
Also as tourism increases in a location the familiarity of US customs, accents and culture increases. For example Jamaica who’s population is 3M had 3M tourists on the island in the first 90 days of 2019. Time zones, strong X pats and managers are also drivers.
Nearshore provides US companies with the ability to “test the waters” or test the idea of lowering costs at outsourcing destinations that are close to home.
Is Nearshore The New Offshore?
The Philippines remains the leading English-voice outsourcing market in the world. But with recent price increases, the lack of familiarity of the US culture and proximity the numbers are declining in the East.
Many companies who do use offshore have a company presence there they have US staff that work directly with the vendors and travel back and forth to the US at great expense. This becomes an expense hard to justify.
Nearshore Is More Expensive Than Offshore
Nearshore labor and operating costs are higher than offshore call centers, in general. But superior English, cultural awareness and increased production bridge the gap in costs.
US companies that use nearshore labor can achieve a 40% – 60% cost savings compared to in-sourced and outsourced all in hourly rates from call centers in the US.
The maturity of the market is the next big thing as markets like Jamaica reach the 40 year mark of call center development will they reach a tipping point? Will the pricing increase? Will some countries reach lower unemployment rates and drive labor elsewhere? All good questions that only time will tell.
Personally I am very involved in the Jamaican labor force and the BPO sector and it is a mature market with many Fortune 500 companies involved. The BPO sector has doubled again in Jamaica and is set to do so again by 2020.
Political concerns in each region are the biggest possible roadblock but many countries like Jamaica need the business to survive so their political structure will always support he industry but many Latin countries have more volatile political environments.
Take advantage of the current nearshore market and watch for signs of maturity and saturation. The industry is growing and the opportunities are great. The smart buyer will find the right vendor to serve their needs so take time picking that vendor.
For more info on this subject contact Phillip w. Duff at [email protected]