Is nearshoring the new IT outsourcing?


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Offshore IT outsourcing has over-promised and under-delivered, but now some businesses are beginning to evaluate alternatives

Mixed results have shown that offshore IT outsourcing -- all the rage for the past decade -- has over-promised and under-delivered. As our ability to calculate total cost of ownership of offshore outsourcing has advanced, CIOs are beginning to evaluate alternatives, many of which may be better bargains than previously thought.

In 2003, offshore outsourcing's main selling point was cost. It was the next frontier in cost savings and increased efficiencies in application development and infrastructure support services. Offshoring offered a grand picture of 10-20% savings on labor arbitrage, the ability to focus on core business, and access to an unlimited source of IT experts. While much of this is marginally true, especially relative to short term costs, potential for failure of offshore IT  outsourcing strategies is also high when the approach is shortsighted. As CIOs factor in issues related to regulatory compliance, protection of intellectual property, culture and language differences, political implications (such as stability and espionage) and even time zones into the outsourcing decision, many are considering other tactics.

India took an early lead as a center for offshore outsourcing, and numerous locations from the Middle East to Eastern Europe are vying to attract outsourced work.  However, nearshoring -- or the transfer of IT to a nearby country -- is becoming increasingly popular. By partnering with a nearshore solution provider, you can reduce the complexity and risks associated with the distance between a client and a service provider such as travel cost and time-zone differences.  Additionally, as Mexico, Canada and the U.S. are each others' premier trading partners and have quite a bit of regulatory overlap, nearshore outsourcing can potentially alleviate many compliance-related issues.

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