Offshoring: Staying closer to home

India and China are about to get some competition, thanks to a recent surge in near-shoring in Canada and Latin America

The next big thing in offshoring is near-shoring. That's the consensus of many pundits who follow the phenomenal growth of outsourcing in its myriad forms.

More and more companies will keep outsourced work on a shorter leash, according to Linda Cohen, a Gartner offshoring analyst, who observes that "too much is going too far away."

What a company saves in labor arbitrage by locating in such faraway places as India and China is offset by the extra work required for oversight, quality control, and translation, according to Cohen. "Offshoring requires a great deal of interaction and a high touch," she says.

On the other hand, with near-shoring, a company can enjoy the benefits of a talented labor pool at a lower cost per employee, without having to deal with far-flung time zones, not to mention the long-haul air travel required to cut deals and keep things on track.

Moreover, as the U.S. government threatens to close loopholes on immigration and H-1B visas, companies such as Microsoft are already making the next move, opening near-shore development centers in countries with more liberal temporary and permanent immigration policies than the United States. For example, just last month, Microsoft announced its first development center in Canada.

Nor is Microsoft being coy about why it is opening a Canadian development center just over the border from Redmond. An official statement from the company sums it up: "The Vancouver area is a global gateway with a diverse population, is close to Microsoft's corporate offices in Redmond, and allows the company to recruit and retain highly skilled people affected by immigration issues in the U.S."

In other words, thanks to Canada's liberal policies on temporary work visas for high tech, Microsoft can bring in world-class software engineers from anywhere in the globe and set them up a mere 30 miles from the U.S. border.

Next stop: Latin America. Hot spots such as Costa Rica may not be right next door, but Gartner's Cohen says many companies are looking at Latin America as the next source of talent. After all, it's still many time zones closer than India or China.

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