Outsourcing and Nearshoring: A Reality Check

Recent researches on outsourcing industry have revealed some startling facts about the industry. According to TPI Global Index, in the first quarter of 2012, there is a tremendous fall in the value of offshore outsourcing contracts when compared to last year values of the same period.

There is a decline of 30% in IT outsourcing contracts. The findings indicate that boom in the off shoring sector is coming to an end.

Latin America is leading in nearshoring. Image Source http://www.inboundlogistics.com/cms/article/nearshoring-latin-america-a-closer-look/

Latin America is leading in nearshoring. Image Source

The Lehman crisis in 2008 and the slow growing economy have made the companies to rework on their business models and their outsourcing strategies. The uncertainty in the economy and the on-going recession in Euro zone are tempting the companies to limit their budget.

With development functions almost halted in companies, there is nothing or little to outsource to their overseas partners. On the other hand, outsourcing companies are struggling to renew their contracts with their partners and for those who succeeded to earn the contract do not have much to be happy as contract durations are short.

The decrease in the value of overseas contract is primarily due to the demand for nearshoring. The rise in outsourcing costs in India and China has made on shoring more competitive. Emerging BPO destinations in Europe and Central American regions are posing a threat to offshore outsourcing markets.

Apart from this, the considerable fall in the outsourcing cost in U.K. also is a prominent reason as why companies prefer on shoring. The rising inflation and the fluctuating currency in BPO destinations like India and China have made offshore outsourcing a nightmare for the U.S and Europe companies, who are already struggling in a weak economy. Also, the wage raise in India and China have prompted them to look out for on shoring options.

Organizations are now-a-days realizing that reducing cost is not only what they want, there is much more they require in addition to that. Companies outsourcing their process expect their partners to deliver them expert services in the areas where they lack the same, which means that they are looking for expert consultants and not just contracting partners.

Many analysts are of the opinion that traditional offshore outsourcing firms do not have the capabilities to offer this expertise.

In addition to this, neither UK nor US economy is showing any signs of recovery, which puts an additional pressure on the companies to keep the jobs on-shore. Further, even if there is improvement in services offered by the offshore outsourcing companies, the perception of public on offshoring have not changed. This again pressurizes the companies to outsource their processes to onshore outsourcing companies.

Considering the changing situation, analysts are of the opinion that offshore outsourcing industry should re-work their outsourcing strategies. The governments of those countries which have made their mark in outsourcing should act immediately act based on this changing situation or else they will witness nearshoring waves washing away their foreign investments.

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  1. ClintonCampbell says:

    To get a greater plan of one’s potential offshore outsourcing vendor, it is necessary to check out referrals from prior clientele.

  2. Otto Pacheco says:

    Further, even if there is improvement in services offered by the
    offshore outsourcing companies, the perception of public on offshoring
    have not changed.

  3. Anonymous says:

    Outsourcing has brought greater impact in today’s global economy. But certain figures sometimes fall. Thanks for sharing your story. Keep it up!

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