Nearshore, Offshore And Blended-Shore: Understanding Your Outsourcing Options

Customer Inter@ction Solutions, May 2005 by Hoen, Jim

Many firms today are evaluating outsourcing options and measuring the cost-savings potential. The choices can be confusing when companies look at their options: there are nearshore providers, offshore providers and a new category of blended-shore firms. How can companies decide? The basic rules of choosing any vendor apply: carefully define your needs, and then match them to the capabilities of the providers. While price is an important consideration, the best outsourcing relationships deliver the right combination of services, languages, customer satisfaction and value.

Defining The Shores

Today's outsourcing environment uses a variety of terms to define the outsourcer's scope of operations. The following describes how each type of outsourcer delivers services.

Backyard outsourcing goes back to where IT outsourcing all started - a service that was intended to be transparent to internal or external customers. With the advent of global expansion, low-cost labor regions and advances in technology, outsourcing options increased greatly. Over time, we have experienced a wave of movement toward offshore, which has resulted in both positive and negative impacts on service, cost and customer satisfaction. There are a number of companies that have the capacity and capabilities to provide the local feel and transparency of the initial goal of outsourcing - to be an extension of the company technically and culturally.

Offshore outsourcing requires choosing a partner to deliver your IT support from a country outside of your primary region. Offshore outsourcing has been equated with lower support costs, primarily delivered from Indian companies, but that only tells part of the story. Companies choose offshore outsourcers for the same reasons they consider outsourcing in general: to focus on their core business, to improve scale, to deliver more services, as well as to achieve cost savings. And there are more shores than just India - outsourcing providers are located in Eastern Europe, Asia and South America as well, each with its own advantages and offerings.

Nearshore outsourcing is very similar to offshore outsourcing, except that the outsourcing firms generally are located in close proximity with a corporation's border. In the case of the United States, this generally means either Canada or Mexico - shores that are near ours. The objective is to capture the lower prices afforded by these countries while still maintaining a close geographical relationship. Because travel times are minimized, some companies feel that nearshore partners are easier to manage and evaluate. Because the U.S. has established business relations with countries such as Canada and Mexico, particularly via the NAFTA treaty, it can be less challenging to develop contractual relationships with nearshore providers than doing so with those in emerging countries.

Blended-shore outsourcing requires selecting one partner that can leverage its multiple locations to deliver a full spectrum of scale, services and savings. The outsourcing firm makes the investments in building contact centers in multiple countries, staffing them, managing them and maintaining them. It can quickly ramp up or scale back depending on the customer's call volume, so the customer only pays for the capacity he or she needs. Blended-shore outsourcing firms can extend a lot of services that would be cost prohibitive for companies, such as after-hours coverage, multiple languages, platform or application expertise, disaster recovery options and extensive reporting. Being able to dynamically route calls to the next available agent who has the right skills along with the right language offers huge advantages over single-site outsourcing.

Matching Needs With The Right Approach

As with any contract, companies considering the outsourcing option need to develop a list of business benefits they hope to achieve. Following are several of the top areas companies usually list when developing their outsourcing criteria, including the advantages and disadvantages for each approach.

English language skills. There have been many stories in the press in recent months regarding customers' dissatisfaction with Indian call centers. The quality of the support services provided is not the issue - the ability to communicate effectively with the call center agent is. If strong English language support is important to your customer base, think carefully before choosing a nearshore or offshore outsourcing provider. A blended-shore strategy is more effective at connecting customer callers to a native English-speaking agent, as long as the provider has at least one U.S.-based location.

Multilingual and native language support. Global companies can deliver consistent support and can capture significant savings when they consolidate help desks from multiple countries into one outsourced contract. However, the outsourcer must have agents who speak multiple languages. Nearshore and offshore locations usually offer bilingual agents; for example, Mexican agents generally speak both Spanish and English. Companies that need consistent service and support for locations in multiple geographies, delivered in local languages, can benefit from the blended-shore approach. Because these providers have facilities in multiple countries, they can deliver calls to the most appropriate agent fluent in the customer's native language.