The Great Debate: Nearshore vs. Offshore Outsourcing Explained

Nearshoring companies provide third-party professionals and virtual assistants from Mexico and other Latin American (LatAm) nations. These trained and knowledgeable personnel perform delegated business processes for client companies.  

Similarly, offshoring providers in the Philippines and other parts of Asia manage outsourced services to streamline operations, enhance efficiency, and offer cost-effective solutions to businesses worldwide.

Which strategy is best for your company—nearshore or offshore outsourcing? What should you consider when picking the right outsourcing approach for your business?

Keep reading to find answers and learn more about the benefits of each strategy.

Nearshore vs. Offshore Outsourcing: Defining the Strategies

To start, what is business process outsourcing (BPO)? Knowing what the term is helps us understand the main subject. BPO involves delegating specific business functions or activities to a third-party provider to streamline operations and enhance efficiency.

Customer service, help desk, information technology (IT) support, accounting and bookkeeping, human resources (HR), and data entry are some services that can be outsourced to a BPO provider. You can typically contract them out via two approaches: offshoring and nearshoring.

• Offshoring. The service provider’s operations are on another continent, such as Asia. For example, your Shopify store in California outsources its data entry tasks to a BPO provider in the Philippines.
• Nearshoring. The service provider manages the outsourced operations in a country close to your headquarters in the U.S. One fine example is outsourcing IT services to a BPO organization in Mexico.  

Drawing a parallel between nearshore and offshore call centers is akin to comparing oranges cultivated in distinct regions. While they share similarities, distinctions emerge in quality, pricing, location, and other factors.

Nearshore vs. Offshore Outsourcing: Is Nearshoring the Best for You?

To better compare nearshore and offshore outsourcing, let us first explore the benefits of nearshore outsourcing to Mexico and other LatAm regions.

Shared Culture for Strengthened Customer and Client Relationships

One advantage of nearshore versus offshore outsourcing is that Mexico and other LatAm destinations are familiar with the U.S. culture. Millions of Hispanics migrate to and live on American soil. Simultaneously, numerous Americans visit LatAm (South America, Central America, and the Caribbean) for business and pleasure.  

Tens of millions of Latinos live in the U.S. Check out the latest figures: 

Sources: (1) Pew Research Center; (2) Expatriate Consultancy; (3) Latina Republic

The following are some commonalities between the U.S. and LatAm:

• Food. Many Americans enjoy Latino food (e.g., tacos, burritos, and enchiladas). Latinos also appreciate U.S.-made foods (e.g., burgers and hot dogs).  
• History. Once under European rule, LatAm nations and the U.S. celebrate their independence annually. Mexico on September 16th, Brazil on September 7th, Colombia on July 20th, Nicaragua on September 15th, Argentina on July 9th, Chile on September 18th, and the U.S. on July 4th.

Low Attrition Rate for Sustained First-rate Customer Service 

One benefit of nearshore versus offshore outsourcing is that LatAm destinations’ attrition rates are relatively low. In contrast, offshore call centers struggle with employee retention. The average turnover rate in the Philippines is between 30% and 40%, whereas in LatAm, it is less than 15%.

A minimal attrition rate means third-party professionals and virtual assistants in Mexico and neighboring outsourcing hubs offer businesses more stability and continuity to sustain efficiency and productivity. 

Examine some perks of nearshore versus offshore outsourcing in terms of low turnover rates:

• More robust customer or client relationships. Third-party workers who are dedicated to their tasks and happy with their responsibilities have an upbeat attitude. Nearshore BPO personnel are encouraged to provide better customer or client experiences. They can build stronger ties with consumers to increase their loyalty.
• Higher-quality customer service. Low attrition rates imply that the BPO workers have been with the service provider for an extended period, so they quickly understand your business before deployment. They gain a deep awareness of your company’s products and services, client preferences, and customer challenges.

Aligned With U.S. Time for Improved Coordination and Response

The minimal time zone difference is the primary advantage of nearshore versus offshore outsourcing. One of the most significant challenges with offshore BPO is the large time zone gap with the U.S. The Philippines, one of the world’s leading destinations, is 12–14 hours ahead. 

Mexico remains an excellent place to outsource because it shares a time zone with most states in the U.S. Areas across borders differ by up to three hours.

Consider the positive aspects of nearshore versus offshore outsourcing concerning time zone similarity:

• Effortless communication and collaboration. Other advantages of nearshore versus offshore outsourcing are better interactions and teamwork. A smaller time difference indicates fewer interruptions in dealing with client or customer complaints or requests. Scheduling virtual meetings is also more convenient and quicker.
• Augmented work-life integration. The nearshore team benefits from clear, healthy work boundaries. Nearshore third-party contractors have fewer emotional and physical pressures, such as isolation, loneliness, or exhaustion. Offshore personnel who work late nights or graveyard hours are more prone to these work-related health issues. 

Close to the U.S. for Superior Quality Oversight

One advantage of nearshore versus offshore outsourcing is proximity to the U.S. It gives you more control over the outsourced services’ everyday operations and simplifies communication.

Apart from those benefits, the advantage of nearshore versus offshore outsourcing lies in the convenience of in-person meetings. For instance, if you are in California, the team in Mexico City can reach your headquarters in less than four hours with an affordable plane fare.

On the other hand, with an outsourcing team in Manila, you face over 15 hours of travel and pricier plane tickets. Nearshoring allows convenient cross-border travel for upskilling and integration, fostering faster outcomes and enhanced interaction.

Other benefits of proximity to the U.S.:

• Heightened visibility. If your company plans to expand to LatAm countries, a thorough understanding of the local market is necessary to better grasp its intricacies. Closer cooperation with the nearshore provider enables more successful marketing and personnel recruitment efforts.
• More rapid actions. The third-party staff can handle customer complaints quicker, resulting in more satisfied consumers and better service for increased retention.

Bilingual Outsourcing Support for Sales and Revenue Uplift

Reviewing nearshore outsourcing examples highlights the importance of bilingual customer support. Third-party professionals in Mexico and other LatAm regions can transition between English and Spanish to provide with a comprehensive experience for Americans.

According to Forbes, 13% of the U.S. population is Spanish-speaking, making it the nation’s most widely spoken non-English language. After Mexico, the U.S. maintains the world’s second-largest population of Spanish speakers. Following present trends, one in every three Americans will be fluent in Spanish by 2050. 

Discover the benefits of nearshore versus offshore outsourcing relating to bilingual assistance:

• More diverse company image. Bilingual outsourced services reflect your commitment to multiculturalism, leaving clients with a positive impression. It also signifies cultural sensitivity, portraying your business as contemporary and adaptable to diverse backgrounds.
• Higher conversion rates. Customers prefer purchasing products or services from agents who can communicate in their native language. Collaborating with multilingual third-party contractors can boost conversions.
• Broader market. Market expansion is smoother with fewer language barriers. Employing bilingual staff accelerates sales by quickly understanding the preferences and needs of the new market.

Nearshore vs. Offshore Outsourcing: Is Offshoring the Better Choice?

Let us now discuss the advantages of offshoring. 

Unique Work Characteristics for Improved Morale and Productivity

Philippine offshore specialists possess work characteristics that enable them to consistently provide excellent outsourced service and boost support effectiveness.

Check the following work traits of Filipino professionals:  

• Optimistic. Filipino workers maintain a positive outlook in challenging situations. They keep a cheerful and optimistic mindset to sustain productivity, performance, and customer relationships.
• Respectful. Filipino team members show respect to supervisors using titles such as “sir,” “boss,” or “ma’am.” This respect signifies conformity, dedication, and discipline, which are crucial for success.
• Service-focused. Filipino professionals warmly welcome foreigners as part of their culture. They aim to deliver the best service to tourists, consumers, and clients.
• Reliable. Many Filipino workers are team players, quick learners, attentive listeners, and trustworthy assets. They are capable professionals who perform tasks to standards with minimal oversight once they are familiar with the job.
• Dedicated and versatile. Many Filipino contractors tackle tasks diligently, passionately, and responsibly, devising practical solutions to workplace issues.

The unique work qualities of Filipino professionals contribute to better morale, resulting in higher earnings, productivity, and performance.

Flexible to Changing Work Hours for Uninterrupted Services

One limitation of nearshore versus offshore outsourcing is worker adaptability. Third-party Filipino agents are used to graveyard shifts and changing schedules. They are amenable to work during holidays, late nights, and weekends. 

Outsourcing to the Philippines and other offshore centers is excellent for providing 24-hour customer service. If your firm is based in the U.S., your on-site or onshore staff can handle day-to-day operations while the offshore team assumes control at night.

With 24/7 operations, your internal and third-party teams can solve customer problems and tickets more effectively. Customers enjoy reduced waiting periods and delays since agents can quickly answer messages and calls.

Look at the following advantages of 24-hour service: 

• Offer several contact channels. You can enhance client communication with 24/7 technical or sales support by integrating chatbots into communication platforms.
• Attract customers worldwide. Your business is available 24/7, minimizing the impact of time differences. By providing consistent service, you can expand your reach and cultivate a more extensive customer base for improved sales. 

Economical Pricing to Minimize Operating Costs

Compared to nearshore outsourcing destinations, the Philippines and similar centers provide more affordable service rates. Offshore providers have lower labor costs than their nearshore counterparts.

To demonstrate, consider the following average rates for nearshore versus offshore call center outsourcing: 

Uncover the additional cost savings when you choose offshore over nearshore outsourcing:

• Office rent and equipment. No new computer systems, digital devices, or office space are required.
• Wages. Your regular employees are paid consistently despite various company circumstances. Their compensation includes overtime pay, sick leave, insurance, and taxes.
• Staffing. Hiring full-time employees is often costly. A BPO company in the Philippines can manage all hiring processes on your behalf, giving you a ready-to-go offshore crew.
• Training and upskilling. Your BPO partner refreshes and enhances the capabilities of offshore workers to meet emerging needs and contributes to training programs and activities.

Well-versed in English for Flawless Communication and Understanding

Third-party Philippine professionals are better English speakers than nearshore professionals. In the annual EF English Proficiency Index (EF EPI), the Philippines has consistently ranked in the top 30 out of 113 countries and finished 20th overall in 2023. Its expertise is equivalent to that of several Western European countries.

Strong English proficiency is a valuable investment. Filipino remote workers fluent in English can easily engage with you, your customers, and your clients, as the language barrier is almost zero. You can outsource contact center, call center, chat, help desk, and virtual assistant services with such high language skills. 

Offshore support can deliver higher customer satisfaction and experience than nearshore support, resulting in:

• More favorable feedback. Offering excellent customer experiences fosters brand loyalty, discouraging customers from switching to competitors. Instead, they will likely return for more purchases and explore new items or services.
• Reduced acquisition expenses. There’s no need for excessive advertising; satisfied customers become brand advocates. They share positive experiences with others, eliminating the need for increased marketing spending to attract new customers.

Dynamic Call Center Environment for Unparalleled Customer Support

Offshore outsourcing trumps nearshore in call center services. Since 2010, the Philippines has been the world’s call center capital. This title implies that businesses worldwide outsource their call center operations to the nation rather than other hubs. It also suggests that Filipino agents excel at managing both inbound and outbound calls. 

The Philippine Economic Zone Authority (PEZA) reports that the country has almost 800 call center enterprises. Financial institutions, telecommunications corporations, e-commerce sites, and telemarketing firms are just a few industries that rely on Filipino contact centers for support, service, and sales.

The Philippine BPO industry offers many outsourced services, including voice and non-voice features. A significant segment is devoted to call center services. The sector might generate almost $60 billion in revenue by 2028. According to the IT and Business Process Association of the Philippines (IBPAP), the industry can produce up to 1 million extra domestic jobs.

The national government fully supports the outsourcing sector. During lockdowns, it helped offshore call centers by allowing them to maintain tax incentives while working remotely. This measure enabled outsourcing companies to operate seamlessly during the pandemic.

The Bottom Line

What is the best outsourcing approach for you? Where should your business operations be delegated?

Each type of outsourcing has its specific benefits. Nearshoring to Mexico provides cultural familiarity, low attrition rates, and geographical proximity to the U.S. Conversely, offshore outsourcing to the Philippines offers 24/7 operations, cost-effective pricing, and a proficient English-speaking workforce.

Your company’s goals and demands determine whether you outsource to either region. Investing in the correct outsourcing strategy boosts output, efficiency, and income. 

Let’s connect if you want to learn more about how nearshore and offshore outsourcing can help optimize your business!