The term nearshoring is derived from offshoring, the mechanism by which a company transfers its business processes or technology to third parties located in distant destinations, in order to reduce costs. Nearshoring, by extension, is the provision of these services from countries that are close to the contractor, generally sharing borders.

A classic example of offshoring has been contracting companies that are located in China or India, mainly for the provision of technological services. The last decade has seen a lot of movement in this regard.

It turns out that offshoring is not turning out as profitable as expected, for various reasons including the rising cost of human capital in both India and China, poor legal and regulatory infrastructure, security risks, and differences in time, culture and language. At first, companies thought that technological communication could obviate the value of face-to-face meetings, but soon realized that this had a negative impact on productivity in the long run. As a result of these circumstances, nearshoring became the new bet of companies in developed countries, in search of efficiency and low cost, and this is where Latin America comes in.

In the US, for example, the advantages of nearshoring with LATAM are evident: they share similar time zones with Latin America, physical proximity allows customers to travel and have face-to-face meetings with their suppliers, they have much greater cultural affinity and language, in addition, the region already has a fairly mature technological platform, capable of offering quality even at a low cost (due to exchange rate and the cost of living, mainly). The governments of the region have also understood the importance of technological development, which is why they have generally invested to promote this area.

A recent study by IDC, the global market intelligence company in the field of technology, concludes that “Latin America offers the North American market a unique combination of geographic proximity and partners with developed capabilities in CRM-BPO, and with sufficient maturity to provide quality services to its customers.” Among the countries with the greatest potential, Mexico, Argentina and Brasil stand out.

When you think about your business, remember the advantage of providing nearshoring services.

You can see the IDC study here.

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