Nearshoring vs. Offshoring
When looking at using outsourced staff, companies must make the decision of whether to nearshore or offshore. Nearshoring is where United States companies use staff in Latin America whereas offshoring is where United States companies use staff in the Philippines or India. Each location has its own strengths and weaknesses. Latin American and India, for example, are known for their tech talent and the Philippines is known for its strong English-speaking skills and back-office workers like accountants and medical billing specialist.
We have had multiple clients approach us about the best place for them to outsource and decided to put a comparative analysis together of multiple, common, outsourcing destinations. Figure 1 shows analysis of the Philippines, Colombia, Mexico, Argentina, India, Chile, and Costa Rica as outsourcing destinations. We analyzed each country based on English speaking skills, available workforce, real GDP per capita, murder rate, wage rates, estimated BPO rates, and number of BPO employees.
We were able to draw several conclusions from our analysis:
- The Philippines is the cheapest location to outsource, closely followed by India and Colombia, and has the strongest English-speaking capabilities.
- Roughly, there is a cost/instability curve with Costa Rica and Chile being reasonable places to operate but probably 75-100% more expensive than the Philippines. Then there are places with similar costs to the Philippines, like Argentina and Colombia, and India but significant political, currency, and stability risks.
- The only way to get bilingual Spanish -English support is through Latin America. Despite being a Spanish colony, the Philippines does not have sufficient Spanish speakers.
- The Philippines is the only location with English listed as an official language and the language of instruction in school.
- The Philippines and India have by far the most experienced BPO employees, but Colombia and Mexico are emerging as popular locations for global BPOs.
To identify the best place to build your outsourced team, you first need to think about your goals for the initiative. Each of these countries has specific reasons for why BPOs open service delivery centers and support clients. Determine first what you want in an outsourcing initiative and then align your choice of country based on those goals.
If you want a free business assessment and proposal, please contact us and one of our consultants can assess your needs and determine which destination would be best for you.
References:
1. https://www.ef.com/wwen/epi/
2.https://www.cia.gov/the-world-factbook/countries
3.https://en.wikipedia.org/wiki/List_of_countries_by_English-speaking_population
4.https://worldpopulationreview.com/country-rankings/murder-rate-by-country
6. https://www.numbeo.com/cost-of-living/country_price_rankings?itemId=105, India is Connext estimate
7.https://www.magellan-solutions.com/blog/philippine-bpo-industry-statistics-2022/
8. https://investincolombia.com.co/en/sectors/information-technology-and-creative-industries/outsourcing-of-services-bpo#:~:text=BPO%20industry%20is%20one%20of,%E2%80%94Colombia%20Productiva%2C%202019).
9. https://www.statista.com/statistics/895283/mexico-bpo-market-key-figures/#:~:text=As%20of%20February%202021%2C%20the,employed%20nearly%20176%20thousand%20workers.
10. https://www.customerserv.com/costa-rica-call-center#:~:text=Costa%20Rica%20has%20a%20population,young%20and%20tech%2Dsavvy%20workforce.
11. https://nearshoreamericas.com/indias-it-bpo-industry-faces-large-scale-layoffs/#:~:text=With%20more%20than%204.5%20million,the%20United%20States%20and%20Europe.
12. estimate based on Connext experience and estimation
