In today’s dynamic business world, organisations are challenged to optimise and make their operational models more efficient. One of the strategies that is increasingly being employed is the establishment of Global Business Services (GBS) centres, either internally or by collaborating with external Business Process Outsourcing (BPO) providers. When making this crucial decision, two options often emerge: Nearshore or Offshore. In this article, we take a look at the differences between these two approaches and in which context the best choice is to be made. For visual support, we recommend watching the informative video at the bottom of this page!
The World of Global Business Services
GBS comes in various forms and sizes, tailored to the unique needs and objectives of each organisation. But what is the best strategy when it comes to choosing between nearshore and offshore services? Many companies are taking steps towards further developing their operational models and must decide how to organise their support functions, either internally or with the help of external BPO partners. Regardless of the chosen approach, a fundamental question always arises: Nearshore versus Offshore.
The Key Distinction: Distance
Let’s delve deeper into this issue using the example of the fictional Dutch company “Holland Infinite.” This company has multiple operational hubs in Europe, but its headquarters, including all support functions, are located in Amsterdam. The management has made it clear that they want to transition to global business services with the help of an external BPO partner. But where should they establish themselves?
Holland Infinite is currently considering Poland as a suitable nearshore location due to attractive rates offered by various service providers. What are the benefits of this choice? The transition to a nearshore location like Poland can yield significant advantages, including:
- Time Zone Advantage: Managing operations in a nearby time zone facilitates communication and collaboration between teams.
- Language and Culture: Proximity enables Holland Infinite to align better with the local language and culture, benefiting customer service and service quality.
- Cost Savings: Nearshore services are often more cost-effective than onshore options, offering financial benefits.
However, Holland Infinite is also looking at India as a potential nearshore location due to even more favourable prices for similar services. On the other hand, there are three key advantages that Holland Infinite can gain by opting for offshore services:
- Cost-Effectiveness: Offshore locations, such as India, typically offer even lower costs, resulting in significant savings.
- Scalability: Offshore locations can provide scalability at a level that is hard to match, allowing companies to respond quickly to changing needs.
- 24/7 Operational Support: Thanks to different time zones, offshore teams can provide continuity and 24/7 operational support.
No One-Size-Fits-All Solution
It is crucial to understand that both nearshore and offshore global business services come with their own sets of advantages and disadvantages. There is no universal solution that suits all organisations. The correct choice depends on various factors specific to the organisation, including financial collaboration requirements and corporate culture.
In this fictional example of Holland Infinite, however, they opted to implement nearshore GBS in Poland, primarily because of their focus on language, cultural alignment, and the expertise of their employees.