Why Nearshoring is the Next Big Thing in Outsourcing

4/11/19 4:18 PM / by Marc Meyer

Marc Meyer

Traditionally, offshoring business processes and software development to another country has always been seen as a viable alternative to doing the work in-house, mainly because outsourcing has always been viewed as an inexpensive alternative to getting the work done.


CA-Auxis-Costa-Rica-9-1Unfortunately, as a lot of companies have found out the hard way, most outsourcing models are often associated with greater risks due to challenging language barriers, unforeseen cultural differences and different time-zones. However, a lot of companies still opt for this model because of the cheaper labor costs. But the old adage, “you get what you pay for,” seems to ring true time and time again. So how can companies save time and money without sacrificing quality and still get the same kind of deliverables that they might ordinarily expect if they were doing the work in-house? Enter Nearshoring.

In 2019 Nearshoring is the new Outsourcing

Even for the largest of U.S-based companies, the challenges of managing an Asia-based offshore model can be daunting.  As a result, over the past decade Latin America has emerged as a preferred shared services and outsourcing destination, with Costa Rica, in particular, being one of the major players.

When comparing apples to apples versus Asia based outsourcing models, Costa Rica can provide a significant labor savings of sometimes 30% to 50%. Clearly, because of this fact alone, companies are attracted to Costa Rica for saving money. Beyond that, the country’s proximity and time zone compatibility to the US are game changers, if only for the notion that picking up the phone in the middle of the night to have a status call or hopping on a plane and flying for 22 hours are generally believed to be, and rightly so, ongoing logistical nightmares. Don’t think that’s a big deal? Think again. Further proof that nearshoring is the next big thing for US based firms can ironically be found in the growth of Asian based consulting firms that have also moved into Costa Rica.

Let’s talk about Culture

Indeed, it’s been said that Costa Rica has an “Americanized” multi-lingual culture. While Spanish is the native language in Costa Rica, it is one of the most westernized, bilingual countries in all of Latin America, with nearly a 98% literacy rate. That’s a huge plus when one considers that one of the biggest complaints in outsourcing is the sizable communications issue that seems to plague any and all outsourcing endeavors.

What about the workforce?

The Global Innovation Index recently reported that Costa Rica is one of the most highly educated countries in Latin America. This distinction directly translates into the country often being referred to as the Silicon Valley of Latin America, meaning that your projects and your initiatives are in more than just capable hands. The talent pool is immense and with the most important skillsets being English, and the second being a highly evolved technical acumen, Costa Rica is quickly becoming the de-facto high-tech/business hub for the Americas with nearshore activities that include IT, cybersecurity, human resources, business intelligence, robotic process automation, customer service, finance, accounting, supply chain, logistics, Big Data, analytics and cloud computing.

According to Tholons and AT Kearney, Costa Rica is the #1 nearshore outsourcing destination in Latin America and currently counts over 350 multinational companies who have taken up residence there. This isn’t by accident or by experiment as much as it is by design. Once organizations realize how talented and how highly educated the workforce is, they then come to realize and reap the benefits of Costa Rica’s free trade zone. This means that foreign investors can enjoy 100 percent tax exemption. The partial list of companies currently “working” in Costa Rica includes Citi, Procter & Gamble, Baxter, HP, Walmart, Bacardi, Bosch, Cargill, VMware, Bayer and Mondelez.

What Does it all Mean?

The assumptions on why organizations outsource have always seem to have been focused on cost savings. But in recent years, companies are starting to realize that there can be much more to offshoring than just saving money.  Whether it’s streamlining resources so that they can continue to focus on the core business processes that matter most, or gaining access to top tier development teams at a fraction of the cost, nearshoring is really about maximizing the use of your external resources and turning them more into business partners.

The primary keys to a harmonious relationship are to find a genuine partner that understands your industry, cares about your objectives, is intent on helping you reach your goals, and ultimately wants you to succeed with your business; and is willing to accept and commit to those goals as their own. This means that outsourcing engagements need to work more like partnerships and relationships rather than just contracts and SOW’s.

With that being said, the closer your outsourcing vendor can be to being an extension of your business, means that there is a higher likelihood that they will be able to match your company's culture, methods, and objectives. The potential of nearshoring can get you there.

About Auxis

With a 22+-year track record, Auxis is a management consulting and outsourcing firm focused on helping senior executives achieve Peak Performance in their back office. Auxis is able to deliver these results through a combination of customized solutions including Nearshore Outsourcing (F&A, Customer Service, IT), Shared Services, Robotics Process Automation (RPA), and BI. Auxis solutions consistently deliver rapid paybacks, cost savings of 30%+, improved controls, enhanced operational visibility, and greater organizational focus on higher value-creating activities. Recognized as one of the Top 100 Global Outsourcing Providers, Auxis’ unique perspective as both advisor and outsourcing operator allow its clients to obtain real benefits and ROI from every engagement. 

Marc Meyer

Written by

Marc Meyer

Senior Content Strategist