Customer Service Glossary
As companies grow, scalability, human capital management, and labor costs often become concerns. With these key metrics in mind, many businesses find themselves considering nearshore or offshore outsourcing.
Both nearshore and offshore outsourcing involve contracting a third-party service provider to manage business process outsourcing (BPO) tasks, such as human resources management, accounting, payroll, or customer service, as well as highly technical tasks, such as software development. However, the concepts differ in a few key ways, which means each organization must consider its needs before transitioning to offshore or nearshore outsourced customer service teams.
What Is Nearshore Outsourcing?
Nearshore outsourcing shifts customer service operations to trained professionals in nearby or bordering countries. Generally, nearshore outsourcing involves minimal time differences, simplifying communication and streamlining workflows. For example, a United States-based company may outsource operations to popular nearshore countries like Mexico or Brazil.
The nearshore outsourcing model can also enhance professional relationships. Typically, managers and executives can easily travel between company headquarters and the outsourced customer service call center. The proximity allows outsourced supervisors and employees to receive hands-on training. At the same time, outsourced employees may align more closely with the company’s goals, organizational culture, and project management processes.
Advantages of Nearshore Outsourcing for Customer Service
Lower Labor Costs
Nearshoring can help companies cut labor costs compared to the cost of hiring in-house employees or using onshore outsourcing. Further, companies do not have to provide contract employees with additional compensation and benefits, such as bonuses, health insurance, or paid leave.
Comparable time zones reduce the challenges of communicating with an outsourced team offshore. Both the parent company and the outsourced customer service representatives keep similar working hours. As a result, both the company and its customers can reach a representative at a convenient time.
Nearshore outsourcing helps companies protect sensitive information and maintain a close watch over their intellectual property. Because nearshoring countries typically follow similar information security guidelines, companies can minimize the risk of data leaks or confidentiality breaches.
What Is Offshore Outsourcing?
Unlike nearshoring, offshore outsourcing redirects customer service operations to distant countries. Typically, the developing markets exist overseas and include an expansive workforce of highly trained client support agents.
That said, the main advantage of offshore outsourcing is typically the low price of labor. Offshore outsourcing can cut hourly labor costs by more than 50%. In addition, as with nearshore outsourcing, companies do not have to provide their contracted outsourced teams with benefits, either.
Companies based in the United States regularly outsource administrative tasks, customer service operations, and financial tasks to third-party groups in developing markets, such as India or Malaysia.
Advantages of Offshore Outsourcing
Inexpensive, Skilled Labor
Offshoring non-core tasks may help organizations minimize hourly wages by 30% or more. Many developing countries have significantly lower costs of living. Further, offshore call centers typically pay their employees less than agencies located in the United States. The two factors usually result in substantial savings for U.S.-based businesses.
Many popular offshore countries have seen an increase in training programs, with some markets focusing on technology, customer service, or financial tasks. As such, businesses can choose from a vast talent pool of trained representatives who can answer both practical and technical questions while helping customers through the purchasing process.
Improved Response Time
As with nearshoring, offshore employees can work rotating shifts, essentially creating a 24/7 support center. Customers can then ask questions or request technical assistance at their convenience.
Is Nearshore or Offshore Outsourcing Best for Customer Service?
Nearshore and offshore outsourcing strategies share many benefits, including reduced labor costs, improved talent pools, and enhanced customer support. However, each company’s needs, values, and preferences vary.
With this in mind, choosing to pursue nearshore or offshore outsourcing depends heavily on the organization’s goals. If low costs outweigh easy travel, a business may pursue an offshore client support team. Others may prefer the increased quality control and proximal location of nearshore services.