The Internet as Social Media: Connectivity and Immediacy Custom Essay

August 7, 2017

Answer the following questions fully Question 1: Briefly discuss the similarities and differences between a S Corp v. a C Corp. Question 2: Both S Corps and partnerships have rules on permissible tax years, and cannot just use whatever tax year they like.

August 7, 2017

I have a research paper which belongs to my senior student who is from same school and same professor.

Published by admin at August 7, 2017

Research paper on

Nearshoring

By Shankhu Vardhan Reddy Kyasaram

Course: IT700 Information Technology Strategy and Policy

Instructor: Dr. Stephanie Collins

Southern New Hampshire University

Contents

Title of the section Page no.

Abstract…………………………………………………………………………….. 03

Introduction………………………………………………………………………… 04

What is Nearshoring?…………………………………………………………………………………… 05

Advantages of Nearshoring………………………………………………………… 07

Risks Associated with Nearshoring………………………………………………… 09

Comparison of Offshoring, Nearshoring and Onshoring…………………………… 10

IT Nearshoring……………………………………………………………………… 12

Global Nearshoring Trends…………………………………………………………. 13

IT Nearshoringvs.Freelancers……………………………………………………… 15

Recommendations…………………………………………………………………. 16

Conclusion…………………………………………………………………………… 18

References…………………………………………………………………………… 19

Abstract:

The Purpose of this paper is to analyze current nearshoring practices and the feasibility of nearshoring for IT outsourcing. There are many factors to consider when a company wants to outsource their business process to a nearshore or an offshore. Both, offshoring and nearshoring play a significant role in helping the companies which seek out to outsource their business processes.

This paper primarily focuses on making a decision when an IT process is to be outsourced. Many CIO’s across the world have the similar confusion as to go with nearshoring or (Placeholder1)offshoring when dealing with outsourcing of their IT business Processes. Many factors which help us understand the basic differences between these two outsourcing techniques have been flourished in this paper.

You will have an opportunity to know about the nearshoring trends around the world. The advantages and risks associated with nearshoring and its comparison with another outsourcing concept i.e., offshoring is also included in the paper. Ideally, how many companies can make an edge by provisioning the efficient resources for the business in their proximity is the concept of nearshoring.

Cultural differences, languages, time zones etc. are few factors which a company will look for, when they have to take a decision in outsourcing. Effort has been put to deal with these factors in this research work.

Introduction:

Outsourcing as the name suggests, is sourcing from out. Whenever a company contracts another company to perform a part of their business or process or task, it is called as Outsourcing. A company seeks to outsource for different reasons not limited to limitation of in house resources, limitation of required skillset, reducing costs, concentrating on core business, increase efficiency, access to innovation etc.

Outsourcing can be done offshore, onshore, nearshore and even in captive centers. Offshoring is nothing but sourcing from a distant country and onshore is sourcing from the same country. Nearshoring is nothing but sourcing from a country which is in the boundaries of your country. It can also be considered as country which takes not more than 3-4 hours of flight.

Different companies have different strategies on taking a decision on which type of outsourcing would help and serve their purpose of outsourcing. It also depends on type of task, process or business you are outsourcing.

Suppose a country wants cost benefit and wants to reduce their operational costs then they would outsource their operational processes to a company where the cost of labor and other costs would be less than their country. Likewise, if a company wants to acquire a specific skillset to their business, they would prefer a country where the required skillset is plenty. Thus, selection of the country to outsource from depends on the business reason of the company opting to outsource.

Whatever may be the objective of the company, there should be a proper analysis to be done to select and decide on what type of outsourcing a company should follow to achieve their objective. In this research paper, we will discuss on nearshoring part of the outsourcing and how this is favorable in case of IT outsourcing. When it comes to IT outsourcing, a company’s CIO is the one responsible to decide on the type of outsourcing. A report by Deloitte &Touche in 2007 on offshoring found that almost 75 percent of the companies use offshore outsouring in the financial services sector.

Not only the advantages but are also few disadvantages in case of outsourcing. The disadvantages include losing of control in particular aspect of the business, losing the direct communication from the customers, communication problems, privacy of information may be endangered etc. Keeping these concepts of Outsourcing in mind, we will move on to the topic of Nearshoring.

What is Nearshoring?

Nearshoring is nothing but outsourcing to a nearby country. Different opinions are heard on this like near-shore countries are those which are 4 hours flight away and some would say that a near-shore is the one for which we don’t cross ocean to reach. But, time zones are the one’s which defines the near-shore. A near shore should not have a time zone which is very much different from the country of the company which wants to outsource. Most importantly, a near-shore is the one which lessens the factors like cultural differences, lingual differences, social behavior and business conditions.

Earlier, outsourcing is commonly known as sending the processes that are to be outsourced to some countries like India, China etc. But, many companies are now moving towards nearshoring as they are offering many favorable factors for their business. Geographical proximity and cultural affinity are the main factors that led to the spread of nearshoring. Nearshoring serves as a best option for the companies which are looking for outsourcing but are worried about the cultural variations.

The term nearshoring was first coined in 2005 which was considered opposite to offshore outsourcing. However, the term was not spread around the world till 2007 when many articles talked about this. We can say that HP is the one which took competitive step and bring their workforce to improve local work force which helped them to march forward in the competition among its peer competitors.

Nearshore concept emerged as a right business alternative as wage rates in China and India gradually increased. Many companies felt that nearshoring would be perfect business solution for the emerging circumstances. They also felt that many factors will help economically too in long term with nearshoring. Thus nearshoring gradually took its position in the global arena.

(Foster Finley, 2011)

Advantages of Nearshoring:

Nearshoring has got many advantages; below mentioned points make nearshoring more attractive:

v Time Zone: Nearshoring proves to be the best option to improve the productivity as the project members from different locations can work at the same time which reduces the complexity of working late night or waking up early. This outsourcing thus provides great value for the projects where the online interaction is must.

v Geographical proximity: Business travels and communications are a must in case of IT projects as most of the issues cannot be handled from a remote location other than the project location. So, travelling two hours for a business meeting would be easier than travelling to a distant country. This limits the time and cost constraints of the Project and enhances the project output.

v Cultural Affinity: cultural diversity is one of the risks that many companies are dealing in the recent times. Nearshoring is the best solution for this problem as the cultural differences and lingual differences would be minimum in this case.

v Visa Advantage: Considering the case of a distant country to which you are outsourcing, Nearshore provide the right advantage in the case of Visa. For example you may not need a visa to travel around the Europe if you are an individual from Europe. Likewise the United States will have this advantage for its nearshore options like Canada, Mexico etc. This reduces a great time and complexity in business travels.

v IT infrastructure: Countries like Canada and Mexico can provide the best IT services as the have the advanced IT infrastructure. So, companies in U.S. tend to use this option for high quality and productivity in their IT projects.

v Exposure: The individual working at a nearshore will have an advantage of knowledge of the market in the country for they are outsourcing. This serves as a potential benefit for dealing with the projects.

v Project management made easy: Project management is easier in case of nearshore as the CIO can make regular travel plans to administrate the IT processes at regular intervals.

v The Nearshore options provide great value by maintaining the operational efficiency, intellectual property security when compared to the countries in offshoring.

Risks Associated with Nearshoring:

In addition to advantages that nearshoring has there are few risks also. Nearshoring also got few risks in common with offshoring. General risks of outsourcing include cultural and language barriers. There are few cases where the problem of language doesn’t occur. For instance, considering the case when U.S. wants to outsource in Canada, there wouldn’t be much of the risk with respect to language. But, many other nearshoring options around the country also have language problems as they speak Spanish in Latin America.

But, few countries are taking the necessary action to reduce the risk with language by introducing more number of bilingual schools in the country and also spreading the awareness about the importance of English language.

Coming to cultural differences, though most of the nearshoring options have the same cultural feelings as that of the client country but there may be few differences in the holidays of these countries. But, compared to offshoring, nearshoring provides a great bit of edge in the business.

Considering the costs of the labor, nearshore option may not provide the real cost savings. When compared to offshoring, nearshoring will not serve the purpose of the company seeking for cost saving in labor costs. However, nearshoring provides value with the productivity in long term. It offers savings in the form of reduced travel costs and infrastructure set up costs. Therefore, nearshoring can be considered viable option for long term but not for the short term.

Most of the US workers complain about the outsourcing as most of the technical jobs are outsourced which created unemployment in the country. Nearshore outsourcing may lead to unemployment in the home country as the employers tend to provide jobs to cheap and effective labor. So the workers need to compete not only with the workers from their country but also labor from other country from which the company is outsourcing.

Mostly, the neighboring countries have more or less the same economic conditions which mean that the company which is looking for outsourcing may not gain much in terms of cost of labor. Instead, they would spend additionally on travel expenses etc. which would not serve the reason of cost saving in outsourcing.

Comparison of Offshoring, Nearshoring and Onshoring:

A company tends to outsource their business process because of the operational needs it has. The company may look to nearshore, offshore or onshore depending on the objective of the company to outsource. The objectives may be anything from cost savings, gaining expertise etc. and also consider the factors like language, cultural limitations etc. Now let us do a deep dive into comparative aspects of each type of outsourcing.

Cost-Savings: The primary goal of any company is to reduce the costs. Onshoring doesn’t offer any cost savings as the cost of labor and infrastructure costs wouldn’t change in this type of outsourcing. When it comes to offshoring there is a real opportunity for cost savings for the company as the labor costs are minimum when compared to the home country. Nearshoring also offers cost savings from the labor perspective but not that much as of the offshoring. The hourly cost paid to a developer is however only a fraction of the overall cost. But, the difference is balanced by the travel costs incurred by the company in the long term which means you will be able to hire the local talent also productive in terms of work.

Execution speed: Onshoring doesn’t have the flexibility to keep the employees idle as the wage rate is high. So, onshoring faces difficulty as it doesn’t have much time to accommodate project members when they are needed. On the other side, Offshoring have the flexibility to accommodate more number of employees as the wage rate is low but have the barriers of language and culture while hiring the employees. Nearshoring, on the other side provides opportunity to hire the employees well ahead and also has considerably low limitations in culture and language barriers when compared to offshoring.

Skillset and Quality: Skillset and quality forms the crucial factor for success of any business. Though, the company have an option to select high quality resources in their home country they search for the people with same skillset in offshoring location as they have to pay less when compared to the resources in the home country. But, in offshoring one may face limitations with language and cultural barriers.

Execution risk: Most of the IT projects require regular client meetings for clear execution of the processes. Project management plays a crucial role in smooth implementation of the system. Execution risks can be minimized by clear risk management plan. Compared to offshoring management of risk is easier in case of nearshoring and onshoring.

IT infrastructure: IT infrastructure in countries like Canada and Mexico is well developed when compared to other offshoring locations. So, companies who want to nearshore with these countries will have the advantage of using the advanced technology systems.

Considering all the factors above, nearshoring seems to be the viable option for IT outsourcing as it offers great flexibility in terms of project management and IT infrastructure advancements.

(Foster Finley, 2011)

IT Nearshoring:

The concept of IT nearshoring is nothing but outsourcing the IT projects or systems o a country which is near to the country, in most of the cases to a country to which the flight is up to 4 hours. Formerly, India is to be the best place to outsource the IT projects. But, gradually the wage rate and the labor laws were enforced which minimized the advantages of outsourcing with India. Soon, Companies realized the importance of looking for an alternative option for outsourcing the IT systems. CIO’s started to evaluate the options of nearshoring and off shoring and decisions were made depending on the objective of their outsourcing.

CIO’s started to feel the importance of the infrastructure for the IT projects. Canada and Mexico posed better infrastructure and relatively less costs as compared with the home country. Thus the companies started to favor the nearshoring option instead of going for long distance offshoring.

According to A.T. Kearney Global Services Location Index 2009, United States stood first in the list for the availability of IT expertise and India stood second.

Cloud computing also served as an alternative for offshoring providing better facilities for data storage. Companies used to spend large amounts on setting up the data centers. In onshoring the companies used to depend on the rural areas for setting up the data centers. Cloud computing served as a best option for outsourcing the infrastructure and data house solutions.

By 2011, Many CIO’s are considering the nearshoring and cloud computing as the best alternative and building the business strategically as per the objectives of their company. Thus nearshoring is serving as available option instead of offshoring because of the following summarized points.

ü Proximity of the geography

ü Cultural and lingual reasons

ü Cost savings

ü Advanced Infrastructure.

Global Nearshoring Trends:

Japan depends on china as its nearshoring options. Canada, Mexico, Honduras etc are the nearshoring options for United States of America. Eastern Europe depends on Western Europe for its nearshoring needs where as India is the nearshoring option for countries like Malaysia, Singapore and Middle East countries.

v The cost of outsourcing in India continues to increase due to inflation and the advantage gap between the nearshoring and offshoring started to dip. Differences in time, service level agreements and understanding the accents of India also served as reasons for the downturn of the India as Offshoring option. The attitudes of Indians were also a concern like not meeting the deadline.

v Latin America having a sound knowledge on the remote sourcing tools posed as the great competitor against the India. Many companies tend to adapt to this technology as the technology is highly advanced and developed.

v United States of America wanted to promote the Columbia and trade with them. FTA allowed the Columbian companies to provide high quality telecommunication services.

v Brazil is no longer a low cost supplier due to increase in the domestic need. But, Brazil having the large pool of human resources serves a better option for large projects.

v Columbia managed to strengthen its profile with increased economy, free trade and higher security and stability levels.

v Agitations in Mexico caused serious threat to its nearshoring business but intervention of US and increased government stabilizing activities forms the remedy.

v Small and medium sized companies from United States of America started to utilize the nearshoring option around the Latin America region. Many Latin American companies started to set up their offices in US and provided employment in the country.

v To meet the needs of the US based Clients, many small and medium sized companies are turning to large companies in the nearshores of the Americas.

v Many firms started depending on the Latin America for their shared services outsourcing as an alternative to their offshoring practices.

v Indian IT firms started to establish their offices in the Latin American region to support the companies based in Americas.

v Due to the setup of many manufacturing units in the nearshore Mexico, third party logistic companies are gaining more opportunities. Third party logistic companies are stepping up with the increase in the nearshoring trend.

IT Nearshoring vs. Freelancers:

Supply of expertise in the field of IT is short which increases the demand for freelancers in the homeland. Freelancers get a chance demand for their price as the demand is growing up in a constant phase. This has become a burden for Small and Medium sized companies to get their job done. So, the concept of Nearshoring seemed very favorable for them to reduce the operational costs. Thus, Nearshoring became the cost-effective alternative for outsourcing.

As per the research of GULP marketplace, the German freelancers demand up to 60 to 80 euros as their hourly rates. The search for IT expertise is increasing among the small and medium sized companies and they look for a complete set of project team from an offshoring location. One trend that became popular with this is the “Dedicated Delivery Team”. This time would primarily focus on the client project and doesn’t depend on any other customers of the Business.

This setup of team offers the client with considerable cost savings as they don’t have a need to hire a set of long term employees. These dedicated teams are specifically hired for the specific project along the project lifetime.

Nearshoring co-operative models gained significance in the recent years as many companies were able to sight the cost savings along with the ease of advancement in technology when needed by the Project. Doing this, the companies are also able to concentrate on their core business which is one of the Primary objectives of Outsourcing.

Due to this trend, many countries emerged as a technology support centers around the world. Ukraine, Costa Rica, Canada etc. are few examples of the countries.

Recommendations:

Following are few recommendations I would like to suggest in accordance to this research paper.

Wage rates are growing high globally and labor laws are enforced in every country supporting the workers. This trend is gradually killing the advantages in the offshoring model of the outsourcing.
Companies have to look at alternative options considering the rise of wages and downfall of the offshore models.
CIO’s are having a hard time making a decision on the outsourcing models to use such that it satisfies the company’s objective.
Companies have to look at the strategic options of outsourcing which could serve them in the long term perspective.
Cost saving is obviously the primary objective of any outsourcing engagement.
Other objectives of outsourcing includes gaining expertize in specific part of the business, to concentrate on the core business part of the company.
Nearshoring is the best option when a company wants to outsource some part of the business in emerging global scenario.
Nearshoring serves as a cost competitive option in the current scenario. It provides the required cost advantage required by the company.
Though the cost of labor may be high when compared to an offshore location, the costs for travel and infrastructure setup will be less which balances the total costs to company.
Also, when considering a project on a whole the cost to company for a developer is fractional when compared to overall costs of the project.
So, Nearshoring will be the best option for IT outsourcing considering the fact that the nearshore countries like Canada and Mexico provides the best IT infrastructure which is advanced when compared to other offshoring locations.
Language and cultural barriers are also the factors which a CIO has to consider when making a decision on outsourcing.
A company will have an edge in the factors mentioned in the above point as it has large pool of proficient employees to select from.
Compared to Onshoring, Nearshoring favors to maintain a bench of project team for the incoming large projects as the wage rate is comparatively very low when compared to wage rate in the home country.
As per the A.T. Kearney Global Services Location Index 2009, United States of America has got the advanced technology expertise when compared to rest if the world.
This means that a company has the facility to select from the talented pool of IT professionals who are ready to work in the nearshore locations which are just 4 hours away from the home country.
Regular client meetings are possible in case of nearshoring whereas in offshoring it is difficult task to travel to long country which takes more than 13 to 15 hours of flight.
Operational processes can be out sourced to a company at long distance i.e., offshore but the IT projects which needs regular client meetings will have to consider nearshoring.
So, I recommend Nearshoring is the best outsourcing methodology for IT outsourcing as per the current global trends of business.

Conclusion:

I would like to conclude this research paper with the opinion that the Chief Information Officers of companies have to consider nearshoring as the best option for IT Outsourcing. Whatever may be the objective and goal of the company’s wish to outsource the business process, Nearshoring proves out to be the best viable option. The CIO’s have to take this strategic decision in order to secure a competitive position in the current emerging market. Nearshoring may cost you more than the offshoring option initially but when considered in the long term perspective, it balances all the costs incurred by the project to that of the offshoring engagement costs.