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The Argument For Onshoring

While the business concept of outsourcing includes the proven benefits of cost savings, reduced time to market, and increased focus on core competencies, the debate between onshore and offshore outsourcing has been revitalized in tandem with the troubled economic climate.

The reality is that neither onshore or offshore will be superior for all business models. Both onshore outsourcing and offshore outsourcing will offer a greater fit based on the particular circumstances for each project type. For example, if you are a US or EU software technology company seeking to outsource the development of a prototype for a new high-tech offering, the onshore strategy may offer greater comfort to intellectual property (IP) holders concerned about the pervasive disregard of IP rights in certain parts of the world. Further, seasoned talent and experienced human capital may be more plentiful in North America. For example, if you're developing video games, social media tools, software as a service applications or other new technology offerings, Silicon Valley, Austin and Boston offer a tremendous number of new technology veterans surrounded by ecosystems of complimentary resources. For biotechnology firms, the resources available in San Diego and South Florida are unmatched throughout the rest of the world. In fact, the availability of technology expertise in North America for the majority of the high-tech sector – from networking to telecommunications to game changing technologies - is generally considered unsurpassed.

Veteran North American professionals not only understand technology, but are also experienced with knowing how to commercialize and capitalize that technology for pinpointed target markets and go to market initiatives. Their full life cycle skills and experience are instrumental in developing products and services that customers actually need.

Protecting IP is vital when considering an outsourcing firm. Many countries advertising for outsourced development have a reputation for not observing copyright laws and legislation, failing to enforce legislation and failing to prosecute corrupt acts which cost US and EU firms billions of dollars annually. While theft and breaches can occur anywhere, they are less likely to occur in the North American market, where legislation is stronger, enforcement if prevalent and the culture is one that recognizes the inherit value of IP.

Proximity and shared time zones are key benefits for onshore firms. When your outsourcing agent is within a short plane ride, face to face meetings are more frequent, communication is improved and the projects benefit from a more iterative development process. Trips to far away destinations are neither convenient nor economical, which discourages the face-to-face interaction, relationship building and assimilation of a common culture.

We’ve heard multiple times over that America and England are two countries separated by a common language. If a North American company elects to use an overseas outsourcer, both parties may be speaking English, but from a practical perspective, it may sound like a modern-day Tower of Babel. Language barriers with offshore firms are improving but continue to be an obstacle not encountered with onshore firms. Even if an overseas outsourcer's key personnel speak English, the pace of their language skills and the lack of knowledge related to key expressions leave room for errors in the communication process.

A frequent dialogue between the customer and outsourcer can be extremely valuable in enhancing the iterative development process and delivering high quality results. North America firms in particular emphasize a great deal of teamwork and communication between the customer and the outsourcer. For example, a product manager or designer may request a product of certain dimensions, for example "I think the product should be this shape." An experienced outsourcer could add value by responding with the follow-up comment, "I know you would like it that shape, but if it were this other shape it would actually deliver more output." This collaboration can brainstorm trade-offs which achieve balance between what the customer wants and what the outsourcer delivers and ultimately achieve the highest quality and most marketable products possible.

In cultures where the normal behavior is to develop what you are told without offering feedback, results may meet specifications, but do not perform according to customer and market demands. Instead, the outsourcers creative contribution does not occur and the project either misses the mark or results in multiple iterations and budget overruns.

From a cost perspective, the often underestimated cost for offshore project management is another significant variable that offers a key advantage for onshore resourcing. Far less management is typically required when using onshore resources because of the dynamics cited.

In the right situations offshore outsourcing makes sense, such as in high-volume manufacturing, product testing or product maintenance. However, failing to recognize onshore advantages for other project types clouds the decision making process and ultimately misses a viable opportunity for many organizations.