In their search for talent, enterprise buyers historically have cast their nets offshore for skilled IT workers, software engineers and other positions. Recently, however, some are showing an interest in nearshoring, which can reduce costs and provide access to quality IT talent in the same time zone as customers.
“Nearshoring has always sounded great, but with legal and regulatory unknowns, and not a lot of case studies to consider, buyers have opted to go with the known idea of offshoring,” notes Dawn McCartney, VP of the Contingent Workforce Strategies Council at SIA. “I believe with additional cost savings pressures, low unemployment rates here in the States and the continued acceptance of remote work, nearshoring may be getting its time in the spotlight.”
Nearshoring is the practice of finding talent in roughly the same time zone and within one day’s travel distance, according to SIA’s lexicon of workforce ecosystem terms. For the US, that means Latin America and the Caribbean.
The option surged in popularity after Covid-19 when people began working remotely and discovered they could work from anywhere, says Jacqueline Samira, founder and CEO of Howdy.com.
“Specifically, nearshoring really took off at that time because people realized we can get the same caliber of individuals in the same time zone by working with people within the Western Hemisphere,” Samira says.
Her firm, Howdy.com, enables US companies to tap into IT professionals from Latin America. Howdy.com also acquired GeekHunter in a deal announced this summer; GeekHunter connects US companies with IT professionals from Brazil.
Eric Peters, president of the professional divisions at national staffing firm BGSF Inc., also said he’s seen increased interest in nearshoring. BGSF itself made an acquisition in the nearshoring and outsourcing space when it acquired Arroyo Consulting in a deal announced this past spring.
“As we met with our customers and asked what service offering they would like to see us add in the future, nearshore/offshore was by far the No. 1 request,” Peters says — hence the acquisition of Arroyo to address that need.
Nearshoring can be an answer to the IT talent shortage in the US and can save companies money, particularly as they try to do more with less, he says. Nearshoring will likely become part of the norm going forward.
“It won’t take the place of US employees or onshore resources, but it’s just going to be another solution,” Peters says.
Proximity Is Value
One of the biggest benefits of nearshoring is the proximity, says Mauricio Sion, founder and executive board chairman of SGF Global.
“Proximity brings value,” Sion says. “If you want to fly down to see your team or you want the people to fly in to come and work here in the office for training or whatever, requirements are usually within a three to four-hour flight.”
But it’s not just the time zones, he says. Latin American workers tend to be both professional and have a good understanding of US culture.
Still New
Paul Taylor, chief revenue officer at national staffing firm Aditi, said that while interest in nearshoring is rising, it’s still a new thing for many people.
“I wouldn’t say that the pendulum has completely swung and people are starting the conversation with, ‘What’s your LATAM presence?’” Taylor says. But “the economy has gone a little sideways, so people are trying to do the same or more with less.” So when conversations turn to nearshoring, it’s “really striking peoples’ appetite.”
Quality talent at a lower cost in the same time zone is one benefit, but another is risk mitigation, he adds. Companies don’t have all their eggs in one geographic basket. Taylor cites the war in Ukraine as an example, saying a significant number of companies moved Eastern Europe development center work to Latin America.
Aditi, like BGSF and Howdy.com, also made a recent acquisition in the nearshoring space when it acquired Resolvit in a deal that closed in October.
Regulation
One concern is regulation and its associated costs.
While Caribbean countries are fairly similar to the US model of workforce regulation, many Latin American countries are based on the European model where there is a heavier hand by government, says Martín Padulla, founder and managing director of staffingamericalatina, an independent media organization focused on Latin America and affiliated with SIA.
One example is sueldo anual complementario, or the “13th month,” which is an additional month’s pay most countries in Latin America require by law.
“You have half the payment in July and half of the monthly payment in December,” Padulla says. “It’s a very old-fashioned model.”
Still, there is cost savings with nearshoring despite the regulations, he says.
You also can’t paint Latin America with a broad brush. Each country is unique. Argentina, for example, is known for having workers with good English skills despite being a Spanish-speaking country.
SGF’s Sion also notes that not every worker on a team in Latin America needs to speak English. If you have a team of IT workers, two or three who speak English could lead the interface with US operations. It’s also likely that even workers who don’t necessarily have high English proficiency would still be able to communicate as well. Teams also do not need to be located in a single country; client companies can source workers from across Latin America, giving them access to an even greater labor pool.
Howdy.com’s Samira also touched on the language issue as well, noting it’s common for people overseas to speak two or three languages. She added that finding a high level of English proficiency has not been a difficulty.
In addition, the stigma of working with workers from other countries — whether nearshore or offshore — is going away.
“I think in five years from now and 10 years from now it’s going to be global opportunities with the global workforce, whether it’s nearshore or off offshore,” she says. “The walls of where we are working and how we are working will be demolished, and it will be a more even playing field for everybody involved.”
