Will Managed Services Providers Pursue Nearshore IT Outsourcing?

Instead of outsourcing IT departments to distant countries, a growing number of U.S. organizations are pursuing so-called nearshore outsourcing. Companies like Softtek and HfS Research are working hard to explain the trend.“It’s all about working collaboratively in support of managed services,” said Softtek CEO Beni Lopez. “It’s cheaper to outsource your IT services to India than it is to outsource it to Mexico in terms of wages. But nearshore is cheaper than offshore because it cuts down things like the time zone difference, travel time and the amount of overhead.”

Lopez points to a report recently published by HfS Research titled How Latin America Powers Global IT Delivery to validate the offshore model. The report cites six key findings that bode well for the nearshore IT outsourcing model, in particularly in Central and South America:

  1. Global IT delivery strategies more frequently include Latin America.
  2. Latin American Strategies underpin global delivery with increasingly mature services.
  3. The region offers three routes to value (skills at a lower cost than the U.S. or Europe, reducing the risk of immature processes, and supporting a broader market move into the region.)
  4. Calculate the true TCO and measure risk.
  5. Build the business case with care – resource levels need careful consideration.
  6. Local providers must play the local delivery card too.
Lopez says there are still uncharted opportunities for IT nearshore outsourcing in South America. The biggest potential, he says, is in Colombia because of its large population and level of education. Still, Softtek has made significant headway in promoting nearshore IT Outsourcing since the company was founded as an IT service company in Mexico in 1982. Since then, Softtek has established a Global Delivery Center in Monterrey, Mexico, acquired GE's Mexican Global Development Center, acquired I.T. United in China to break into the Asian market, and has set up 30 offices throughout North America, Latin America, Europe and Asia. All this while insisting that it's not trying to abolish the offshore model, only offer an alternative.

"It's not a shift to nearshore, it's an expansion to nearshore," Lopez said. "The shift is in diversifying the portfolio of MSP's. They are realizing the limitations of offshore and the benefits of nearshore, like working more collaboratively, specifically when it comes to managed services."

For more on this topic check out Nearshore Americas, a blog that tracks Latin America outsourcing trends. MSPmentor Editorial Director Joe Panettieri previously worked with Nearshore Americas founder Kirk Laughlin while at Ziff Davis Media.

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