Nearshoring- The New Normal!
“Do what you do best and outsource the rest”.
The year 2020 witnessed a plethora of changes in the business, work culture, and market mindset. Although the COVID-19 pandemic restricted the movement of physical goods and injected vulnerability into the global economy, it brought risk competitiveness into sharp focus. With the pandemic situation bringing new challenges, companies are now assessing their capabilities, defining the scope of their risk boundaries, and identifying and controlling the risks they are exposed to. With the shift in the mindset today, IT outsourcing, particularly nearshored IT outsourcing, is anticipated to become a service model that helps through the downturn.
Nearshoring is anticipated to become a more sophisticated approach to attaining risk competence, a stronger cash flow, and a stable business model. Nearshoring offers organizations the opportunity to build a cost-effective service model with diverse teams and the most minimal restrictions from governments and their laws. Organizations can attain risk competence by adopting nearshoring and its resultant benefits, for stronger cash flow, stable business model, and agile service offerings. They think that nearshoring and regional diversification are the two most viable options to battle the current times. Research also suggests that the post-COVID era will witness a sharp growth in the nearshoring of IT, Finance, and Accounting.
The LatAm Attraction
Latin America, also called the LatAm region, gained traction for outsourcing IT services because of its location attractiveness. The region offers a time-zone advantage especially for companies located in the US, lessening response times between teams and enabling highly synchronous communication. Today’s LatAm market offers greater asset diversification, a richer talent pool, and access to countless new markets. Almost all LatAm countries are independent, democratic, and open to foreign businesses, resulting in greater investor engagement.
LatAm is also attractive due to its business environment, people’s skills, and tax benefits. Cost is one of the determining factors when considering outsourcing of services. LatAm countries are cost-effective and offer better hiring rates for domains like IT development, finance, and accounting when compared to the USA. The workforce in most LatAm countries is proficient in spoken and written English. Languages like Spanish, Portuguese, German, Dutch, French, Italian, Mandarin, Japanese, Finnish, Polish, Czech, and Malay are very common in most of the LatAm countries. Research reveals very interesting facts about the location attractiveness of Latin America.
- According to Forbes, the overall LatAm GDP is expected to grow by 2.6 percent in 2020.
- Five LatAm countries including Costa Rica, Brazil, Mexico, Chile, and Columbia are listed in the Top 20 Countries where services can be outsourced.
- Columbia will be the most educated nation by 2025.
- Costa Rica is rated as one among the Top 10 Best Countries for Outsourcing and is rated as the safest country in LatAm for its political stability, democracy, and peace.
Costa Rica- The Nearshore Destination
Costa Rica also referred to as the Silicon Valley of LatAm, offers flexible business practices along with a temperate climate, a stable business environment, and a rich cultural history. With investor confidence on the rise, Costa Rica is becoming the LatAm jurisdiction of choice for its operational setup. Alongside, Costa Rica offers an outstanding human resources pool and the best possible nearshoring capabilities in the areas of IT support and services, finance, accounting, and back-office services.
Costa Rica’s resource pool is unique, as the country’s literacy rate is as high as 97.4 percent. 2.3 million out of the total population of 4.48 million comprise the skilled workforce in the country. The country is comparatively young with 1.7 million people in the age bracket of 15-34 years.
In Costa Rica, Feuji has earned a great reputation by building sustainable business relationships with several enterprises. We are competent in the job market and have shown our strength and deep-rooted presence by creating employment opportunities and hiring the best talent.
With the changing economy, drifting mindset, and investor sentiment, companies must conduct a strength versus weakness analysis to analyze their core versus not-so-core offerings. This exercise builds the foundation towards achieving a stable business plan and internal cost-optimization efforts by leveraging the advantages of nearshoring and hence achieving regional diversity.