Whitepaper - The Nearshore Outsourcing wave and the End to sleepless Nights

1. Whitepaper
January, 2010
The Nearshore Outsourcing Wave and the End to
Sleepless Nights
The never-ending quest to find talented resources at competitive prices drove the
consulting industry to follow other industries in the drive towards offshore outsourcing.
But as the sheen wore off and reality set in, consultants found that the promise of
offshore outsourcing was not fully realized. Studies found the true cost of using IT
resources from offshore countries such as India were higher than originally thought.
And the trade-offs required in terms of difficulties in working arrangements and time
zone differences led to the entrenchment of the confusing late night conference calls in
the lexicon and humor of consultants.
Many consultants have likely wondered if there was a better way while they participated
in a conference call at 11:30pm. With the move towards nearshore outsourcing, there is.
Traditional Offshore Challenges
As many consultants have learned the hard way, there are generally five serious issues
with traditional offshore outsourcing to countries such as India.
Time Zone Differences: Traditional offshore teams are usually halfway around the
Differences:
world. While US-based consultants are working from 7am to 6pm, the offshore team is
sleeping and vice versa. This is in addition to the fact that in-person collaboration is
made problematic at best. Differing time zones present management challenges,
increased cost of travel, and communication breakdowns.
Language Barriers: Offshore teams add additional risk via language barriers. Working
with traditional offshore teams can amplify miscommunication; it is common that ideas
can be missed and issues can be misinterpreted.
Cost Bloating: Offshore resources can be 75% cheaper than stateside resources.
However, when calculating the Total Engagement Cost a few things often overlooked
include travel time and cost, re-work required because of confusion, inefficiencies in the
development team, and US team checks and balances to name a few. Offshore projects
include costs above and beyond the discounted hourly rate.
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Phone: (310) 455-6188 | Fax: (310) 564-0344
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2. Whitepaper
January, 2010
Quality: The culture is different, the training is different and the knowledge base is
different. This applies to both technical support and application development. Offshore
quality is an issue.
Manageability: Offshore managers are finding themselves working swing shifts,
handing off plans with other managers, wrestling with achieving results over the phone,
wasting hours trying to find information. The list goes on and on. Offshore teams are
hard to manage.
Consultants who went across the oceans to find a better, cheaper, faster technology
team soon found out that it was more risk-prone than ever, and the challenges identified
above provided a whole new way for consultants and project managers to amplify their
stress levels.
The Nearshore Model
Nearshore is an “across border” team that is on the same continent, in a country such
as Mexico or Canada. The recent decline of the US dollar makes Canada much less
attractive as an outsourcing partner. Mexico has since seen a resurgence of interest as a
nearshore destination for consulting firms looking to augment teams with talented IT
resources.
Mexico is a rapidly developing country with incredible resources, and a deep and
talented labor base. Nearshore partners provide dramatic costs savings for
development while at the same time mitigating many of the challenges of traditional
offshore outsourcing.
Same Time Zone: Nearshore partners are in North America and work in the same time
zones. Not only is the whole team working together geocentrically, team members are
only a few hours away from each other if need be. Nearshore resources often join the
US teams as needed, but may return to their home development center when their
presence is not required, further reducing travel costs while at the same time promoting
high bandwidth communication.
Low Language Barriers: Culturally Mexico shares many commonalities with the US.
The language gap is greatly reduced and, in many cases, all but unnoticeable.
Reduced Cost Bloating: Ironically, given the proximity, cost bloating is greatly reduced.
Cost overruns due to design challenges can be caught early. Resources can collaborate
www.sieena.com
Phone: (310) 455-6188 | Fax: (310) 564-0344
1901 Avenue of the Stars 2nd Floor; Los Angeles, California, 90067

3. Whitepaper
January, 2010
via phone, video or live much more effectively and team sizes can be optimized instead
of maximized.
Greater Efficiency: With the nearshore hybrid model, in general, fewer resources are
required to accomplish the same task. There are reduced management costs and less
need for “overflow” developers who are on deck specifically to address some of the risk
points identified in this discussion. And fewer developers mean real cost and time
savings.
High Quality: There is a tremendous push on quality from nearshore firms and a
diligence and attention to detail that is really exceptional. Knowledge and abilities rival
that of the US, and nearshore vendors also strive for and have achieved standards
qualifications such as CMM level 5.
Secured Intellectual Property: The North American Free Trade Agreement (NAFTA)
provides legal certainty that your intellectual property will be protected. For consulting
firms in engagements involving sensitive intellectual property, this benefit alone is
priceless.
Quicker Visas: NAFTA offers nearshore firms another benefit in the form of rapid visa
processing, giving US consulting firms quick time to market advantages to staff up as
conditions require.
Manageability: All of the above factors yield a much more manageable team and
project. The ability to have real business day exchanges between technical counterparts
is tremendous. There is no substitute for real-time communication, and when combined
with a highly focused, optimized team, a good portion of project risk is reduced.
Of course, with any outsourcing there is still an element of risk. But compared side by
side to traditional offshore outsourcing, the benefits of nearshore outsourcing may
finally spell an end to sleepless nights for consultants.
www.sieena.com
Phone: (310) 455-6188 | Fax: (310) 564-0344
1901 Avenue of the Stars 2nd Floor; Los Angeles, California, 90067

4. Whitepaper
January, 2010
About Sieena
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www.sieena.com
Phone: (310) 455-6188 | Fax: (310) 564-0344
1901 Avenue of the Stars 2nd Floor; Los Angeles, California, 90067