Nearshoring: Why Retailers Should Look Closer to Home

Online, August 4, 2010 (Newswire.com) - Outsourcing providers have refined their business models to offer retailers a choice of nearshoring and offshoring where activities, processes and functions are relocated to low-cost locations outside of the UK.

Mike Morrison, chief executive of ISG technology stated that nearshoring was emerging as a growing trend in outsourcing. "A lot of businesses are nervous about offshoring because of time and language barriers and data governance issues."

ISG technology recognises that many businesses are operating in a very difficult economic climate and are looking for realistic ways to drive down costs, without impacting on the service levels they deliver to their customers. It has established a Nearshore Support Centre (pictured) in Bulgaria that enables it to provide a wide range of outsourcing services to the UK retail market.

"Our confidence and knowledge of the service stems from the fact that we use Bulgaria extensively ourselves. Across our 24-hour helpdesk, multi-lingual IT support services, finance, HR, administration, project support and telemarketing department, we have consistently found that we have increased quality of service and reduced costs significantly," explained Morrison.

Offshore operations for UK companies have traditionally been offered out of Asia and Latin America, including India, China and the Philippines. Nearshore offerings tend to be based mainly in Central and Eastern Europe. The trend towards nearshoring is gathering pace as companies recognise the benefits that this alternative sourcing model provides, particularly in the IT and business process outsourcing (BPO) areas of their business.

Morrison shared the results of a survey of 105 IT decision maker's at large European companies already using nearshoring and offshore providers, where 95% found the greatest benefit of outsourcing was cost reduction. Just over a third (35%) thought they benefited from faster results, 33% cited better reliability and 29% resource availability. Better quality of work (24%) and improved support (21%) rounded out the top benefits to organisations.

Research released by Valueshore, the Spanish Government-backed group of IT consultancies, found that three quarters of UK organisations were disappointed with the quality of work provided by offshore outsourcers. Some 70% of the organisations surveyed reported that they were considering nearshoring as a viable alternative.

"Communication problems with offshoring to more remote locations are eliminated, rapid responses to client requests are possible and travel costs are kept to a minimum," Morrison continued. "The location of our operations in Sofia means you can be in the office three hours after flying out of Heathrow, ensuring strong customer engagement."

Nearshoring overcomes the customary difficulties associated with offshoring to distant countries and continents. Working with countries on the same continent means clients and staff are operating in similar cultures, aiding project management and day-to-day communication. Face-to-face meetings are much easier and less expensive to schedule, and working in this way tends to provide for a more satisfied, loyal and stable workforce.

ISG has operated as an IT delivery and support service provider for some of the world's leading retailers for many years in the UK and now intends to expand its European presence in line with the needs of its customers. To date it has successfully delivered nearshore contracts, focusing on remote IT support, project management and BPO, particularly in the areas of finance and HR.

"Most activities, tasks or roles where an employee does not need regular contact with a customer can be transferred to Bulgaria and we believe that this can save up to 35% on current personnel costs. We are able to offer our customers easy access to high quality, high productivity, loyal, and low cost personnel and facilities, and at a significant savings compared to the UK," Morrison continued.

Nearshoring within the EU is potentially a very important element of corporate strategy as it can help to maintain and improve competitive advantage. "For many years the UK's largest companies have secured significant benefits from offshoring. We believe that we can make those benefits available to the mid-sector retail community through nearshoring via our Sofia facility," said Morrison.