Nearshoring can be defined as an activity in which a company outsources work to a supplier located in a foreign low-wage country, as the vendor is close geographically and in terms of time zones. Simply put, nearshoring involves outsourcing work to companies with the economic benefits of an offshore location, but a closer cultural, linguistic and geographic fit with the user generation. In comparison with offshore outsourcing, nearshoring provides many benefits including lower travel, costs, same time zone, and closer cultural similarities.
According to the Global Sourcing Association (GSA), the SEE region has become an attractive location for nearshoring due to the low cost of qualified staff and a large number of highly educated, bilingual and qualified IT professionals. First and foremost, it’s about the buzz and energy brought by young talented people. That’s the biggest valuable asset that the SEE region has compared to other European countries where the population is ageing.
Kosovo for instance has the youngest population in Europe, with 53% of Kosovars being under 25. The country has a lot to offer in terms of young qualified, bilingual people, cheap labour force, the euro currency, low taxes, business-friendly environment and cultural similarities with Western Europe, highest internet penetration in the region, and an increasing number of graduates.
Moreover, the SEE region has highly educated labour force, a large part of which is fluent in both English and German, which gives it a competitive edge to India, where rates are cheaper, but you can end up spending more time to overcome communication and cultural difficulties and getting your message across. A study done by Blue Prism found that more than 60% of UK responders have had problems with an offshore centre representative from India for not being able to understand their accent which has posed a huge communication barrier to vendor customers.
The SEE region, in particular Kosovo, is an attractive destination for nearshoring due to its strategic location at the heart of Europe. You can get to Berlin in less than two hours via a direct flight, staying in the same time zone, but you cannot get to Mumbai in less than 10 and at a much higher cost. The close strategic location can work both ways - not only making it easier for a German representative to get in touch with a Kosovo development team, it also makes it easier to get developers on the ground in Germany whenever necessary. The best practice is to stay within five hours of flight distance and avoid crossing the ocean. Interestingly enough, a large number of Indian service providers have opened BPO/ITO and shared service centres in SEE.
Managing people from different cultures and background can be a huge challenge which has prompted a number of US and European companies to turn away from places like India to nearshoring destinations such as SEE with which they share a number of traditions, customs and holidays.
Shorter Supply Chain
A shorter supply chain means more saving, flexibility, reduced inventory and better customer services. The benefit of nearshoring is that it makes easier to manage operations and ease communication between businesses in terms of both time and language. In addition, nearshoring to SEE region offers companies many benefits of cost savings, access to skilled people, greater speed to market and control over the supply chain. Other advantages include high-quality control, better inventory control, no visa requirements and the ability for better procurement and logistics to easily communicate with partners.
High-Quality Talent Pool
SEE has a wide range of talented people ranging from computer engineering to computer networking and telecom. The educational systems have a focus on computer engineering and mathematics. Romania for example produces up to 30,000 computer engineers every year and has the largest number of IT specialists in Europe and sixth in the world.