Over the past years many organizations shifted from outsourcing their operational processes to the typical offshore hubs to partners closer to home. Nearshoring or nearsourcing is the trend. For companies in Western-Europe the nearshoring of critical business processes such as finance & accounting (FA) en legal support services (LPO) bring many advantages compared to offshoring.
Three reasons why nearshoring is hot:
- The stability and safety you need.
With a focus on costs and quality you can easily overlook that shoring your work to a safe and stable country is of utmost importance. A safe and stable environment is the first condition for a work situation where set goals can be achieved. After the disintegration of the Warsaw Pact and Yugoslavia, followed by the entry of many countries into the European Union, (South) Eastern Europe has become a region consisting of countries which have stable political systems. Risks of sudden change of laws, expropriation and/or embargoes are low. A deal is a deal and corruption is less than in many traditional offshore outsourcing centres.
The threat of crime and terrorism is low in most Eastern-European countries. Slovenia (15) and the Czech Republic (10) for example rank higher than the Netherlands (20) in the Global Peace Index of 2015 and other Eastern-European countries are not far behind.
- The proximity you desire.
From most Western-European countries you can find direct flights which will take you within two hours to Eastern-European destinations. And by car, you can be there in a day’s drive. The nearness of Eastern Europe makes it easy to keep regular personal contact with your outsourcing partner and take swift action in case of urgent matters or organize regular face-to-face meetings.
Nearby also means, working in the same time zone resulting in minimized time loss in the follow-up communication.
- The qualified workforce you look for.
In Eastern Europe you can find a highly skilled and motivated workforce. Many speak several foreign languages and there is an excellent knowledge of English. Staff turnover is much lower than in offshore centres where turnovers are reported of as high as 40 per cent.
Labour costs in the business economy sector in Eastern-Europe remain low. Data from Eurostat shows that the average hourly labour costs in 2014 in the Netherlands amounted to 33.5 euro, Belgium 41.1 euro and Germany 31.8 euro. The labour costs in EU members from Eastern-Europe were 15.5 euro (Slovenia), 9.6 euro (Czech Republic), 10 euro (Slovakia) to as low as 3.8 euro (Bulgaria).
Furthermore, many Eastern-European countries understand the potential they have for nearshore activities from Western-European countries and created conditions in order to facilitate the outsourcing industry and shared service centres.
Two reasons that make nearshoring even better:
- The convenience you enjoy.
In Eastern Europe you find several countries which are in the Eurozone. Nearshoring with a partner here will give you the convenience of doing business with the euro. The costs of nearshored work can’t be affected by currency appreciation and depreciation. Dealing with partners in Eastern-European countries within the European Union will give you the conveniences of Europe’s single market.
- The culture you know
The cultural differences between Western and Eastern Europe are small. Work and business mentality are very similar. Cultural reference points are alike. And that makes communicating and cooperation significantly easier.
In many, if not all ways, nearshoring is the attractive solution. Better is a neighbour who is near than a brother who is far away.