What Is Onshore Outsourcing and Is It Right for You?

If you’re considering onshore outsourcing to optimize your business operations, you’re in good company. Finding top talent while managing costs is crucial, especially in today’s competitive talent market.

In this article, we’ll guide you through the ins and outs of onshore outsourcing, including its benefits and potential challenges.

We’ll also explore real-world examples of successful onshore outsourcing implementations and list some vital services you can outsource to onshore partners. Lastly, we’ll show you how to pick the right outsourcing company for your business needs.

What Is Onshore Outsourcing?

Onshore outsourcing (sometimes called domestic outsourcing) involves delegating tasks or services to providers located in the same country as your business.

An example of onshore outsourcing would be a New York-based company externalizing its customer service department to an onshore team in Texas. Companies choose the onshore outsourcing model for a variety of reasons tailored to their specific needs and circumstances. One significant factor is the desire for proximity and ease of communication.

Onshoring vs. offshoring

Onshore and offshore outsourcing are distinct types of outsourcing for businesses seeking external support. While both models entail collaborating with external providers to fulfill a specific business process or role, their geographical distinctions come with unique advantages and considerations.

With onshore outsourcing services, businesses collaborate with providers situated within their own country. This arrangement fits those looking for proximity and familiarity.

However, offshore outsourcing goes beyond national borders, involving partnerships with providers located in foreign countries. This distant collaboration can be more dynamic, especially considering language barriers, cultural differences, or differences in business processes. 

Still, there can be significant benefits to offshore services, including reduced overhead and labor costs.

Onshoring vs. nearshoring

Since onshore outsourcing involves relying on domestic vendors for the desired services, it often makes the process convenient and familiar.

Nearshore outsourcing retains some of these advantages, such as time zone and cultural similarities, by enabling companies to partner with providers in a nearby country or region like Latin America (LatAm). This approach also offers similar advantages to offshoring, such as reduced costs and access to a diverse talent pool.

In this way, nearshoring offers many of the best aspects of both onshoring and offshoring.

What Are the Benefits of Onshore Outsourcing?

The benefits of onshore outsourcing are diverse, ranging from accessibility to effective team communication. Let’s explore four of the top advantages below.

1. Onshore outsourcing is a nearby, highly accessible solution

Onshore outsourcing provides businesses with immediate access to service providers. For instance, a tech start-up in San Francisco outsourcing its software development to a firm in Silicon Valley can help ensure close collaboration. 

This approach allows for more regular in-person meetings and brainstorming sessions while keeping the core business on track in a potentially cost-effective way.

Businesses are already starting to take advantage of this major benefit. In 2024, the projected revenue in the IT outsourcing market is expected to soar to $512.50 billion, with the majority of it being produced in the United States. This is largely due to advancements in technology, such as:

• Big data analytics
• Artificial intelligence
• The Internet of Things (IoT)
• The United States’ strong position in the innovative technology sector

2. It provides excellent cultural alignment and communication

Partnering with onshore service providers can help you take advantage of better cultural alignment and linguistic fluency. Communication barriers are also reduced thanks to minimal time zone differences, with the biggest possible gap in the US mainland being only three hours. 

Additionally, the shared cultural understanding and language command is a huge consideration, especially when it comes to resolving complex issues.

3. You’ll feel safer in terms of regulatory compliance and data security

Cybersecurity is a major issue. Cyberattacks, ransomware, and security threats are only some of the key challenges companies are facing. Unfortunately, this hurdle is not going anywhere, which is why Gartner predicts that by 2026, 70% of boards will include a cybersecurity expert.

Onshore outsourcing involves partnering with service providers operating within the same regulatory environment as your organization. Keeping operations within national borders ensures compliance with local regulations and the same data protection laws, meaning increased accountability for your service provider. 

4. You can improve quality assurance and customer satisfaction 

Onshore outsourcing can translate to higher service quality and customer satisfaction in certain fields. 

Take, for instance, a healthcare organization in California that is outsourcing medical transcription services to a provider in Los Angeles.

Due to the onshore nature of this partnership, the service provider ensures adherence to HIPAA regulations. In contrast, this could be more difficult to achieve with companies from different countries in this particular industry.

What Are the Challenges of Onshore Outsourcing?

While onshore outsourcing poses many benefits, it comes with undeniable challenges, such as the following:

Higher costs than other outsourcing models

Compared with offshore or nearshore outsourcing, allocating work to a domestic labor market is often the more expensive option. Due to the higher cost of living and generally higher wages in the United States, onshore outsourcing won’t always prove to be as cost effective as sending work overseas.

Competition for talent

There may be significant competition between companies for onshore outsourcing providers, particularly in industries such as tech or regions with high demand for skilled professionals. Competing organizations in the US often want the same pool of top talent, leading to resource shortages, increased recruitment costs, and potential delays in project timelines.

What Services Can You Outsource?

Here’s a breakdown of common services ideal for onshore outsourcing:

• Customer support and call center services
• IT services (such as software development, cybersecurity, and infrastructure management)
• Legal services (onshore legal firms can handle legal processes and tasks such as contract review and compliance auditing)
• Financial services and accounting (tasks such as payroll processing and financial reporting and forecasting)
• HR services (outsourcing companies like Near can prove to be a great asset in supporting your recruitment and benefits administration operations)
• Digital marketing (many businesses are already delegating specialized services like SEO and social media management to agencies and freelancers outside their in-house team)
• Administrative support (think of tasks like data entry and document management, as well as opting for a virtual assistant to improve operational efficiency and free up internal resources)

Is Onshore Outsourcing Right for You?

Deciding whether onshore outsourcing is the best fit for your organization involves evaluating factors like specific needs, budget constraints, and strategic objectives. 

Consider the following table to make an informed decision:

Additionally, try using the “If...then” approach to evaluate the suitability of onshore outsourcing for your company. Consider the following examples, but make sure to tailor them to your organization’s specific needs:

• If your budget allows for higher up-front costs and you prioritize proximity and real-time communication, then onshore outsourcing may be the ideal choice.
• If your business operates in a highly regulated industry with strict compliance requirements, then onshore outsourcing ensures adherence to local laws and regulations.
• If cultural compatibility and alignment are essential for your project management, then choose onshore outsourcing for shared understanding.

7 Tips for Choosing the Right Onshoring Outsourcing Partner

Here are seven key tips to follow when making this important decision:

1. Look for a partner with a proven track record and extensive experience in your industry. Check their legal status, peer reviews, and internet presence.
2. Assess the technical capabilities and skills of potential partners by looking at certifications, qualifications, and relevant experience.
3. Choose a partner that has clear and transparent communication channels or is willing to adhere to your communication preferences.
4. Consider the scalability and flexibility of the outsourcing partner. Ensure they have the resources, infrastructure, and agility to scale operations.
5. Evaluate the partner’s quality assurance processes, methodologies, and standards. What KPIs do they use? How do they track them? What’s their project success rate?
6. Determine whether the provider shares your company values, work ethics, and communication styles.
7. Obtain references and client testimonials from previous or existing clients of the outsourcing partner.

Final Thoughts

Onshore outsourcing offers numerous benefits, including proximity, cultural alignment, and regulatory compliance. With the information covered in this article, you’re better equipped to assess and choose the right onshore outsourcing partner to support your business and make the most of these advantages.

If you’re still considering more cost-effective outsourcing alternatives that don’t compromise the quality of your team, don’t forget the option of nearshoring: You can reduce overhead costs by 30–70% by hiring talent in LatAm.

If you want to further explore the cost savings you can achieve by hiring professionals from LatAm, check out our comprehensive LatAm versus US salary guide.