The Hindu Business Line : `Nearshore sites vital in global sourcing strategies'

NEARSHORE destinations such as Canada and Mexico are an important component of a global services sourcing strategy according to a new research report issued by neoIT, the leading offshore outsourcing advisory and management firm.

The latest issue of neoIT's Offshore Insights White Paper Series, titled "The Nearshore Opportunity:

A Closer Look at Mexico and Canada" said: Assessment of nearshore options is imperative to any well-balanced global sourcing strategy.

"Both Canada and Mexico have unique strengths that, when combined with offshore options, enable our clients to truly leverage the advantages of a global sourcing strategy," neoIT Managing Director, Mr Debashish Sinha said.

Based on primary and secondary research gathered by neoIT in late 2003, the report has outlined the key issues companies should consider when weighing nearshore over offshore, which includes the nearshore governments' support to the local IT industry, the labour costs in nearshore markets, the type of infrastructure exists in near shore markets and the importance to maintain a well-balanced global portfolio.

The report states that for development projects and initiatives that require a high level of collaboration, Canada and Mexico would be the right destinations since these projects leverage the nearshore market's proximity and cultural affinity to produce higher productivity and a greater propensity of successful implementation.

Outsourcing fairly commoditised application development to nearshore markets is less attractive since offshore vendors have become extremely capable and efficient in performing these services.

Canada's geographical proximity, cultural affinity and solid infrastructure combined with a qualified, less expensive labour pool compared to the US offers an excellent alternative for companies who are highly risk averse but seek to lower their operating costs.

For companies that are slightly more risk tolerant, Mexico may provide the right combination of cost savings, service quality and service options.

For US companies servicing the growing US Latino population, Mexico is proving to be an excellent source of qualified, Spanish-speaking resources, the report said.

Another emerging opportunity for nearshore markets is in the hosting of mission-critical and non-mission-critical applications.

This opportunity takes advantage of the strong infrastructure, geographical proximity and the North American Free Trade Agreement (NAFTA).