Nearshoring vs Offshoring vs Onshoring: The Complete Strategic Guide

In the United Kingdom, a survey revealed that 86% of organizations have found hiring “quite” or “very” competitive in 2023. This year, 40% of these organizations also expect “lack of skilled candidates available” to be their greatest recruitment challenge.

But this is not limited to the U.K. According to the ManpowerGroup survey, 75% of employers around the world report difficulty in filling roles.

Luckily, business leaders have three options for solving their talent acquisition challenges: onshoring, nearshoring, and offshoring. 

Businesses worldwide have been leveraging these different models to hire top-notch talent with specialized and highly in-demand skills. This is especially true for specific industries with hiring challenges, such as software development and digital marketing.

Key Takeaways

• Three Distinct Models to Solve Talent Shortages: Businesses have three primary models to combat the global talent shortage: Onshoring (relocating within the same country), Nearshoring (outsourcing to a neighboring country), and Offshoring (outsourcing to a distant country). Each offers a unique balance of cost, control, and talent access.
• The Core Strategic Trade-Off is Cost vs. Velocity: The most critical decision, particularly between nearshoring and offshoring, is a trade-off. Offshoring typically offers the highest cost savings and access to the largest talent pools. Nearshoring, due to its minimal time zone differences, offers superior decision-making speed and real-time collaboration.
• Onshoring Provides Maximum Control at the Highest Price: Onshoring is the most straightforward option, eliminating time zone, cultural, and major regulatory challenges. However, it also provides the least cost savings and limits a company to a smaller and often more expensive domestic talent pool.
• A Hybrid Strategy Can Be the Most Powerful: The most advanced approach is not to choose just one model but to combine them strategically. By building a team that includes local, nearshore, and offshore talent, a company can leverage the unique strengths of each to create a more dynamic, resilient, and versatile global workforce.

Nearshoring vs. Offshoring vs. Onshoring: What are the Differences?

Nearshoring takes advantage of resources from a nearby country within the same region. For instance, the U.S. is advancing its nearshoring priorities in countries in Central America with Special Economic Zones. Policymakers and business leaders in the U.S. focus on diversifying supply chains to pull Asia-based supply chains away from China and nearshore them to the Americas for greater economic security.

Offshoring, on the other hand, is similar—only that it moves certain business processes, such as hiring talent, to geographically distant countries. 

Meanwhile, onshoring, also sometimes referred to as domestic outsourcing, transfers specific business operations to another city within the same country. 

Onshore vs. nearshore vs. offshore―one can assume they differ only in distance. All three have many similarities, but are entirely different talent acquisition strategies, especially in their unique ways of helping you achieve your business goals.

The Meaning of Nearshoring and How It Can Help Your Business

Nearshoring involves outsourcing tasks to a nearby country, usually on the same continent. Your nearshore partner is a little bit closer to you, but it’s still outside your country. 

For example, if your company is in California, you can outsource your work to a nearshore company in Mexico. Mexico’s northern states are a top destination for companies that want to position their operations or link with suppliers who are closer to the U.S. and shift their production capacity away from China. 

Most manufacturing, e-commerce, financial services, and software development companies nearshore their production, customer support centers, and software development tasks.

The Advantages of Nearshoring

Nearshoring is ideal if you want to cut costs and increase efficiency by outsourcing to a nearby location with lower labor costs. Businesses benefit from nearshoring because of geographical proximity, leveraging key resources while reducing expenses. 

You can make more frequent but less expensive trips for in-person communication and face-to-face meetings. Because you are in the same time zone, you can communicate and make decisions quickly, pivot strategies, and grab new opportunities just as fast. Thus, your business becomes more agile and flexible enough to scale up or down easily.

What are two viable locations for nearshoring for US companies?

Based on where I see successful nearshoring vs offshoring decisions playing out, two locations dominate for US companies:

Mexico: The Manufacturing and Tech Hub

Northern Mexico, particularly Tijuana, Mexicali, and Juárez, has become the nearshoring destination for manufacturing. But the real growth is in tech hubs like Guadalajara and Mexico City.

Why Mexico works: USMCA trade agreement benefits, two-hour flights from major US cities, and a growing tech talent pool. Mexican developers often earn $35K-$50K annually compared to $100K+ in the US. The country produces 130K engineering graduates annually.

The infrastructure reality: Guadalajara has Google, IBM, and Oracle offices. The talent pipeline is established, not experimental.

Costa Rica: The Services and Support Center

Costa Rica has positioned itself as the nearshore hub for customer service, back-office operations, and shared services centers.

The numbers: Costa Rica boasts one of the highest levels of English proficiency in Latin America, particularly within its professional workforce. Time zones align perfectly with US business hours. Political stability and strong educational system create consistent talent quality.

Corporate presence: Amazon, Microsoft, and Procter & Gamble run major operations there. This isn’t emerging market risk—it’s established nearshore infrastructure.

Why these two beat other options:

Colombia and Argentina have talent but currency volatility creates budget uncertainty. Canada has talent but costs approach US levels, eliminating the economic advantage.

The nearshoring vs offshoring calculation changes dramatically when you factor in travel costs, time zone alignment, and cultural similarity. A $400 flight to Guadalajara versus a $1,200 flight to Manila, plus the 16-hour time difference, makes Mexico compelling even if hourly rates are higher than offshore alternatives.

The strategic insight: Choose Mexico for technical roles requiring real-time collaboration. Choose Costa Rica for customer-facing operations where cultural alignment and language skills matter more than raw cost savings.

The Disadvantages of Nearshoring

Nearshoring provides more control over the entire business operation or project management process. However, every business owner must also know the disadvantages of nearshoring. 

For instance, the quality of nearshoring services is not guaranteed and will depend on how much research you devote to finding the best nearshoring solutions provider in that region. 

Moreover, being in close geographical proximity to your nearshore partner also puts your business at risk if there are any ongoing social, economic, or political challenges in its location.

Read more: Hiring and Working With Offshore Teams: Know the Real Deal

What is Offshoring and Its Pros and Cons?

Like nearshoring, offshoring moves business operations or services to a different location. But the major difference between offshoring and nearshoring is that the offshoring partner is not nearby. It’s in a more distant and entirely different geographic location.  

The Advantages of Offshoring

Offshoring also has advantages and disadvantages. 

When managed properly, the difference in time zones can become more of a benefit than a setback. 

You can run critical business functions and leverage the time zone difference to get work done while your in-house team sleeps. For example, a company operating in California with an offshore team in the Philippines is 16 hours behind. There’s a 1-hour overlap if the local and offshore teams work within the typical 9-to-6 schedule. The teams can maximize that overlapping time by conducting daily virtual meetings for alignment, progress tracking, and tackling potential issues—and then spend the rest of the day on deep work.

It also allows your business to operate continuously and provide 24/7 customer service and staffing flexibility, so you miss no growth opportunities. As a result, you increase your productivity and improve customer satisfaction. 

As far as offshoring companies go, you also benefit from the wide range of options. Offshoring destinations like the Philippines have a vast, diverse, highly skilled, and English-proficient talent pool. With their specialized skills and proven competence, you can build multi-disciplinary offshore teams efficiently and effectively at reduced costs. 

See also:

• Find Out the Cost Savings You’ll Get from Offshore Staffing
• 5 Non-Negotiables When Building A Filipino Offshore Team

The Disadvantages of Offshoring

There are downsides to consider too. Unlike nearshoring where you can exercise more control, offshoring is more challenging because of the distance and the time difference. You need to invest in technology that enables asynchronous working, so your operations keep running despite the time and geographical boundaries.

Additionally, although offshoring countries like the Philippines have English as their second language, there may still be challenges like language and cultural barriers that can interfere with the way your in-house team and remote team collaborate.

See also: Offshore Staffing Trends in 2024: KPO, Automation, and More

How Onshoring Works and Its Pros and Cons

Onshoring makes sense if you want to outsource to a third-party service without the challenges that nearshoring and offshoring pose. It involves moving your business processes to another location within the country, usually somewhere more affordable or strategic for your operations. 

Onshoring vs Offshoring: Which is Better for Your Business?

Onshoring is ideal for startups because it gives you control, security, and coordination over many business processes. 

There’s also increased efficiency, cooperation, and coordination since your onshoring partners speak the same language and come from the same cultural background. Along with this, there’s no time zone difference, so everybody can work in sync.

Unlike offshoring, onshoring doesn’t have to factor in overseas travel and living expenses. Proximity to your onshore partner reduces costs, from shipping, inventory holding, and transportation to customs duty. 

You’ll also encounter fewer problems regarding domestic regulations, taxes, and financial laws, as they will be subject to the same laws, rules, and regulations. Plus, you’ll be tapping into the native labor force and using domestic facilities, infrastructure, and resources. 

The Disadvantages of Onshoring

Despite its significant cost savings, onshoring has higher production costs than offshoring and nearshoring. It can be a competitive disadvantage, especially when more affordable options exist globally. 

Moreover, the localized approach of onshoring can potentially limit not just your global market presence but also your access to a diverse, highly skilled global talent pool.

Your onshore operations can also be affected whenever the country has supply chain disruptions, such as labor strikes, natural disasters, and economic fluctuations. 

What is one benefit of nearshoring over offshoring?

The single biggest advantage of nearshoring vs offshoring isn’t what most people think.

It’s not time zones, though that helps. It’s not even cost, because offshoring often wins on pure numbers. The real benefit is decision-making speed.

Here’s what I mean: When your offshore team in the Philippines encounters a problem at 9 AM their time, your US team is asleep. They either make decisions without your input, potentially creating expensive mistakes, or they wait 12 hours for guidance, killing momentum.

With nearshore teams, problems get escalated and resolved the same day. I’ve watched this play out repeatedly:

Offshore scenario: Bug discovered in production at 3 AM US time. Philippine team documents it, emails the details, and waits. US team sees it 8 hours later, asks clarifying questions. Philippine team responds the next morning US time. Resolution begins 24-36 hours after discovery.

Nearshore scenario: Same bug discovered at 3 PM US time. Mexican team escalates immediately via Slack. US team joins a quick video call, makes decisions, and deploys the fix by end of business day. Total resolution time: 4-6 hours.

The compounding effect:

This speed advantage compounds across hundreds of small decisions. Feature iterations happen faster. Customer issues get resolved quicker. Strategic pivots become possible.

Yes, nearshoring costs 20-30% more than offshoring. But when faster decision-making translates to capturing market opportunities or avoiding customer churn, the ROI calculation flips.

I’ve seen companies choose offshoring for the cost savings, then switch to nearshoring after missing critical deadlines because of communication delays. The nearshoring vs offshoring decision often comes down to whether you optimize for lowest cost or highest velocity.

Bottom line: If your business model depends on rapid iteration and real-time responsiveness, nearshoring wins despite higher costs. If you’re optimizing for stable, long-term cost reduction on well-defined processes, offshoring makes sense.

Nearshoring vs. Offshoring vs. Onshoring: In a Nutshell

Still deciding on which talent sourcing strategy is the best for your company? Refer to this table that summarizes the key differences between nearshoring, offshoring, and onshoring.

You don’t have to choose one over the others—it’s actually strategic to combine two or all of these strategies to maximize their benefits. 

For instance, nearshoring and offshoring can be complementary and be considered part of one’s talent acquisition strategy, according to Nicolas Bivero, CEO and co-founder of Penbrothers, the #1 Fastest-Growing Company in the Philippines.

“Offshoring isn’t an alternative to nearshoring; it’s a natural extension. By building a team that includes local, nearshore, and offshore talents, you’re strategically combining their strengths to create a more dynamic, versatile, and robust workforce,” says Nicolas.

Read more about Nicolas’ thoughts on nearshoring, onshoring, and offshoring here.

Final Thoughts

Whether nearshoring, offshoring, or onshoring, all can benefit your business. To determine the best business strategy, define your priorities, challenges, and what you’re trying to achieve for your company. Is it primarily to cut costs, hire the best talents, or reach a global audience? Only then can you decide on which strategy to adopt.

It can be overwhelming to get down to the nitty-gritty of each talent acquisition model. This is why it’s crucial to work with an experienced and strategic partner to guide you through the entire process and jump through the hoops for you.

Frequently Asked Questions