The Server-Side Pad

by Fabien Tiburce, Best practices and personal experiences with enterprise software

The Case for Nearshoring to Canada

with 2 comments

Recent accounting scandals and political instability in India have exposed offshoring as an uncertain and risky proposition.   There are cost savings to offshoring but is there value?  Let’s see.  Offshoring is by no means convenient.  Coordinating efforts with individuals in different time zones takes much planning.  It can affect an organization’s productivity and a product’s time to market as simple changes turn into costly iterations coupled with high management overheads.  Communication requires extra work too as the person on the other end may not have a sufficient grasp of English, Spanish or French (whatever is the prevailing language of your organization and jurisdiction) to communicate effectively.   Quality is harder to control and issues often take longer to fix.  Lastly, let’s not forget that the focus on customer satisfaction is very much a cultural phenomenon which may be blatantly absent in some parts of the world. In other words, it is unreasonable to expect offshoring to be like working with local contractors albeit cheaper.  It is nothing like working with local contractors, will definitely affect your operations, lengthen your time to market and may increase your risks.  All things considered, it may or may not be cheaper.  

None of this is new of course.  In fact many US companies realize the risks of offshoring and already nearshore to Canada.  The value proposition for Canada is strong.  Canada has political stability, infrastructure and an educated labor force.  It is aligned with the US time zones, has similar work ethics and business values (customer satisfaction, attention to details, etc…).   Canada has over 80 ethnic communities (lots of languages spoken) in Toronto alone.  Lastly with generally lower wages and a strong US dollars (1 US = 1.25 CDN at the time of writing), the risks are low and the advantages real. 

A decision to offshore should be based on overall value, not up-front cost savings. Canada’s value proposition is strong.

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Written by Compliantia

January 21, 2009 at 10:10 pm

2 Responses

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  1. Hi Fabien,

    good to reply here again. I work in Brazil for a US company which offshores in India, Malasia and Brazil.
    In India and Malasia we focus on development, while in Brazil I work as Product Manager.
    I agree with you about the challenges and also about the advantages of offshoring in Canada.
    Pushing to my side, I would say that in Brazil the time zones, work ethics and business values are close as well. I think our main problem is related to instability of our currency. The exchanges rates vary so much every day and even we having contracts in dollars, we end up having expenses in Reais which has some time to be adjust.
    About the language, the accent from a Brazilian is closer to an English Native than someone from India for sure.
    Marcio Ferrini

    Marcio Ferrini

    January 22, 2009 at 1:54 pm

  2. Hi Fabien,

    As you know I’ve done quite a bit of offshoring in a number of regions at a number of companies and have been successful in some and not in others. All good learning experiences 🙂

    You make some valid points. For offshoring to be successful, you truly need to commit to it and integrate it into your processes and commit to going there regularly. So yes there are additional costs outside of just what you initially see to make it successful. As soon as you outsource anything, be it down the street, or half way around the world, there are complexities that need to be managed or things can fall apart. The further away though, the more issues that can happen. Timezone is by far the biggest factor in my opinion. We outsource to an area where people can work later in the day, but still match up with our timezone. This makes coordination much, much easier. We also have an IP phone system between the offices, again to facilitate communication. Also having your own people that you hire and manage makes a big difference. Canada is obviously a great option, but even for Canadian companies, if good choices are made when offshoring and integrated into the day to day operations versus a “throw it over the wall” mentality, outsourcing can be very effective both from a cost perspective and a productivity perspective.


    Gary Toste

    January 22, 2009 at 8:18 pm

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