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Outsourcing has come a long way during last decades. As practice became more popular enterprises choose to outsource various functions. Onrush of ICT allowed companies to access world-wide resources for a friction of costs compare to those in their countries.

There was a big rush to go offshore early this decade, particularly to India, as country provided an abundant cheap labor pool of technically savvy workforce with good grasp on English. Outsourcing to India has opened significant opportunities to overseas (particularly US and EU) companies to reduce costs, improve productivity and get access to cheap yet skilled workforce. Possibilities to reduce overheads and free up resources attracted companies around the globe to outsource to India. As a result India's outsourcing industry saw a phenomenal growth in a very short span of time.

Such a demand for IT offshoring in India, however has lead to the industry failed to keep up with the fast growth and economic expansion revealing first signs of market inconsistency with wage and attrition levels fluctuations, security and financial ambiguities and scandals resulted in lowering of customer satisfaction levels.

From other side, offshore outsourcing has not appeared to be a panacea, for many businesses as long distances, unfamiliar culture and intellectual property issues appeared to be a real issue. In 2005 an outsourcing consultancy Ventoro polled 5,231 US and European executives at firms that use offshoring services and found that the average costs savings to be slightly below 10 percent for use of less expensive overseas labor.

Researchers at Ventoro have found that long-distance offshoring does take its toll on the control of projects. The time zone and geographical difference which were so glibly relegated to a non-issue has come back to haunt many offshoring clients. User firms reported that the time zone problem with a lag time of up to 12 hours in some cases eroded communication and project management.

According to the Ventoro many interviewed executives mentioned geographical difference as a disadvantage as great distances between offshoring providers and clients make frequent trips rare and expensive. With a very little face-time between project managers and offshored staff many engagements resulted in misunderstandings about the direction of projects brining unexpected management costs.

The last straw for many executives to have a second throughts about offshoring and begin to consider nearshore alternatives were spiraling turnover and salaries rates, security and financial scandals as well as terrorist attacks in one of the offshore industries main destinations. These escalating uncertainties and regional threats in offshore locations resulted in increased focus on vulnerability management and demand to keep data, business process and resources closer to where clients actually based.



The realities of an unsafe world have fully overrun into outsourcing decisions. As the savings gap between India and other world locations sunk to less than ten percent, the value proposition was tempered more by potential threads. From this point, the ability of suppliers to ensure that customers' sensitive data and business processes remain safe with the perspective to location's proximity, intellectual protection and infrastructure capabilities has been considered as an important element of decision making process and included into strategic outsourcing planning. While less inclusive outsourcing location rankings based on cheaper but skilled labor pools and tax incentives considered to be not sufficient to make a qualified destination decision.

The survey being made by Black Book Research indicates that Central and Eastern Europe and Latin America are viewed as significantly less dangerous outsourcing locations that all major hubs of India and being marked as the top destinations for operating with lowest downstream risks in 2009-2010. According to research having centers nearshore and sameshore will be a major client priority during next years.

Compared with offshore outsourcing, there are some other factors of nearshoring allowing to improve outsourcing governance and build productive relationships with providers, including less travel costs, less time zone differences, and closer cultural compatibility. In nerarshoring study conducted by Erran Carmel and Pamela Abbott argue convincingly that distance still matters, and point to customer choosing the nearshore option to gain benefit from one or more of the following constructs of proximity: geographic, temporal, cultural, linguistic, economic, political, and historical linkages.

Canada, Central and Eastern Europe and Latin America, for example, are significant nearshoring destinations for US and West European customers respectively, and some analysts argue that clients can have lower total costs with nearshoring to Canada and Central and Eastern Europe respectively than with offshoring to India. As proximity between parties provides with lower costs interaction enabling client's management to be more present in the project, cultural closeness also makes easier communication thereby reducing time to reach a conclusion. Time zone aspect eliminates the need in extra work. And as a result of all this the hourly rate difference between nearshore service model and “traditional” farshore model is eliminated and real costs match.



Increased focus on vulnerability management as well as shifted outsourcing delivery preferences to nearshore and sameshore allow nearshoring destinations to profit from their advantages in specific clusters based around clients in North America, Western Europe and in a less degree East Asia, differentiating themselves from farshore suppliers on proximity criteria.