A few years ago, it seemed offshoring would be the answer to all business problems. It would save money and would provide unlimited opportunity for labor. In many cases, offshoring successfully accomplished these aims… but then there were the other cases.
If you’re ready to onshore some of your operations, read this article first. There is a correct way to pull ahead of your competition during this process, but you’ll need to avoid the three most common onshoring difficulties in order to succeed.
1. Running Out of Talent
Offshoring provided unlimited labor expansion in a global setting. Onshoring definitely limits your expansion. In fact, if done wrong, your onshoring project can quickly lead to a costly labor shortage for your company.
Avoid the issue by carefully choosing your onshore location. If you’re planning to “farmshore,” which is when you relocate some of your in-country operations to less populated areas with a lower cost of living, you’ll want to pay attention to key growth and labor generators. These include:
• Nearby colleges and universities that offer degrees in the skill sets your company seeks
• A base of certified professionals with required skills
• A desirable location where young college grads can build a home
Increase your onshoring success by making sure nearby colleges and universities have large student populations. In today’s job-hopping society, the one thing you can definitely count on is turnover, so you’ll need new people to fill those vacant spots regularly.
In addition, ensure that nearby colleges promote broad related skill sets. Agile companies like yours must constantly evolve to stay ahead and if you find that your onshore location is lacking in the newest tech skills a few years down the road, you’ll have to scramble to get work done.
2. Drowning in Fixed Costs
Offshoring limits your fixed costs so you can maintain competitive pricing. Onshoring grants you much-needed flexibility in terms of lead times, small-run testing, and other agile practices, but costs can rise—dramatically—if you aren’t careful.
Savvy companies sidestep cost concerns by performing careful research before finalizing an onshore location. Specific factors to investigate include competition and insurance.
• Competition – If you’re not the first company of your kind in the area, your entrance will create a competitive job market, which spikes local wages.
• Insurance – Sometimes affordable areas are burdened with higher rates of natural disasters and pervasive environmental hazards. Both of these can increase your expected insurance costs for equipment, buildings, and employee healthcare.
Also, pay attention to your scalability and exit strategy from the area. If you decide later to sell off your fixed assets but there are no local buyers, you may get stuck with an ongoing bill that limits future capital allocation strategies.
3. Suffering from Management Strain
If you’ve spent the past few years working with an offshoring vendor, you’ve been spared the responsibility of remote employee management and sourcing for non-core skills. Be prepared, because onshoring typically requires you to assume responsibility of your entire workforce again. Are you ready for that?
If you aren’t sure you’re up to the task of handling extra insurance carriers, strange PTO requests, grumbling employees, key personnel power plays, and workplace politics, you may want to consider working with an onshore management vendor.
These organizations will maintain your onshore talent for you, and will find and recruit skilled employees at key times to help you stay confident that your onshore location stays as agile as you imagined it would be. Some of these organizations also provide their own facilities to spare you from additional fixed costs concerns.
Here at ISG, we’re especially partial to Boomerang, our onshoring service that provides application development skills for United States-based operations, along with secured facilities that help you keep onshoring fixed costs well under control – headache-free.
Onshoring Should Benefit Your Company
Though the trend of offshoring has been wildly successful for reducing many costs and tapping into global labor potential, onshoring may work better for companies or operations that seek to ease communication and shipping capabilities, while providing enhanced flexibility through shorter lead times, reduced waste, and increased cash liquidity. For some areas of your business, these onshoring benefits may be exactly what you need to pull ahead.
Start your onshoring project right when you contact ISG about Boomerang. This innovative program can improve your onshoring success with an easy transition to fully managed application development pros ready to tackle your most pressing projects. Right now.