Top 7 Nearshoring FAQs Answered: Costs, Benefits, and What to Expect in 2025

Foreign. Welcome everyone to the Nearshore Cafe podcast. Today I'm going solo and I'm going to answer frequently asked questions about the world of nearshoring. For those that don't know, I'm Brian Sampson, the host of the Nearshore Cafe podcast. I'm the founder of Plug Technologies and I've been doing nearshoring for over 10 years. So I'd like to give my firsthand account to to some of the most frequently asked questions that we get. The first one, explain nearshoring versus offshoring versus onshoring versus outsourcing. What are they? How does this all go together? Very common question. I like to think about it in terms of workday overlap and time zone. So offshoring, very common. That's usually when, say, the US is working with Asia. So one time zone is generally sleeping, the other time zone is awake. And it's almost like a follow the sun model. Offshoring is usually the least expensive but has the most limited workday overlap. The next is near shoring, which is usually developed countries working with developing countries in the same time zone. So think UK with Poland, the US with Mexico. So same time zone, same workday overlap, little less expensive. Then you've got onshoring, which is same country, same time zone, most expensive. Some of these could be outsourcing, some not. The way you should think about what outsourcing is. Is this person part of my team? Were they part of a company that's handling a function for me? If they're part of an outside company that's handling a function for you, say you're outsourcing accounting or outsourcing marketing or SEO, it could be anywhere in the world. They could be onshore, they could be nearshore, they could be offshore. But it's a specific company outside of yours, external, that's handling a certain task or function. For example, plug, we're not outsourced. This is an embedded team staffing. So we're bringing nearshore talent from Latin America to be part of your team. So not outsourcing. Another question that we get all the time is, is okay, so let's say I nearshore, how much can I really save? What's the cost savings with going nearshore? It does matter which countries you look at, but generally speaking, you'll save anywhere from 40 to 70% versus higher end in the U.S. and that is really nuanced by how expensive your U.S. city is. San Francisco versus say Omaha, Nebraska. You're going to get the most cost savings with San Francisco and Latin America. The Least cost savings with, say, Omaha and Latin America. And then there's also nuances with how expensive places are in Latin America. As you'd imagine, Buenos Aires or Sao Paulo or Rio might be more expensive than, say, rural Bolivia. So take all that into account. But generally 40 to 70% is what you'll save. What are some of the major benefits that a company might get when they nearshore? By far the most important benefit is time zone alignment. You're going to be working with people on your time zone. That means when you send a slack message, you'll get a response right away. Project management software, emails, phone calls, zooms, they're all on your time zone. So it's instantaneous communication. I think that matters a lot in 2025 and beyond of collaboration. People want to share ideas, especially when you think about return to office. What you really want in return to office is collaboration. You want instant feedback. You want to be able to bounce ideas off kind of that water cooler chat. So time zone alignment, obviously, number one. Now let me tell you about my favorite benefit. Latin America, for better or worse, is volatile. You've got governments that are sometimes unstable, you've got inflation institutions that have many flaws. And I'm not saying the US is perfect, US has certainly its share of flaws. But when you grow up in a country where you can't trust the government, the currency, the institutions, you have to think creatively. You've got to find workarounds, you've got to be a problem solver. Things that would totally stress me and my friends out in the States. It's just a regular Tuesday in many countries in Latin America. Take that as an advantage, not a disadvantage. These people are adaptable, flexible, gritty, scrappy. They're not afraid of chaos and they can find solutions to chaos. That is by far my favorite benefit of working with Latin America. Another question I get is how does Plug differ from its competitors? Well, as the founder of Plug, I've been near shoring for over 10 years and I've had a chance to see the different angles and frames that companies can take. And I think there's really four buckets that exist today in 2025. Bucket number one is the traditional dev shop. And often you'll have a lot of people in the middle, architects, project managers, directors of engineering, and that's all great, but there's two major issues with that. The first is there's a lot of a lot more overhead you're dealing with. And when a company has more overhead, they've got to charge you More to make up for it. So is that extra overhead worth it? The second is you might not be getting the best engineers, period. You're getting the ones that are the most cost effective for the dev shop. And in some cases they're the ones that they're just dying to get off the bench so they don't have to. They can turn that cost into a line item on their income statement of pos, of positivity. But there's a trade off, right? Again, it's someone they're dying to get off their bench, dying to remove. As a cost center, you're the one paying for it. So there's the other three buckets, which are traditional staff augmentation. Staff augmentation is basically contract recruiting. It's bringing talent that is supplementing or augmenting whatever you've got going on within your team. There's three buckets here. There are the companies that are strictly US based and we're seeing a lot of that, you know, as there is a big land grab and rush for Latin America. The 2020s in my opinion are the decade for Latin America. That means you've got a lot of US staffing companies that are seeing flat revenue and they are trying to hack near shoring, but they're doing it from the U.S. you know, U.S. recruiters, U.S. salespeople, they haven't had experience in Latin America. They don't have the infrastructure, the payroll systems, they don't understand the culture. So it's really hard. Now you've got the opposite of that and you've got true Latin America headquartered firms. In this case, they understand the talent quite well, but they don't have the understanding of the U.S. environment. U.S. contracts. They're asking you to send these international wires. Sometimes the contracts don't feel clean and clear. There's just a way that they're doing business that doesn't totally map to the US and then there's plug and we kind of live in the center of that. We're a U.S. entity, U.S. contracts, U.S. bank accounts, easy Quickbook invoices. And we've got multiple people on the team, myself included, who have been expats in Latin America. So we've had to live it and learn it all firsthand. So we can provide this special firsthand advice on how to properly set up in Latin America. The different nuances, these are all things we've kind of lived. Going through customs, eating at restaurants, taking taxis. We understand all this. And then we have the Latin America infrastructure, recruiters in Latin America, operations In Latin America, payroll, hardware, onboarding, all these things that are set up for long term success, loyal and committed team members. It's 2025 and Trump is president in the US so a question we're getting all the time now is tariffs? Are tariffs impacting nearshoring? And my answer here is not really, but it's not a definitive no. That's not a definitive yes. Nearshoring if it relates to goods like products, think cars, watches, clothing, certainly. And we're in this war basically of reciprocal tariffs or tariffs going on a pause or a hiatus. China obviously is the biggest trade antagonist right now for the U.S. so if you have products made in China, they're going to be a lot more expensive. Now Latin America, near shoring, there's a lot of friendly, friendly relationships with the U.S. so you're not getting as many reciprocal type of tariffs. But if there are, probably applies more to goods, it hasn't hit services yet. So I think software and staffing hasn't really impacted that quite so much. Now the thing that is kind of in the air is when companies are getting hit with tariffs, their costs go up. So they might be looking for an outlet on how to save money elsewhere. Funny enough, nearshore services might be a really interesting way to go in 2025 as tariffs are top of mind. So your costs might go up in one line item, but they can go down in labor and staffing by considering nearshoring. I'm often asked to give advice, you know, on companies that maybe are near shoring for the first time in their history. What should they do? How should they think about it? The best advice I would give is think about your risk profile. So is near shoring a little more risky than onshoring? Yeah, but the risk you take the trade is usually cost savings. So if you nearshore, you hope to win in that trade and get more benefits than the risk that you're taking. Again, you know, saving money that way. But then if you're already opted in for near shoring, every country kind of has a different risk profile. And that's what a plug is usually able to help with, is understanding the different risks, the nuances, everything from currency volatility to customs, hardware, onboarding, talent, pockets, things like that. So I'll give you an example of two countries that are neighbors, say Nicaragua and Costa Rica. Costa Rica is by most accounts more developed. There's no standing army, long a consistent democracy. Many companies have been there already, you know, between Microsoft and Intel and so forth. But therefore it's more expensive but then you've got Nicaragua, less expensive, maybe a more volatile past, but in my opinion a much bigger upside and opportunity, bigger population, a lot of English speakers. So it really depends on like where you are maybe in that bell curve. And the more open to risk, the more upside and potential arbitrage that you have. The last question that I get are hey Brian, what roles should I even think about? Near shoring? What are the common roles that people look to Latin America for? I think the tri true tested starts with software development. That was one of the first things offshored and it's also one of the first things that was nearshored. So thank your full stack developers, backend developers, front end developers, QA, DevOps, tech, adjacent UI, UX, things like that. Very common. You'll find tens if not hundreds of thousands of capable talent all over Latin America that fits this profile. Secondly, Central America is really making a run for a great place to install a call center. So think help desk, customer service, even customer success type roles. They're right on par with the call center of the world, you know, which is the Philippines. And I tend to like it because you get a lot more unscripted people that can think on their feet in Central America at relatively same cost. What I probably would not nearshore are executive roles. I probably would not nearshore like my first developer or second developer, but I would think about it as staff augmentation, as ability to accelerate and grow my team with really minimal risk. I don't worry at all about IP theft or anything like that. I think nearshoring is really the way to go as you look to grow and scale your team and again, not necessarily outsourcing. These people are truly eager to be embedded as part of your team and think what's best for the business. So there you have it. My top seven FAQs frequently asked questions about the world of Nearshorin. If you have any questions you can always contact me personally. And our website is PlugPlugg Tech. You're listening to the Nearshore Cafe podcast. Thanks again and we'll see you next time.