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Tag: nearshoring

  • Boost Revenue Per Employee With This Effective Strategy | Entrepreneur

    Boost Revenue Per Employee With This Effective Strategy | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    In the contemporary business landscape, we can say in the last 20 years, the revenue per employee (RPE) has emerged as a salient financial metric, commanding the attention of Big Tech companies as a critical determinant of organizational success. RPE, which quantifies the average revenue generated by each employee, serves as a barometer for workforce efficiency and productivity. The impetus for Big Tech’s emphasis on RPE is multifaceted, encompassing operational efficiency, competitive advantage, cost optimization, talent attraction, retention, scalability, innovation and agility.

    In this article, I’m sharing the significance of RPE in Big Tech and delineating the potential of nearshore IT staff augmentation as a strategic lever for bolstering RPE and catalyzing growth.

    Related: What is Staff Augmentation? 3 Reasons It is Vital For Your Business

    RPE in Big Tech

    Operational efficiency: The quest for operational optimization is a perennial concern for Big Tech companies, and RPE provides a valuable lens through which to evaluate workforce utilization. By scrutinizing RPE, organizations can pinpoint opportunities for productivity enhancement and judiciously allocate resources to maximize returns.

    Competitive advantage: The Big Tech arena is characterized by intense rivalry, necessitating relentless innovation and differentiation. RPE is a comparative benchmark, enabling companies to gauge their performance vis-à-vis competitors and industry norms. A superior RPE ratio indicates an efficient and productive workforce, conferring a competitive edge.

    Cost optimization: Labor expenditures constitute a substantial outlay for Big Tech companies. Organizations can mitigate labor costs by amplifying RPE by generating higher revenue with the extant workforce, optimizing cost structure and bolstering profitability.

    Talent attraction and retention: A commitment to RPE can enhance Big Tech companies’ ability to attract and retain high-caliber talent. By manifesting a dedication to productivity and efficiency, organizations convey that they prize high-performing employees and cultivate a work environment conducive to innovation and growth — especially crucial when it comes to navigating the post-pandemic global market.

    Scalability: The rapid growth trajectories of Big Tech firms necessitates a workforce that can scale commensurately with burgeoning demands. By prioritizing RPE, organizations can monitor the ramifications of growth strategies on workforce productivity and implement adjustments to preserve or augment efficiency.

    Innovation and agility: The technology industry’s rapid pace of change demands innovation and agility. A robust RPE ratio signals a company’s capacity to innovate and swiftly adapt to evolving market conditions. By concentrating on RPE, Big Tech firms can ensure their workforce remains nimble and poised to capitalize on emergent opportunities and surmount challenges.

    In the past 20 years, I have seen organizations go through on-and-off cycles of RPE. It is a critical metric for Big Tech companies, underscoring the centrality of workforce efficiency, productivity and innovation in propelling growth and securing a competitive advantage.

    Related: Learn The Simple Equation That Tells You If Your Business Will Grow and Scale

    How nearshore IT staff augmentation can boost RPE

    Organizations can optimize operations, entice top-tier talent and achieve scalability and agility in a dynamic and competitive market by assiduous monitoring and enhancing RPE. Nearshore IT staff augmentation, as a strategic initiative, offers a viable pathway for augmenting RPE, facilitating sustained growth and fortifying Big Tech companies’ market position, especially in the post-pandemic era.

    In Latin America (LATAM), several countries have emerged as attractive destinations for nearshore IT staff augmentation, particularly for businesses based in North America. These countries offer unique advantages that can contribute to improved revenue per employee (RPE) and overall operational efficiency. Below are some of the LATAM countries that are well-suited for nearshore IT staff augmentation, along with the factors that make them unique:

    1. Mexico: Mexico’s proximity to the United States and its participation in trade agreements such as the United States-Mexico-Canada Agreement (USMCA) make it a prime location for nearshore IT staff augmentation. The country boasts a large pool of skilled IT professionals, competitive labor costs and a growing technology ecosystem. Mexico’s time zones are also closely aligned with the United States, facilitating real-time collaboration.

    2. Brazil: Brazil is the largest economy across LATAM and has a vibrant technology sector. The country produces almost as many STEM graduates yearly as the United States, providing a rich talent pool for IT staff augmentation. Brazil’s technology hubs, such as São Paulo and Florianópolis, are known for their innovation and entrepreneurial spirit.

    3. Colombia: Colombia has made significant strides in developing its technology and innovation sectors. The country’s capital, Bogotá, and cities like Medellín are emerging as technology hubs with many startups and tech companies. Colombia’s government has also implemented initiatives to promote digital transformation and attract foreign investment in the technology sector.

    4. Argentina: Argentina is known for its highly educated workforce and a strong emphasis on research and development. The country has a well-established software development industry and a reputation for producing high-quality IT professionals. Argentina’s technology sector benefits from a culture of innovation and a focus on advanced technical skills.

    5. Chile is recognized for its stable economy and business-friendly environment. The country has invested in technology infrastructure and education, resulting in a skilled IT workforce. Santiago, the capital, is a regional technology hub with a dynamic startup ecosystem. The government has also implemented policies to support entrepreneurship and technology development.

    6. Costa Rica: Costa Rica has a growing reputation as a nearshore IT destination, partly thanks to its political stability and high literacy rate. The country strongly emphasizes education, particularly in STEM fields, and offers a multilingual workforce. Additional advantages include Costa Rica’s strategic location and time zone compatibility with North America.

    Related: Why Entrepreneurs Are Looking Towards Latin America for Nearshoring Opportunities

    It is important to note that the suitability of a particular country for nearshore IT staff augmentation depends on various factors, including the specific needs and objectives of the company seeking to augment its workforce. Companies should conduct thorough due diligence and consider factors such as language proficiency, time zone alignment, intellectual property protection and cultural compatibility when selecting a nearshore IT staff augmentation partner. Please make sure they are transparent!

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    Lonnie McRorey

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  • Entrepreneur | Outsourcing, Offshoring or Nearshoring — Which is Best for My Company?

    Entrepreneur | Outsourcing, Offshoring or Nearshoring — Which is Best for My Company?

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    Opinions expressed by Entrepreneur contributors are their own.

    Large corporations have been using offshoring to gain a competitive advantage by lowering their manufacturing costs since companies like General Electric pioneered the practice in the 1960s. Outsourcing started in the 1950s and became an attractive business strategy in the late 1980s as businesses began focusing more on their core competencies (NCST). Initially, these business strategies were mainly reserved for big corporations. However, as remote work technologies have developed and offshoring has gone from a strategy for lowering manufacturing costs to recruiting talent from around the world, companies of all sizes have turned to offshoring or nearshoring as a business strategy.

    The strategy has grown since 2020 due to five main factors:

    • global competition and the search for the best talent
    • COVID-19 forcing businesses of all sizes to work remotely
    • employees voluntarily resigning from their jobs en masse, compelling businesses to find talent abroad
    • high inflation rates and fear of a recession prompting businesses to examine strategies for cutting costs and maximizing their budgets
    • companies applying these strategies to almost all positions and not only IT.

    Related: Your Most Pressing Offshoring Questions, Answered

    What are the differences between these concepts?

    We must first understand the difference between outsourcing and nearshoring/offshoring. Outsourcing is when one company hires another to be responsible for a complete activity, losing control of the work done; the former pays for deliverables. For example, when a company outsources its designs to a design company, it relinquishes control of the activity, and the hired company takes responsibility for the designs. It will manage the team and deliver the designs.

    Nearshoring or offshoring is when a company hires staff abroad through a firm. The company controls the team, which reports directly to the company. The firm oversees legal compliance, payroll and HR — it might also provide office space and other value-added services. Let’s say a company wants to retain control of its design team and design activities; instead of outsourcing the work to a design company, it would hire designers from Mexico through a nearshore staffing firm. That firm would be the employee and be in charge of everything related to staffing, but the staff would report directly to the first company, ensuring they share the same culture and values.

    Nearshoring/offshoring is sometimes referred to as staff outsourcing because a company is outsourcing everything to do with staffing in a given country to a firm. Another term used for these practices is virtual staffing, where a company hires, for example, virtual designers. However, virtual staffing is a misnomer because the staff would not be virtual; they would report directly to the hiring company and would be an extension of its team in another country.

    The difference between nearshoring and offshoring is that, in the former, staff is in a neighboring country rather than an overseas country, as with offshoring.

    Related: 10 Strategies for Hiring and Retaining New Employees

    Which one is better for my company, outsourcing or nearshoring/offshoring?

    Deciding which strategy is better for your company requires first understanding your needs.

    From my experience, you should outsource when an activity:

    • is not your company’s core competency
    • does not affect your clients directly
    • does not involve support for your clients
    • does not strictly have to be controlled by you
    • cannot be handled by someone hired in-house, and economies of scale are available (for example, needing designs but not many scenarios would justify hiring a designer via outsourcing, whereas nearshoring/offshoring will be cheaper when you need to hire and manage a designer)
    • is one you do not know how and do not want to oversee (for example, outsourcing your accounting and taxes to a CPA firm makes sense when you prefer not to invest time and energy in an accounting and tax department).

    You can always use nearshoring or offshoring to cut costs or stretch your budget while getting talent from around the world. For example, if you have the budget to hire one digital designer but require a team, you might be able to hire three digital designers in another country. Based on my experience, I recommend analyzing which positions can be performed remotely by:

    • ascertaining if you are having trouble filling a position;
    • reviewing for each position how much you would save if you were to nearshore/offshore it; and
    • identifying any department, such as customer service, that could be completely nearshored or offshored.

    These analyses will guide you in developing a plan for building your remote team through a staffing company.

    Related: How to Prepare Your Employees for Outsourced Hires

    Should I go nearshore or offshore?

    Companies initially recruited from developing countries primarily to save money. They, therefore, turned to counties like India and the Philippines and began offshoring low-level positions.

    Companies are now using offshoring and nearshoring to save money and tap into global talent. They are offshoring positions of all levels. Companies are not looking for the cheapest solutions but for workers in the same time zone, countries with cultures similar to that in their country, and firms that share their values. Companies thus often look in neighboring countries, which is why nearshoring has been growing.

    Whether nearshoring or offshoring is better depends on what you are looking for. If you are looking only for savings, I recommend offshoring. Offshoring’s likely drawbacks are differences in time zones, culture and distance. If you are looking to save but willing to save a little less to have your team in the same time zone as you, in a country with a similar culture, and one flight away from your offices, then nearshoring is the best strategy for you.

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    Pedro A. Barboglio Murra

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