More and more Indian outsourcing companies are beginning to focus their attention on nearshoring to suit client requirements.

Over the past few years, India has become one of the most favorite global outsourcing hubs. However, a report from Gartner, Inc., a market research firm, cautioned that labor shortage and wage inflation would eat away as much as 45% of Indias outsourcing market share by 2007. This clearly signals that India may lose its hold on the global outsourcing market if it doesnt address these issues soon. One of the ways to maintain its pace, while addressing these country-specific issues, is to explore new business opportunities in countries other than India.

On the other hand, many of the European and American clients also prefer to outsource their business to countries in close proximity. Therefore, Indian companies are taking this opportunity to embark on a nearshoring voyage, which could also increase the comfort of their clients across the globe.

Offshoring has been in the limelight since the last decade when the first world countries like the US and the UK decided to concentrate on their core activities and outsource their non-core business activities. Outsourcing was viewed as a solution to their concerns by reaping the benefits of economies of scale of developing countries. Among these, India has captured the major chunk of the outsourcing business. India has asserted its position as the favorite destination for outsourcing activities by virtue of its strengths like huge English-speaking and skilled workforce who can deliver the work at highly competitive prices.

Of late, a new demand has been witnessed from continental European companies that also want to leverage the benefits from outsourcing work to low-cost centers. However, they are not willing to outsource their work to offshore centers but instead, prefer to choose nearshore locations for their outsourcing activities. Though the cost advantage of these nearshore locations is lower than that of the offshore destinations, the European companies seem to prefer the nearshoring option with fewer savings rather than offshoring with higher risks. Interestingly, similar kind of interest has been evinced by even some of the American companies as they face increasing challenges in offshoring like labor shortage, increase in wages, etc.

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