Flattening the Global Sprawl and New Drivers to Nearshoring.
A Wall Street Journal article recently posed an interesting question: “Is the world likely to become less flat because of the pandemic?” According to the article, while globalization was the growing trend in the early part of the new century, key drivers such as rising offshore costs, localization and a shift toward services delivery has begun to take some steam out of it. The Economist called this trend, slowbalization.
While there are conflicting predictions about the effects of COVID-19 on globalization, I believe that while the world may continue to be flat. The pandemic has created vulnerabilities that will increasingly put the focus back on local.
There’s no question about the huge benefits in partnering with offshore firms – whether it is for services, manufacturing or materials sourcing. Costs have traditionally been lower, labor has been cheaper and competition is higher. Yet, these benefits are slowly starting to erode.
The value equations are diminishing, as off-shore costs slowly begin to rise along with their demand, and the complexity of today’s technology and new customer needs require specialized expertise and skill-sets that can’t easily be honed from just anywhere.
Rethinking Offshore Operations
For these reasons, businesses are beginning to rethink the offshore route and COVID-19 is accelerating this thinking. It’s been an uncertain and frightening time, causing people to retreat to the shelter of their homes and businesses are no different. Conducting business with partners, manufacturers and service providers close by may become a sign of the times. As air travel becomes more complex, hotel stays become riskier and quarantining becomes common practice, the business circle may very well begin to get smaller.
Additionally, while it’s unclear where the next hotbed of COVID-19 will arise, the risk is better managed when partners, subsidiaries and manufacturers are all located in the same country to ensure all parties follow similar guidelines and situations. Take, for example, the major outbreak in Italy, which shut down all operations. It would be difficult to rely on a manufacturer in that region during that time.
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Services Leading the Charge to Sourcing Local
Nearshoring, which is sourcing your service needs to states or territories within your own country, may experience a major surge, especially when it involves specialized expertise. As referenced by the Wall Street Journal article, “Activity is shifting towards services, which are harder to sell across borders: scissors can be exported in 20-foot containers, hair stylists cannot.”
In fact, according to Deloitte, “Services has been, by far, the biggest contributor to GDP, accounting for over 68% in 2018.” The reason for this growth is the scarcity of specialized talent, a competitive marketplace and a renewed focus on customer experience.
Because of the pandemic, companies are now under even greater pressure to compete, quickly deploy technology solutions and keep business not only up and running, but thriving. Even without a lack of qualified software engineers or data scientists, and with most companies still predominately working from home, it would be difficult to on-board new employees or train existing ones on ever-changing new AI tools and techniques. For that reason, nearshoring software and AI development to service providers in the U.S. can provide a major jumpstart to digital transformation initiatives.
Today, companies are more focused than ever on improving the customer experience. Customers want answers to their questions quickly and easily. No one has patience for being stuck on hold with a call center, being passed from one staff member to the next or not being understood.
For this reason, companies must forge long-term partnerships with service providers and design experience specialists who can help you get to the heart of your customers’ needs, frustrations and challenges and find a way to address them. Choosing partners closer to home, with the same experiences, common language and culture – to not only better understand you but also your customers– is key to better customer experience.
Maintaining Culture With a Remote Workforce
Because of COVID-19, companies are operating with remote workforces – often far-flung to every corner of the nation (in fact, companies, such as Facebook, have begun to pay different salaries to remote employees based on where they live, with places like Silicone Valley commanding a higher salary than someone in Nebraska).
With a disparate staff, many companies will find it difficult to maintain their corporate culture. Working with service providers that are closer to your corporate headquarters – often closer than some of your employees – allows them to more easily learn and maintain your culture, and help to make sure that it remains strong and intact.
So, will the world become less flat because of the pandemic? Probably not, because there’s really no turning back the global march of today’s commerce. Yet, when it comes to sourcing professional services to help grow their businesses, companies will increasingly find some level of comfort and convenience by partnering with those closer to home.