In the past, outsourcing meant sending work offshore--very far offshore. India always made the short list when companies moved to outsource solely to reduce their TCO.

But now, as India's labor costs rise, other countries are making inroads into the outsourcing business. And organizations are weighing the potential for "near-shoring"--sourcing work closer to home, in Canada, Mexico, and other Western hemisphere locations--for reasons besides costs. Near-shore locales offer tighter language, educational, commercial, and cultural alignment; time-zone coordination for work teams and managers; and relative stability of resources.

However, the distinctions between offshore and near shore are gradually blurring. Indian and Asian-based providers are expanding to near-shore locations, particularly Central and South America. As more options come online, CIOs making an outsourcing decision should consider these rules:

• Engage vendors in a competitive process. Leverage their best thinking, and challenge them to propose the optimal solution based on your requirements.

• Quantify costs of labor, infrastructure, travel, and telecommunications.

• Evaluate factors such as vendor attrition, cultural differences, and the impact of time-zone differences.

• Analyze geographic, geopolitical, and geoeconomic data with appropriate discount factors.

• Visit potential offshore and near-shore sites. Too many CIOs make decisions worth hundreds of millions of dollars without setting foot in their vendor's facilities or interviewing their proposed project management team.

• Give stronger consideration to vendors with both offshore and near-shore capabilities.

• Consider a blended shoring approach as a hedge against unstable or unpredictable labor, security, financial, or political factors. Factor transition (offshore to near or vice versa) terms into your contract.

-- Steve Martin, partner, and Dan McMahon, senior associate, at consulting firm Pace Harmon

Photograph By Getty Images

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