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Local knowledge


According to Russell J. Pass, a member of Chicago-based management consultant Bridge Strategy Group L.L.C., while there are many factors to consider in selecting an offshore location and each company's priorities are unique, there are a few factors that are almost always relevant:

Workforce quality and skills: Companies today consider language skills when selecting a location, but typically assume they will need to train for industry or function-specific skills. As countries build specialized competencies, it will become possible to seek out locations that offer a critical mass of ready-made expertise specific to a company's needs. IT development and maintenance are moving to India not just because labor is cheap, but also because India has become a world-class center of information technology expertise.

Wage rates and trends: It is important to evaluate not only prevailing wage levels and inflation rates, something few companies neglect to do, but also longer-term influencers of labor supply, such as population trends and public and private investments in the university system.

Availability: Where availability is critical, companies will need to evaluate a location's power and telecommunications infrastructure, the potential for geographic (e.g., earthquake) or weather-related disruptions, and the potential for political instability at any level of government. Locations prone to strikes or other labor actions also present availability risks.

Proximity: Where semifrequent face-to-face meetings or overlapping onshore and offshore work schedules are necessary, proximity can be critical. This has given rise to the term "nearshoring." The reverse is also true, where nonoverlapping onshore and offshore shifts enable a company to accomplish more in a 24-hour period than it could hope to in just a single location.

Government policy: Labor laws, tax incentives and even monetary policy can have a significant impact on the costs and benefits associated with a particular offshore location.