Nearshore Americas
Canada tech attrition

Pandemic Prompts Canada to Look at Nearshore in a New Way

The pandemic has changed the way the world does business, and Canada is no exception. More people in Canada are working from home, with the big cities seeing a modesty exodus to smaller locales. Amidst this transition, Nearshore has raised its game.

“The pandemic has made Canadian companies more open to the Nearshore model,” says Jaime Aronowitz, founder and CEO of PROXIMITEAM in Toronto, which uses Nearshore resources in Costa Rica, Colombia, and Mexico.

“In this new world where remote work has become a fact and a necessity, Canadian companies have options: they can choose from a nearby Canadian location like Hamilton, or a nearshore alternative like Cali, in Colombia.It’s not a trend yet, but people are willing to investigate.”

The Nearshore value proposition is also changing, in that more providers are able to deliver on higher value technologies such as Advanced Analytics, Artificial Intelligence (AI) and Robot Process Automation (RPA). The challenge in Canada is that – even with the transformative effects of the pandemic – the business culture remains cautious and a bit slow to adapt.

“In Canada, I’ve seen that companies prefer to keep certain areas to their own core teams, and are not willing to expose areas like AI and machine learning to contractors,” says Aronowitz. “It’s a matter of maturity – it will come over time.”

Jaime Aronowitz of PROXIMITEAM: “So many more tech companies – from Ottawa to Kitchener”

Canada’s GDP shrank by 5.1% in 2020 – a bigger hit than the United States’ 3.5% contraction – but the economy is nonetheless proving resilient. This has led Royce Mendes, an economist at the Canadian Imperial Bank of Commerce (CIBC) to report that, outside the sectors hardest hit by the pandemic, “the economy appears to be faring well”.

Nearshore’s Northern Footprint

For now – and likely for the balance of 2021 – the pandemic has provided a unique opportunity for Nearshore to prove its mettle to Canadian customers. There’s been a broadening of the client footprint, and a willingness to embrace Nearshore as a means for digital transformation.

“We’ve noticed an increased confidence in sectors not traditionally comfortable with outsourced service offerings,” says Will Munoz, VP of Digital Transformation Strategy at Calgary-headquartered Analytika, which specializes in process optimization and task automation. “The COVID-19 pandemic has accelerated the pace which companies across industries are exposed to collaboration with remote teams.”

Analytika has access to 20 IT professionals in Mexico. This team supports the organization as it delivers client solutions in AI, Machine Learning (ML), and the Internet of Things (IoT). Munoz says that, in some ways, a “glass ceiling” has been broken when it comes to how Nearshore can help Canadian companies with digital transformation.

“Misconception and fear are playing less of a role,” he says. “Decision makers are now keener – at least to explore on a small scale – obtaining services from a partially outsourced team.”

“There has been a spike in offshore service offerings arising from companies more comfortable with remote work, and from circumstances that the pandemic has imposed” – Will Munoz, of Analytika

Rising Demand for Digital 

While Canada has a reputation for having a conservative business culture that is more risk-averse than in the United States, it has nonetheless seen steady growth for digital solutions.

“Over the past decade, I’ve seen a huge shift in the market in Canada, especially in Toronto,” says Aronowitz. “There are so many more tech companies in the corridor from Ottawa to Kitchener, all supported by excellent universities, and with access to the US market. The start-up scene is booming.”

The news isn’t exclusive to Ontario. Quebec and Western Canada have also seen strong public sector and corporate investments in digital technologies, especially in AI and ML.

“More recently, and due to efforts from different jurisdictions to support diversification and investment attraction, smaller but still very vibrant technology hubs have been popping up and thriving across the country,” says Munoz from Analytika. “This is really notable in Alberta and British Columbia, which have benefited from an increase in tech start-ups.”

Inevitably, interest in outsourcing offshore development has increased. Nearshore can sell itself on proximity and cultural affinity – valuable factors when outsourcing the latest, cutting-edge digital technologies. India and Eastern Europe remain strong competitors, but have unique cultural and geographic challenges.

“There has been a spike in offshore service offerings arising from companies more comfortable with remote work, and from circumstances that the pandemic has imposed,” says Munoz. “The challenge is that without the right strategy and implementation, working with an offshore team can be complex, and high risk.”

Nearshore has an advantage here. In order to bring teams closer to North American standards, Munoz says that the time and effort required for success tends to be much smaller with nearshore than with offshore teams.

When Borders Close

In Canada, the pandemic has complicated matters in that – while it has further proved the viability of outsourcing solutions – it has also mitigated against one of Nearshore’s prime value propositions, which is its physical proximity. Ensuring cohesive team collaboration is critical, and there are times when face-to-face interactions make all the difference, particularly when building trust in high-value contracts.

Will Munoz of Analytika describes a spike in demand.

“It all depends on the project,” says Aronowitz. “I believe in the benefits of remote work and the Nearshore model, but I also believe that a hybrid approach works better. This is why we need to bring people together.  It not only helps to build rapport with teams, it enables better collaboration and efficient communication, which is so needed in remote environments. Normally, we would do this once or twice a year.”

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Of course, these are not normal times. On January 31, Canada suspended all flights to and from Mexico and the Caribbean until April 30, 2021.However, this temporary measure doesn’t appear to have affected the demand for Nearshore solutions, which is still being driven by labor shortages and competition form the US market.

“In Canada, there’s still high competition for data scientists, data analysts, ux/ui designers, and software developers,” says Munoz. “Tech talent is constantly and easily scouted by American firms, where salaries and benefits are much more attractive.”

The result is that, even during the pandemic, Canadian businesses of all sizes are struggling to attract and retain talent.The good news is that, for the rising number of companies that have put digital transformation at the top of their to-do list, Nearshore has put itself into the game.

Tim Wilson

Tim has been a contributing analyst to Nearshore Americas since 2012. He is a former Research Analyst with IDC in Toronto and has over 20 years’ experience as a technology and business journalist, including extensive reporting from Latin America. A graduate of McGill University in Montreal, he has received numerous accolades for his writing, including a CBC Literary and a National Magazine award. He divides his time between Canada and Mexico. When not chasing down stories, he is busy writing the Detective Sánchez series of crime novels.

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