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Why American Tech is Near-Shoring to Canada

Blog posted on by Evelyn Ackah in Cross Border Business, How To Move To Canada and Tech Immigration

Why American Tech is Near-Shoring to Canada

As American businesses face increased taxes and public protests against outsourcing manufacturing, IT and support jobs to China and other Asian countries, Canada is becoming an attractive destination for U.S. tech companies to export jobs.

Near-shoring - aka nearshoring - is defined as

"the outsourcing of business processes, especially IT processes, to companies in a nearby country, often sharing a border with the target country."

Canada has a very skilled and highly-educated native and foreign workforce. Canada's tech sector is actively recruiting more tech workers. Recent changes to U.S. immigration policies have made Canada an attractive option for high-tech immigrants. Canada has been actively recruiting skilled and educated immigrants to help build the Canadian economy and create jobs, and has launched the Global Talent Stream with fast-track visa for skilled immigrants, approved a permanent Start-Up Visa Program for Entrepreneurs, and are providing private and public funding programs to support innovation and growth.

Benefits of Near-Sourcing to Canada

Financial

Digital marketing agency Iversoft says for American companies, "One of the greatest perks of near-shoring to Canada is saving on your budget. With the Canadian dollar being lower in value than that of the American dollar, a little bit of budget goes further working in Canada."

Currently, the Canadian dollar is lower in value than the American dollar; the exchange rate is $.77 U.S. = $1 CA. This means that by near-sourcing work to Canada, an American company saves approximately 25% - or, they can spend the same amount, and get nearly 25% more work for the same cost!

Geographic Proximity

The United States and Canada share a border from coast to coast. So that means for American companies on the East Coast, the West Coast or in the MidWest the cost of traveling to Canada on business is considerably less than traveling to India, China or the Philipines, for example. "American IT firms hardly view Canada as a foreign country," says Stafflink, a Canadian IT recruiting firm.

Communication and Culture

Canada and the U.S. share the same language and similar cultures. According to BrickRed Systems, language and cultural differences are expensive: "difficulty in communication can decrease the efficiency of employees and increase costs to the project, because more communication between the client and the outsourcing party is required. This can also increase risks in such a way, that projects have known to have failed merely on the difference in culture."

Education, business practices and work-life customs are very similar in America and Canada. Most American project managers, as well as end-users, would not recognize an American product that was developed in Canada: any differences would be negligible in managing the project and seamless to users.

Is Near-Shoring to Canada Right for Your Company?

For American companies, a simple cost-analysis of outsourcing vs nearshoring should also include:

  • Tax considerations
    Many Canadian provinces and cities offer tax incentives to recruit foreign workers, companies and projects
  • Rework
    Rework is often a hidden consideration of outsourcing, according to Pegasie Technologies. "The largest undisclosed cost is often rework. This usually results in additional unplanned spending amounting to approximately 11% of the entire project. According to Forrester Research, 30% of project costs are for rework, and, according to Meta Group, 70% of rework is attributed to correcting requirements errors."
  • Quality
    Companies who outsource to distant countries such as China or India have consistently experienced difficulties with the quality of the product or services, including substandard manufacturing facilities and a negative response to support calls with heavily accented call centre staff.
  • PR
    Public relations is a critical issue for many American businesses who are deluged by Americans who choose to "Buy American" when faced with outsourced products and services for China or India. Although there can be U.S. / Canadian political tensions, most Americans do not voice the same negativity with products and services provided with services from our friendly neighbour, Canada.

Ackah Business Immigration Law offers employment law and human resources advisory services for companies that do cross-border business. Ackah Law's legal team works with HR departments to protect their business interests and employees. We recommend you review your HR policies and practices and consult a Canadian immigration expert if you are considering near-sourcing to Canada.


Evelyn L. Ackah, BA, LL.B.

Founder/Managing Lawyer

Ms. Ackah is passionate about immigration law because it focuses on people and relationships, which are at the core of her personal values. Starting her legal career as a corporate/commercial ...

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Very informative and definitely a go-to for NAFTA US immigration questions and concerns.

M.G.

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