It’s been a few weeks since Secretary Janet L. Yellen shared, through a press release coursed through the Office of the Treasury but originally posted on Project Syndicate, her essay on the importance of friendshoring or ally-shoring between the United States and its partners, and a good six months since she first spoke about it during a fireside chat. There has been ample time for advocates and critics alike to voice their sentiments, but regardless of political stance and economic apprehensions, it seems the outcome will all boil down to adoption.

But first of all, what is Friendshoring or ally-shoring?

The trend of offshoring – basing processes or services overseas to take advantage of lower costs – was followed by reshoring aka onshoring, moving operations from overseas back to the country it is originally located. From offshoring came nearshoring, which refers to the practice of moving operations to a nearby country, still with lower production or labor costs than its original country, rather than one farther away.

Ally-shoring, more widely known as friendshoring, is adjacent to nearshoring in that it calls for the movement of outsourcing to countries with shared values in the hopes of creating more resilient supply chains that offer long term security.

In Secretary Yellen’s own words, friendshoring “aims to deepen our economic integration with a large number of trusted trading partners that we can count on. And it seeks to build in supply-chain redundancies to lower risks for our economies. Friend-shoring aims to achieve economic resilience and realize trade’s economic efficiencies simultaneously.”

As the last few years have exposed vulnerabilities in critical global supply chains, the call for resiliency in the face of political upheaval and pandemics alike comes as no surprise.

But who, exactly, are these “friends”?

Like the proverb goes, “don’t put your eggs in one basket.” According to Yellen, the goal of friendshoring is to diversify from high-risk countries and concentrated supply chains, not “to limit trade to a small group of countries.

[Friendshoring] is open and inclusive of our partners in emerging markets and developing countries, in addition to advanced economies. In fact, a key part of our agenda is to deepen the integration of the US and our partners with developing countries.”

What it Means for Businesses

Having a big circle of friends has, historically, proven to be a sound strategy in life as well as business. Only time will tell what specific policies friendshoring will bring about, but the theory is sound. For now, the best move for business would be to diversify among several suppliers without cutting your main supplier down to zero. This limits the risk that a friendly country today becomes less reliable tomorrow, and, in theory, will redirect economic opportunities to more developing countries.

EPIC’s Proven Nearshoring Model

The heart of EPIC Software Development lies in Costa Rica – not just for its talented and well-educated workforce but also for the economic and political stability of its democratic government. This, in combination with our highly skilled workforce and local team of experienced project managers, make it possible for us to provide long-term strategic planning and execution at reduced costs.

 

Contact us today to discover how EPIC can deliver the best possible outcomes and long-term value for your software development projects.