Nearshoring is something that probably every business owner has heard about over the last couple of years. No wonder, as it is one of the most common practices when it comes to complicated and time-consuming tasks as, for example, software development. What exactly is IT nearshoring, why has it became so popular and what nearshoring benefits and flaws are to be considered before starting to work with it — we will discuss in this article.
Nearshoring 101: What Is Nearshoring?
Before we begin discussing nearshoring, it would be only fair to mention outsourcing, as it is a part of it. What is outsourcing? Generally, such a practice means finding an outside contractor who will be able to complete your daily work tasks while being located somewhere other than at your office or even your country. Outsourcing gained enormous popularity over the last couple of years, as it offers some undeniable benefits to businesses, the biggest of which would be cost reduction. It is precisely the economic benefits of outsourcing that made it so high in demand.
Typically, there are three main types of outsourcing and they are called nearshoring, onshoring and offshoring. What are the differences, you might ask? Well, basically, offshoring and nearshoring are quite the same. The only difference between them would be the distance of your contractor’s location. In the case of offshoring, it is usually somewhere far away, probably even another continent, while with nearshoring you are hiring someone within your geographical region. Finally, onshoring means bringing your services back from an outside contractor to your home country.
So, why exactly nearshoring? It would be fair to say that it has some undeniable benefits:
Cost reduction
Nearshoring allows you to significantly cut your expenses and therefore save money for more important tasks. Depending on the country you are hiring your developers from, the differences between rates can be significant. For example, an average yearly salary of a Mexican developer is around $15,700. At the same time, in the US an average yearly salary of the same kind of specialist would be somewhere around $85,000. Obviously, it is best for the US business owners to search for nearshoring outsourced specialists in Mexico.
It grants you control
In the case with offshoring, your outsourced team will be located far away and your access to them will be rather limited. On the contrary, with nearshoring the time travel to your team usually varies within a few hours of flight time, which makes it a lot easier to keep control over things.
Pool talent expansion
By turning to nearshoring services, you are broadening your horizons in terms of finding more qualified labor for your projects. For example, Ukraine is one of the most popular nearshoring destinations in Europe due to the high level of its specialists’ professionalism. According to Hacker Rank, Ukraine is among 20 countries that have the best programmers in the world.
No cultural boundaries
Clear communication is an important part of doing any kind of business. When making a comparison of nearshoring vs offshoring, many business owners choose the first option as it brings more clarity to the communication process between the outsourced team and client.
Market expansion
Nearshoring benefits could also be a way for you to broaden your services’ territory by entering new markets. For example, when Expensify decided to focus on entering a new market, they hired a team of outsourced specialists to take care of their back-end development so they could solely focus on more important tasks.
As you can see, there are plenty of benefits to the nearshoring strategy these days that make it so appealing to businesses of all sorts around the globe. Let’s now talk specifically about custom enterprise software development and how much of a use nearshoring can be in such a case.
Nearshore Software Development for Enterprise: Popularity and Demand
According to one of the recent Statista reports, the global market of outsourcing reached the point of $85.6 billion. That impressive number also includes profits from nearshoring. Also, according to this data, the whole number of outsourced jobs could be divided into two big categories — business process outsourcing and IT outsourcing. So far, one of the most popular branches of the latter is software development outsourcing. Why do so many business owners prefer to outsource this particular part of their companies’ workflow?
The business world is undergoing changes at a rapid speed and new challenges appear every second. It is very hard for businesses to keep up with such an enormous tempo; that is why outsourcing seems like a natural choice. Nearshoring is exactly the right option for those companies that do not want to lose their competitive advantage. Besides timing, nearshoring is a perfect solution for enterprise software development and here is why:
It grants easy control over the process
Software development is one of those things that you can definitely outsource, however, for the best possible results, it would be better if you monitored the process by yourself. Nearshoring gives you an opportunity to visit your outsourced team every once in a while, as typically such contractors are located not that far away from the client’s main office. Also, there is often a really slight difference in time zones, which shortens your flight time.
Convenient integration process
You will not need to wait for weeks before your outsourced team will tune into your business processes. The key benefit of nearshoring is that your team will share the same culture and language with you, so they will be able to give you the best of their performance straight away. It is especially important that the outsourced team has the same type of technical expertise as your in-house team, as it will make the collaboration process more productive.
The similarity in the legal system
Intellectual property laws are to be considered in any type of development, especially software. When your contractor is from somewhere nearby, the chances are high that they will be familiar with your country’s laws and you will not get into any kind of legal troubles that could postpone your project’s launch. IPR can vary from one type to another. In many cases, it depends on the country and particular firm in whether they are applicable, and if so — to what extent. So far, it is highly recommended to register such aspects as trademarks, industrial design and patents. One of the recent studies proved that when it comes to protection of the company’s IPR, it is highly recommended that companies turn to nearshoring, as it is the only type of outsourcing that allows high control over how these rights are being secured.
It broadens your talent search party
Nearshoring is a great option for finding a true superhero who is located not far away. Not all countries have great specialists, especially in the tech industry, so nearshoring could easily fix that problem. For example, one of the biggest online stores in China, Alibaba, used to outsource their website development to US contractors back in the day, as Chinese web developers used to be not as good as American ones back then.
Reduced cost
Last but not least — nearshoring is the perfect option if you want to find a ‘golden middle’ between the price and the quality. It might be a bit more expensive than offshoring, however, due to increased control, you might actually get a better result at the end. According to IT Outsourcing Review, Appsumo’s owner used to outsource at the beginning of his career path to reduce costs and let his company grow.
As you can see, there are plenty of reasons for you to turn to nearshoring if you are planning to work on enterprise software development.
Nearshoring Vs Offshoring: What Do Enterprises Typically Choose?
More and more businesses are now giving their preference to nearshoring in comparison to offshoring, and there are several reasons for that:
Distance
Offshoring often implies a significant lag time, sometimes even up to 12 hours, which also means a lack of control over the whole process and its deadlines. Offshore teams often consist of people with a lower life quality level, which often results in a big turnover and can affect the result of the software being developed. On the other hand, nearshoring can solve all these problems or at least reduce them significantly.
Cultural differences
As discussed previously, cultural and language differences can create significant barriers that will be hard to overcome. It can result in trouble with communication, delays, legal troubles and so on. That is why more and more companies are looking at nearshoring as an easier way to outsource, as it usually implies speaking the same language with your contractor and sharing the same business and cultural values.
Improved ROI metrics
Return on investment is why companies turn to outsourcing in the first place, and that is why they usually try nearshoring first. In the long run, offshoring (which is initially less expensive) might cost you some additional expenses because of the troubles that occur along the way, such as management issues, underperforming, lack of control and communication, and so on.
Data protection laws
Companies that work with general data protection laws usually try to find an outsourced contractor somewhere nearby to avoid any difficulties with these laws. That is why nearshoring seems like a more natural option in this particular case.
The price
Even though nearshoring looks very appealing in comparison to offshoring, there still might be some things to consider. One of those things is price. With nearshoring, you’re dealing with specialists from a country that is economically similar to yours. As a result, you might get higher prices than if you were dealing with offshoring.
When it comes to nearshore IT services and nearshore outsourcing in particular, there are plenty of benefits and reasons for business owners to choose this form of outsourcing in comparison to offshoring. It is always a great idea to hire an outsourcing company, as they usually have broad experience in such things and will ensure you get a high-quality result. So far, some of the most popular destinations for nearshoring are Eastern European countries such as Poland or Ukraine.
Final Thoughts
Nearshoring is rapidly becoming everyone’s favorite type of outsourcing and there is no wonder about that, as it offers wonderful perspectives and opportunities for almost any kind of business. Easy access, control over the whole process, lack of language and time barriers and many other benefits will be granted if you choose nearshoring as your main outsourcing option.
Due to its many benefits, plenty of companies turn to it after trying offshoring, which despite all its pros is losing in competition to nearshoring. The key here is to find a trustworthy contractor and specifically describe your project’s needs. After that, you can assess all the benefits that nearshoring can bring to your business.
