Apr 16, 2021

8 min

Exploring Nearshore Outsourcing: Benefits and Pitfalls

Are you still choosing between insourcing and outsourcing software development? If you are confused by cultural gaps, language issues, time zone differences, and management difficulties, but you don't have enough money and time to build your own team, there's an intermediate option. Let's talk about nearshore outsourcing that is able to solve the above–mentioned problems.

written by:

Nadezhda Mal

nearshore software development

Are you still choosing between insourcing and outsourcing software development? If you are confused by cultural gaps, language issues, time zone differences, and management difficulties, but you don't have enough money and time to build your own team, there's an intermediate option. Let's talk about nearshore outsourcing that is able to solve the above–mentioned problems.

Nearshore Outsourcing in Detail

The value of the international IT outsourcing market stood at $342.9 billion in 2020. It's expected to increase at a CAGR of 2.6% from 2020 to 2027 and reach $410.2 billion. Companies usually order outsourcing services to cut costs, reduce the workload of their employees, better manage the risks, and focus on their core business. We're going to discuss nearshore software development and give you some tips on choosing a trusted provider.

Let's look at the nearshore outsourcing definition. This is a practice when you delegate your software development tasks and processes to third–party specialists located in neighboring countries or regions. For example, an American company orders outsourcing services from Mexican or Canadian software developers, while a Western European business works with development teams based in Eastern Europe (e.g., Belarus, Ukraine, Poland, Bulgaria, etc.). As a rule, the distance between the nearshore outsourcing company and the customer doesn't exceed a couple of hours of flight.

The nearshore outsourcing model allows you to solve a number of problems caused by the offshore outsourcing practice, such as cultural and language barriers, misunderstanding, poor control and management, long–distance relationship work, time zone differences, and others. Simply put, it combines the advantages of both offshore outsourcing and in–house practices. It's time to find out what the nearshore software development method offers you.

cost reduction

Which Benefits Does Nearshore Outsourcing Provide?

Time and cost savings

As you know, businesses hire external software developers to cut costs, save resources, ensure high quality, as well as launch their product to the market faster. Creating and maintaining your own team from scratch is very expensive. 70% of companies choose outsourcing services because of significant cost reduction. Joe Hadzima, a senior lecturer from the Massachusetts Institute of Technology, calculated that the base salary of an in–house specialist grows by 2.7 times due to the payment of taxes, benefits, and other allowances.

The advantages also include savings on business trips to neighboring countries. It's convenient when your partner is located in close proximity to your country. Despite the fact that there is a huge number of various audio and video communication tools nowadays, sometimes circumstances require us to meet face–to–face to discuss the project, software development process, and other issues. A 10–hour flight from the USA to European countries will be tiresome and expensive while traveling from New York to Mexico City will take 4 hours 30 minutes. The same holds for nearshore outsourcing companies from Eastern Europe and their clients based in Germany or Norway.

Better communication

The misunderstanding caused by cultural and language differences is one of the biggest disadvantages of outsourcing. Researchers from the National Outsourcing Association found out that 75% of businesses take into account language and cultural gaps when choosing an outsourcing company. Different living styles and attitudes to work have a profound effect on operation processes and end results.

If you are still anxious about this issue, nearshore outsourcing is an excellent choice for you. Neighboring countries have similar cultures, languages, habits, and holidays. Therefore, people with a similar mentality should not experience communication problems. Celebrating the same holidays with your outsourcing partner makes your life much easier. You don't risk losing too many working hours because your colleagues from another part of the world have a long weekend.

Time zone independence

Imagine that you work in the USA, and you have a question for your provider from Eastern Europe, e.g., Belarus or Ukraine. You live in different time zones, and there are 7 hours between your locations. It's 9 am at your place, and you start your working day by sending an email to Pavel, a member of your outsourcing team. But he can't answer your letter immediately because it's off-hours in his country. He will be able to write back in the morning when you rest after work. So, you have to wait for 24 hours to get information. What if your question is serious and urgent and needs a quick response?

Cooperating with nearshore outsourcing companies allows you to conduct calls and meetings regardless of the time zone. Let's return to our American–European example. It's difficult to discuss the project with your sleepy team members because it's too early or too late in their countries. If you choose developers located in Mexico, it will be much easier to match your working hours.

Similar laws and rules

Offshore outsourcing requires businesses to consider regulations applicable in other countries. It's vital to know that your solutions won't violate intellectual property, data security, international trading, and other legislation. For example, Europe and the USA have different approaches to personal data protection. The EU General Data Protection Regulation (GDPR) doesn't allow US companies to store the personal data of European citizens on their servers.

The Wall Street Journal has already brought up fears that this measure might result in the loss of billions of dollars from data cross–boundary transactions, including cloud services, advertisement, Human Resources, and marketing. Cooperation with nearshore outsourcing companies can address this issue because neighboring countries usually have similar regulations.

limited talent pool

Which Drawbacks Does Nearshore Software Development Involve?

More expensive than offshore outsourcing

The budget is both the main advantage and disadvantage of the nearshore outsourcing model. Offshore outsourcing is still the cheapest option. For example, it will be better for the business from Great Britain to hire developers from Poland or Ukraine due to the geographical proximity. However, specialists from Africa and Asia offer lower rates, according to the Geniusee research.

software development rates

Narrower talent pool

Whatever one may say, but nearshore outsourcing doesn't give you access to the global market of professionals. It's true, the pool of specialists with the required skills, expertise, and knowledge is wider than if you look for IT staff in your country. But it's still limited by your region and nearby states. Your nearshore software development provider should have enough qualified talents in the pocket.

Limited control

The inability to fully manage the development process is a common outsourcing problem. Unfortunately, nearshore software development can solve it only partially. Of course, it will be much easier to come to the neighboring countries and communicate with your remote team. But you won't be able to monitor all the tasks.

nearshoring

How to Choose the Best Nearshore Outsourcing Company

If you want to reduce time–to–market and successfully launch your product, you need to find a reliable and qualified partner that will be able to deliver your project on time, quickly respond to changes, comply with regulations, and, in general, meet all your demands and expectations. 78% of companies worldwide are satisfied with their outsourced team. Bear in mind the following four factors to be among those businesses that have found a trusted and top–ranked nearshore software development provider:

1. Region / country

Carefully study the economic level of the country or region where you'd like to order outsourcing services. Pay attention to average salary, taxation, and English proficiency level. For example, Indian developers are famous for their low rates, but the time zone difference may adversely affect your cooperation with them. High prices don't guarantee a high–quality code, either. Select among countries that are known for their superior tech expertise and skills. For example, you can use Tholons Top 20 Digital Nations 2021 or similar rankings.

2. Available technology and expertise

You need to define what technology and stack you'd like to use to create your solution. For this purpose, look for specialists who have experience in applying these technologies and tools and will be able to implement your project. Figure out how many skilled professionals and which resources this nearshore outsourcing company has. Reliable software development providers constantly keep track of the market trends and expand their expertise.

3. Data protection and cybersecurity

If you don't want to lose your confidential information, carefully study what measures your future partner is taking to protect sensitive data and intellectual property. A privacy–minded company incorporates safeguards, such as the use of anti–virus software, two–factor authentication, data encryption, and the signing of nondisclosure agreements with its employees.

4. Reputation

Before entering into cooperation, explore the reputation of your future outsourcing partner. Spend your time to check the reviews about this company on specialized websites, such as Clutch or CrowdReviews. In addition, ask the provider to submit the necessary certificates and recommendations. It's important for your business to interact with a highly skilled software development team that will be able to meet a deadline, clearly understand your goals, and ensure a good code.

development outsourcing

Bottom Line

Nearshore outsourcing is the best option for those who can't find narrow specialists in their country, don't want to maintain an in–house team, or are simply skittish about offshore outsourcing due to a range of pitfalls. They usually include time zone problems caused by language barriers and cultural differences. For example, team members from New York and Beijing can find it difficult to match their working hours, while a UK company is culturally aligned with its Belarusian or Polish colleagues. Choose the right option depending on your business objectives, expectations, and capabilities.

Need more details about nearshore software development or want to learn about outsourcing best practices? Visit our website or contact our experts who are always ready to share valuable insights with you.

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