Around the world, companies are considering outsourcing various technology functions to gain benefits like reduced business costs. However, if it's not implemented correctly, outsourcing can lead to negative outcomes, especially for startups.
By utilizing nearshore outsourcing—as opposed to the more familiar offshore outsourcing—companies are able to delegate tasks to agents in other countries, but in similar time zones, allowing for simpler management of most business details and situations.
The term 'nearshore software development' may still feel new for some, but successful companies such as Google, IBM, and Tesla all use nearshoring as a business tool to meet their needs. Learn how you can, too!
Let's start with offshoring in general. Offshoring is a business model that allows businesses to outsource work to a partner company in another country. For U.S.-based companies, offshoring typically referred to far away countries like China.
Nearshoring, on the other hand, relies specifically on working with an outsourced partner who can be found within a one to three hour time zone difference. Essentially, as long as the outsourced firm is in a different country and within geographical proximity to the customer, it can be considered a nearshore model. Onshoring, meanwhile, would refer to an outsourced partnership within the boundaries of your own country.
Nearshore software development is a specific subset of the nearshoring industry. It's a cooperation model between a customer/client and a team of software engineers, and has the goal of ensuring high-quality production at a lower price point, without sacrificing time or workforce quality.
Nearshore software development services can cover many areas from a project's development process and methodologies. Whether you want custom software development, a mobile app, web development, backend features, or real-time project management, working utilizing nearshore software development outsourcing may be the best way to go.
Businesses rely on outsourcing companies when faced with a talent shortage in their area that causes them to look for talent elsewhere. According to a study by Korn Ferry, approximately 85 million jobs may go unfilled by 2030 as a result of a worldwide tech talent shortage.
As countries continue developing and producing highly qualified workers, North American companies are finding spectacular software engineering talent in Central and South American regions. For financially aware companies with staff augmentation and growth goals, outsourcing work to nearby countries is an optimal solution.
There are four very common benefits of oursourcing that most companies appreciate, and each of those benefits offers specific perks when applied to software development projects.
Nearshore software development outsourcing is cost-effective, which is the primary reason companies consider this outsourcing model. Typical cost savings due to nearshoring will include reduced Human Resources expenses, reduced staff wages, and reduced travel expenses as opposed to the more common offshoring model.
But the savings are even more dramatic when applied to the software development industry. U.S.-based software developers require exceptionally high salaries. Move those jobs to a nearby country where workers have significantly lower hourly rates and just as much know-how, and watch as salary expenses plummet.
Finding another team within a similar time zone is already a 'win' for most people. However, choosing to work with people in a country nearby can help with cultural norms. Partnering with teams in distant countries can create difficulty in understanding references, themes, and other cultural norms that should be followed.
This comes in handy when your software development team needs to really understand how the software they're working on will be used. Processes and ways of life vary widely from region to region around the globe. It's helpful to work with outsourced partners who have a good grasp on the local customs of the company they're working for.
Nearshoring makes all of that much easier. Working with nearby partners helps ensure that the people you're working with likely have similar cultural customs, allowing the communication and flow of ideas between both parties to be much better and more fluent.
Companies that focus on software development are moving fast. They don't have time for miscommunications, and time spent waiting on a reply can be costly. Making the decision to trust a third party with your projects is already difficult, so it's often imperative that the outsourced company be agile enough to respond quickly.
The benefit for nearshore software development, then, is that partners will be at max only a few hours ahead of or behind your own workday. Shifts in the project can be communicated same day, and any issues that may arise can be resolved within hours. This time zone benefit goes a long way toward preventing bottlenecks in time-sensitive software projects.
The projected shortage in skilled software and IT professionals in the U.S. could have a detrimental effect on the number of in-house teams managing their work onsite. The good news is, other countries are projecting workforce growth in these areas, and they're willing and able to accept work.
Eastern Europe, for example, has more than 1.3 million software engineers and science graduates that companies worldwide can start hiring today. It's worth taking a look to see what cost-effective, skilled workers can be found near your company's headquarters.
Still, remember that the point of working with a nearshore software development partner is not to get rid of your internal team but rather to expand your dedicated team to other countries for enhanced accessibility to talented team members and increased cost savings.
Many corporations, in many countries around the world, have already begun utilizing nearshoring for their software development needs, and hot spots have popped up across the globe. These locations offer product development and custom software development experts that have already accumulated years of experience, and who are ready to tackle your business processes without any problems. Take a look at some of the best countries for software development outsourcing.
U.S.-based companies have access to excellent talent in Mexico, Central America and Latin America. In fact, Mexico is quite popular as U.S. nearshoring option. Many of Mexico's high-quality universities produce skilled software developers, and the almost identical time zones between the two countries offers incredible convenience.
Brazil, on the other hand, is known for its impressive workforce of IT experts. The country features more than 70 technology parks and development centers, along with several resources for core IT infrastructure.
Colombia and Argentina have only a slight time zone difference from the U.S. and skilled workers—many of which who are often bilingual in Spanish and English—making these locations ideal for outsourcing countries.
Finally, Chile's recent growth and modernization has earned foreign investments from the U.S., among other countries. This investment in the country's future shows promise for software and IT fields.
Companies based out of Europe would do well to focus on neighboring Eastern European and Central European countries for their software development outsourcing needs. Poland is recognized as an excellent option for its high saturation of available and cost-effective software development teams.
Belarus, Romania, and Serbia also offer highly educated and experienced software development professionals, making them great choices for starting your search for a European-based nearshoring partner.
Those companies that have headquarters or regional offices in Asian countries are nearly surrounded by fantastic software development nearshoring options. India, for one, has long been considered a top outsourcing destination due to it's extremely wide and varied talent pool. The Philippines, meanwhile, offers a sophisticated workforce in digital marketing, IT outsourcing, and software development in general. And of course China, Japan, and Korea are all highly respected for their technological advancements, and offer workers who are known for their precise attention to detail.
Due to a shortage in technical talent, it's no surprise that the idea of nearshoring your software development needs to nearby countries has risen in popularity.
By retaining a nearshore software development team, you gain access to added team members within a virtually unlimited talent pool—often at a lower cost than hiring in-house. You can easily maintain visibility on the project through frequent communications with a team in the same or similar time zone. And you gain easily build that partnership through shared cultural understanding.
For many, the pros outweigh any cons. Learn more about how TDSGS can help you find the right nearshoring partner for your business.
