Nearshore Outsourcing: 7 Ways to Master It

Consider why so many countries seek IT services from other nations. Isn't that intriguing? Moreover, some companies even prefer to hire IT experts from different continents. Why? The answer is clear. Every business desires to obtain services that are both cost-effective and of high quality.

The challenge arises when such services are not readily available within a company's home country. Consequently, the only viable solution is to hire skilled professionals from nearshore locations.

In this article, we will delve into the world of nearshore outsourcing, exploring benefits of nearshore outsourcing and uncovering the secrets to successfully mastering this approach. Let's kick things off by understanding different outsourcing models and why nearshoring stands out as the top choice.

Onshore VS Nearshore VS Offshore Outsourcing

In 2023, the international IT outsourcing market was worth $469 billion. It is predicted to grow at a 2.6% CAGR from 2023 to 2030, reaching $758 billion. That’s why you need to know more about outsourcing models, but which one to choose?

The main difference between offshore, nearshore, and onshore outsourcing is the geographical distance from the client to the contractor.

Imagine that your company is located in Germany.

• When you hire a development team from your country, it's an onshore model. Its benefits are the same language and identical time zone.
• Outsourcing distant countries with significant time zone difference are referred to as offshore.
• If your “German” company cooperates with a team from Poland - that is, from a neighboring country, this is nearshore outsourcing.

But today, we will focus on nearshore outsourcing and its major advantages here. Let me show you how to manage it successfully.

Nearshore Outsourcing

Nearshore outsourcing refers to delivering services from a nearby location, usually within the same continent or time zone. It is becoming more popular as an alternative to offshore outsourcing.

Nearshore development is used by 37% of small enterprises to manage at least one of their core business processes. Companies most frequently outsource accounting (37%), digital market (34%), or IT operations (37%).

Assume you live in France and wish to delegate certain software development work that cannot be done in-house to a team from another country. At the same time, you want to save money yet don't want to deal with time-zone offsets. In this case, you can consider looking for a nearshore outsourcing model hiring developers in nearby nations such as Poland.

When faced with the decision of onshore, offshore, or nearshore outsourcing, it's crucial to carefully consider your requirements and thoroughly analyze the short- and long-term goals of your project, along with your budgetary constraints.

What are the Nearshore Outsourcing Benefits?

There is an endless demand for change and reinvention in the software development sector. These are not differentiators for our competitors, but they are necessary for any firm that wants to be at the top. Outsourcing software development is the best instrument to increase your capacity and efficiency.

Proximity and time zone

Geographic closeness is a primary benefit in nearshore software development outsourcing since travel times and expenditures are less costly comparing nearshore vs offshore outsourcing. In-person meetings are easier and less expensive when your outsourced staff is close to your office since nearshore locations allow quick access to check the workflow.

That reflects in managing employees an external workforce is time zone compatibility. Managing the same time zones helps you to communicate with your outsourced team and have real-time communication throughout typical work hours. This eliminates the challenges often faced with offshore outsourcing, such as significant time time zone differences that can lead to communication delays and project bottlenecks.

Nearshore services is a win-win situation for everyone, enhancing collaboration on both sides and making communication easier and quicker project turnaround times.

Cost-effectiveness

70% of businesses seek to outsource services to save money. Despite being crucial to company goals, 59% of outsourcers say that an outsourcing strategy is primarily implemented to reduce costs.

By collaborating with service providers in nearby countries, you gain access to highly skilled professionals at more affordable rates compared to hiring locally. This allows you to optimize your budget without compromising on the quality of work. With nearshore outsourcing, you can achieve cost savings while receiving top-notch deliverables, ensuring a better return on your investment.

Cultural and language compatibility

When partnering with service providers in a neighboring country, you benefit from shared or similar cultural values and business practices. It enhances communication and understanding, leading to smoother collaboration and a reduced risk of miscommunication or misunderstandings across the team and client. Language barriers are minimized, ensuring clearer and more effective communication, crucial for successful project execution.

Common laws and regulations

Businesses that outsource to foreign nations must examine the legislation in other countries. It is critical to ensure that your solutions will not breach intellectual property, data security, international trade, or other laws. For example, personal data protection is regulated differently in Europe and the United States.

The policy might cost billions of dollars in cross-border data transactions such as cloud services, advertising, Human Resources, and marketing. Cooperation with nearshore outsourcing companies lower complexities and minimizes potential legal and compliance risks. It facilitates smoother contract negotiations, ensures compliance with local regulations, and fosters a more streamlined and secure working relationship.

Better communication

One of the most significant drawbacks of outsourcing is misunderstanding caused by cultural and linguistic barriers. According to National Outsourcing Association report, 75% of organizations hesitate about language and cultural differences when selecting an outsourcing provider. Different living styles, cultural barriers and work attitudes significantly impact operational processes and end outcomes.

Neighboring countries share cultures, languages, customs, and festivals. As a result of cultural similarities, persons with similar culture and comparable mentalities should have no trouble communicating. It makes life easier if you and your outsourcing partner share the same holidays. You don't risk missing too many work hours because your coworkers in another area of the world are on vacation.

Being closer to your nearshore company and having the same time zone improve overall communication. According to the benefits of nearshore outsourcing, it allows for more effective project management, regular face-to-face meetings, and better oversight of the development process. The geographical proximity facilitates stronger relationships and enables you to maintain a higher control over the project, ensuring it aligns with your business objectives and quality standards.

Less time for on-site interviews and onboarding

Even though unemployment may reach 32%, the IT industry is solid. Although the number of IT job listings has decreased by 16% since February, the huge layoff is unlikely to commence.

As a result, competition for experienced developers, quality assurance engineers, and other tech-related expertise remains fierce. Aside from that, in today's market, people are unlikely to gladly leave their positions, begin the round of job interviews, and move their cherished teams for unknown males they see on Zoom.

Rather than hiring full-time employees, you can engage with nearshore service providers on a project basis. This provides flexibility and agility in scaling your outsourced team as per your project's requirements, ensuring you have the right resources at the right time. By leveraging this approach, you can efficiently cover workload peaks, manage tight deadlines, and maintain a lean workforce.

Access to new technologies

Increasing efficiency by 24% and getting help from a professional by 18% are the main reasons businesses prefer to outsource. Working with experienced specialists and software developers gives you access to technical advancement. When you outsource software development to a nearshore company, you are working with a development team that is up to date on the newest technologies and processes.

This expands your options for finding specialized talent, particularly in areas where there may be a shortage locally. Additionally, nearshore outsourcing can expose you to new technologies and innovative approaches that may not be as readily available in your home country, giving your product or business a competitive edge.

Scaling

Instead of worrying about software and infrastructure requirements, nearshore outsourcing allows you to focus on your business processes, internal resources and energy on strategic initiatives, innovation, and growth. Nearshore outsourcing services are a good choice for companies looking to develop and scale strategically since they can obtain what they need when needed.

Diversity mindsets

Nearshore outsourcing brings diversity and enriches mindsets within your organization. Collaborating with professionals from different cultural backgrounds and perspectives fosters creativity, innovation, and fresh ideas. This multicultural environment promotes cross-cultural learning, broadens horizons, and encourages the exchange of knowledge and best practices.

How to Master Nearshore Outsourcing

Suppose you want to decrease time-to-market and effectively launch your product. In that case, you must choose a dependable and competent partner who can deliver your project on time, respond swiftly to modifications, comply with laws, and generally satisfy all your requests and expectations.

78% of businesses are pleased with outsourced staff

Keep the following points if you want to be among the organizations that defined their relevant provider by all specifics among all nearshore outsourcing companies:

Create a project estimate

Is it internal software for a small group of employees? Do you require ongoing, technical support and assistance? Which resources do you need? What timeline does your project have? Do you need full-cycle development from an outsourcing company, assistance with UX/UI design, or improving security services? The answers to these questions are critical because they will help you realize which outsourcing provider you need. For example, hiring an experienced team to create a single-page application with limited functionality might significantly impact your company's budget.

Don't be confused if you don't know where to start with project estimation, TechMagic experts are ready to help you in discovery phase stage.

Research the nearshore country state

Once you've chosen to start outsourcing software development to Eastern European enterprises, you must select the most profitable site. Poland, Romania, and Ukraine are among the best destinations for people working in the rapidly growing IT sector. Outsourcing firms employ around 170,000 IT experts in Ukraine, producing a revenue of $2.07 billion.

Furthermore, the Ukrainian market is quickly expanding due to the 150 schools and institutions that educate students in STEM areas. The Polish labor market has 255,000 IT experts working in over 90 enterprises with 50 or more workers. They earn $1.38 billion in income and can attend 31 colleges nationwide.

Select the right nearshore outsourcing company

The secret of nearshore services is finding the right company to work with. Not all nearshore companies are the same. Some charge too much, some offer poor quality, and others don't deliver what you want.

• A good company is transparent. They will tell you exactly how much their services cost. They will give you all the information you need to make a decision.
• A good company offers quality service. The services they offer should exceed your expectations. They will strive to provide you with the best service possible.

To establish successful cooperation with your nearshore software development team, it is crucial to clearly define the objectives and expectations of your project. Ensure that entire team understands the project's requirements and deliverables. It will enable you to establish common ground quickly and choose whether you want to engage a certain offshore software development firm.

Find out data privacy and security of software development company

If you don't want to lose your secret information, investigate how your potential outsourcing partners protect sensitive data and intellectual property. Companies outsource their services and value privacy, implement precautions such as anti-virus software, two-factor authentication, data encryption, and sign non-disclosure agreements (NDA).

Look for a proven track record

Before entering into a partnership with a nearshore development company, conduct thorough research to ensure your project is in safe hands. Verify outsourcing partner credentials, for example, on Clutch, check if they comply with essential regulations and industry-standard accreditations such as ISO or SOC2. Look for case studies that showcase their skills and experience, and request references from previous clients. A nearshore company with a strong track record increases the likelihood of a successful collaboration.

Discuss flexibility

Tight timelines and frequent revisions generally govern the software development process. Most leading software development companies use Agile methodologies such as SCRUM, Kanban, and XP Programming to meet deadlines and coordinate collaboration. Such techniques enable them to establish a productive working environment and continuously build as needed.

As a result, while looking for a reputable software development business, be careful to enquire about its business performance and its working methods. Discuss all stages of nearshore product development and engagement approaches.

Ensure that all communication is kept clear and consistent

Communication is the key to handling the challenges of outsourcing effectively. In each project, communication between the team and the management is critical. Communication that is coordinated, transparent, and ensures everyone's visibility is a vital success factor.

Nearshore practices must also be consistent with the company's business goals. To achieve alignment, you must have cultural closeness, linguistic competency, and a complete grasp of the market.

Final thoughts

Nearshore outsourcing is the perfect alternative for those unable to locate specific experts in their own country, do not want to keep a team, or are just wary about offshore outsourcing owing to various hazards. They frequently involve time zone issues brought on by language hurdles and cultural differences.

“Clients do not require traditional vendor management. They want vendor management that understands technology, the startup environment, can assist finding business solutions, and manage internal stakeholders.”

Hiring a nearshore outsourcing business can work in your favor, but only under one condition. Before hiring external professionals to supplement your in-house team, you must balance all advantages and downsides and conduct extensive research.

Considering these points can guide you in deciding if nearshore outsourcing aligns with your business goals and requirements, propelling you toward success:

• If you seek enhanced product quality through access to experienced professionals with years of project-specific knowledge.
• If time to market is critical, you want to launch your product quickly without compromising quality.
• If you want to focus on your core business operations and leave the technical side
• If you're going to tap into the expertise and experience of professional developers proficient in various programming languages and technologies
• If you plan to scale your business rapidly, nearshore outsourcing can help you add new features and functionalities without delays.

There is no right or wrong answer here; it all relies on your company goals, money you spend on a project of future collaboration with a dedicated development team you want to hire.

Choose the best solution for your company based on its goals, expectations, and capabilities. If you are ready, contact us to see how nearshore outsourcing benefits you!

FAQ

1. What is nearshoring, and how does it work?

   Nearshoring is a form of outsourcing where businesses engage software development companies located in nearby countries to carry out work or provide services. It involves leveraging the talent and expertise available in neighboring or nearby regions to fulfill project requirements.

2. What are nearshore outsourcing benefits?

   Nearshore outsourcing offers several benefits for businesses. Firstly, it provides access to a skilled talent pool at lower costs than onshore resources, resulting in significant cost savings. The geographical proximity also enables overlapping time zones, making communication and coordination smoother and more effective. Cultural and language compatibility fosters better understanding and collaboration. Additionally, nearshore outsourcing allows for resource maximization, scalability, and flexibility. Nearshore services enable to reduce risks, offers legal and tax regime compatibility, and can optimize costs and open up opportunities for expanding into new markets.

3. How can nearshore outsourcing positively impact business productivity and growth?

   Nearshore outsourcing can significantly enhance business productivity and fuel growth by leveraging a skilled talent pool available in neighboring or nearby countries. With proximity, time zone compatibility, and cultural affinity, nearshore outsourcing allows for seamless collaboration and effective communication. This proximity facilitates faster response times, easier coordination, and streamlined project management.

4. How is nearshore outsourcing different from offshore outsourcing?

   Nearshore outsourcing and offshore outsourcing differ primarily in geographical proximity. Nearshore outsourcing involves partnering with service providers in neighboring or nearby countries, usually sharing borders or located in the same region. On the other hand, offshore outsourcing involves working with service providers in distant countries, often across continents. While offshore outsourcing may offer cost advantages, nearshore outsourcing offers the benefits of proximity, cultural affinity, and streamlined communication, making it an attractive choice for many businesses.

5. Is nearshore outsourcing suitable for small and medium-sized businesses (SMBs)?

   Yes, from nearshore services can benefit small and medium-sized businesses (SMBs). SMBs often face resource and budget constraints, making hiring and maintaining a skilled in-house workforce challenging. Nearshore outsourcing provides access to nearby cost-effective talent pools, allowing SMBs to tap into specialized expertise without requiring substantial investments. The proximity facilitates effective collaboration, knowledge transfer, and better alignment with business objectives. SMBs can leverage nearshore outsourcing to scale operations, gain a competitive edge, and focus on core business functions.

6. How can nearshore outsourcing help with cost savings?

   Firstly, by partnering with nearshore service providers, businesses can access skilled talent at lower costs than onshore resources, reducing labor expenses without compromising quality. Additionally, nearshore outsourcing minimizes overhead costs associated with setting up and maintaining physical infrastructure, such as office space and equipment. Proximity also reduces travel expenses, allowing easier client visits, training sessions, and project coordination.