The Top 5 Nearshoring FAQs, Answered

Published on September 29th, 2022

Unless you’ve spent the past decade living under a rock, you must have heard about software development outsourcing.

At this juncture, this industry is becoming impossible to ignore.

In 2020, the global IT outsourcing market was valued at $556.67 billion. And if you think that’s a lot, think again: This figure is expected to reach a whopping $806.63 billion by 2025.

Now, what you may not know is that there are different types of software development outsourcing.

Most people will have at least a rough understanding of traditional offshore outsourcing. Nearshore software outsourcing or nearshoring, however, is another matter. It’s a more recent business model that may need some explaining.

Here’s the least you need to know:

The Most Asked Questions About Nearshoring

1. So, What Exactly Is Nearshoring?

Nearshoring — also known as extended development, distributed development, and staff augmentation — is an outsourcing model in which you delegate software development to teams based in one or more nearby countries.

This is different from traditional offshoring, where your outsourcing partner is based on another continent.

For instance, potential nearshore locations for a German company include Poland and Ukraine. For U.S. businesses, these would be countries in South and Central America, such as Mexico or Brazil.

Geographical proximity aside, another major difference between nearshoring and offshoring is that nearshore developers don’t normally replace or work independently from your in-house staff.

Instead, the internal and external teams work jointly. They collaborate on common projects, work toward the same milestones, and may even share specific tasks and deadlines.

The goal is for the nearshore team to function as a seamless addition to your in-house staff but without the added hassle and overhead of hiring remote employees.

2. Nearshoring Aside, What Other Outsourcing Models Are There?

The two main alternatives to nearshore software outsourcing, other than doing the work exclusively in-house, are:

Offshoring

Offshoring is similar to nearshoring, except that the outsourced developers are based on another continent and don’t usually work in conjunction with the in-house team due to the bigger time difference.

Onshoring

Onshoring is “home country” outsourcing. You outsource software development to locations with lower labor costs in your own country, such as non-metropolitan areas.

3. Is Nearshoring Better Than Offshoring?

Both outsourcing models have pros and cons. Which would be a better fit for you largely depends on:

Your budget
Your business goals
The set-up and capabilities of your internal workforce
How important time-zone overlap and geographical proximity are to you
Whether the project requires faster communication and close collaboration

As a rule of thumb, offshore development is usually cheaper in terms of hourly rates. However, you may accrue additional costs and budget hits due to the slower turnaround and potentially ineffective communication stemming from language and cultural barriers.

Nearshore software outsourcing can be more expensive in the short to mid-term but is more flexible and enables closer collaboration, faster communication, and a quicker time to market.

4. What Are the Benefits of Nearshoring?

Advantages of nearshore software development over other outsourcing models and in-house recruitment include:

Quick and Easy Hiring

Your outsourcing partner will take care of most of the steps for you, including recruitment and interviewing. Your only involvement is at the end of the hiring process to make the final selection from the top candidates.

Less Red Tape

Depending on your jurisdiction, hiring developers in-house can be extremely time-consuming and document-heavy.

For instance, anyone looking to hire developers in Germany is looking at notice periods of three months and upward.

Nearshoring widens your geographical reach and enables you to recruit talent from countries such as Spain, where notice periods can be as short as two weeks.

No Operational Hassle

With nearshoring, there’s no need to worry about:

Training and onboarding the new hires
Buying equipment
Renting and maintaining an office space
Setting up physical workstations
Setting up payroll and employee benefits
Your nearshoring partner should have these and other business operations covered.

Increased Transparency

The collaborative nature of nearshore outsourcing facilitates real-time or near-real-time communication and the transfer of knowledge and ideas, both of which result in increased transparency between internal and external teams.

Faster Time to Market

By operating as a seamless extension of your in-house staff, a nearshore team helps you do more in less time and reach your business goals faster.

Potentially Greater Cost Savings

The increased efficiency and faster turnaround associated with nearshore software development can drive significant cost savings and budget optimization in the long term.

5. How Do I Pick a Nearshoring Agency?

When assessing a potential nearshore partner, carefully check their website and other online assets such as Medium blogs and social media channels, and look for:

Relevant Experience

The first thing you want to do is ensure that the company has the technical and industry expertise you require. Look for relevant experience in your domain, including involvement in projects similar to yours.

Evidence of Customer Satisfaction

Good indicators of client satisfaction and good customer service include:

Case studies
Success stories
Testimonials
Long-term or repeated collaboration with the same client(s)

Signs of a Developer-Friendly Culture

Use platforms such as Glassdoor and Indeed to find out how developers feel about their employers. Nearshore companies with a developer-friendly culture normally have higher retention rates and staff engagement, driving better results and customer satisfaction.

Conclusion

Nearshoring enables you to transcend the limitations of your domestic market and find world-class engineers abroad, often at more competitive rates, and without the hassle of traditional offshoring.

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