Nearshore Software Outsourcing: A Brief Guide
Nearshore software outsourcing refers to outsourcing software development work to a country adjacent to the company's headquarters. For companies in the US, nearshore outsourcing typically translates into sending work to software teams in Latin America or North America.
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Nearshoring is a type of outsourcing where a given company seeks a development partner in a different country or region.
However, what distinguishes nearshoring from other kinds of outsourcing is the fact that the development partner is still nearby. Since companies are usually in the same time zone, this facilitates communication and allows frequent visits.
Some of Latin America's most popular nearshore destinations have compatible working hours with all time zones in the US, including Argentina, Colombia, Mexico, and Brazil.
These nearshore outsourcing partners also have the language skills and cultural compatibility needed for close collaborations to run smoothly.
Companies that opt for nearshore outsourcing are motivated by the high technical skills and the value added to software products, even if cost reduction is essential in outsourcing decisions.
Today's businesses must make crucial decisions regarding their operational and strategic agility, and technology plays a big part in ensuring they can act competitively.
One of these decisions may be whether to start in-house software development or look for an outsourcing partner.
The problem companies come up against is assessing whether their chosen team will be able to cope with the upcoming project successfully.
Let's focus on the risks and opportunities that in-house and nearshoring present. We have compiled a list of three benefits and three risks of using a nearshore partner and an in-house team.
Why outsource software development to a nearshore company?
Resolving Staff Shortages
Nearshore developers are experienced in project-based software, with the skills and flexibility to bridge staffing gaps at short notice. Their experience working with various companies ensures software meets quality standards, which means nearshore development teams will fit in with your company smoothly.
Skill Set and Talent Pool
Nearshore software developers provide businesses with access to a vast talent pool, which means companies aren't restricted by the current skills of their in-house team – they have access to the most experienced teams a region has to offer while not having to spend money searching for suitable candidates to join their team.
Deciding to develop a new product usually comes with many reflections. Can we do it? Do we have the budget for it? And the most important one – do we have the necessary skills?
Nearshoring opens access to experts in their fields who aren't new to modern technologies and most probably have experience, having dealt with projects which, in many ways, can be similar to yours.
Access to such a talent pool makes the development process more effective and valuable. Instead of spending time recruiting people with the right skills locally, you can start pursuing your business goals right away.
Cultural and Language Similarities
Sharing a language and similar working cultures is critical to achieving project goals. Straightforward communication underpins every software development undertaking, and nearshore outsourcing provides no language barriers.
Communication styles can heavily affect how our relationships function and how cooperation develops.
Not many of us realize that cultural differences in communication have the potential to break an outsourcing partnership. Gestures, eye contact, words, and behaviors that seem entirely normal to us can be highly offensive in other countries.
There are also differences in values, beliefs, and expectations. That is why nearshoring is gaining ground.
Choosing partners whose culture, as well as work ethics, are very similar to yours allows you to experience far fewer, if any, uncomfortable situations and misunderstandings.
Augmenting Company Efficiency
Companies that opt to develop internally often overload themselves with work and need help to take on new projects.
At the same time, nearshore providers enable companies to concentrate on day-to-day business activities, freeing up the in-house team's time and resources and streamlining their processes.
Regional Proximity
While nearshore outsourcing doesn't require face-to-face collaboration, being geographically close to your development provider has advantages.
Travel costs are usually low, and timezone compatibility enables convenient and timely communications. If you need to meet with your provider in person, nearshore outsourcing helps with this option.
Problems within projects usually occur at the least appropriate moment. The success of the entire endeavor depends on their fast and favorable resolution.
Additionally, projects require a lot of planning before they start and decision-making while they run.
These processes are, without a doubt, time-consuming and involve close cooperation between both parties. Doing so on two different hemispheres is extremely difficult.
When both parties share a similar time zone, you and your partner will likely be at work simultaneously. In case of urgent issues, they are just one call away.
Nearshoring caters to those who appreciate or require frequent communication, personal visits, and quick availability of an additional talent pool in emergencies.
How to outsource to a nearshore software development partner
To help businesses choose the best nearshore outsourcing software development company for your project, we recommend following the following steps:
Assess Your Organization's Skills
Companies need to know where their internal team's skills lie before outsourcing software development.
One of the most valuable ways of evaluating your team's expertise is conducting a staff survey to benchmark the current skill set of the company.
The results will give the organization an excellent picture of its team's strengths and weaknesses.
After creating project requirements and specifications, the next stage is creating a shortlist of nearshore development partners with the necessary skills.
Contact each company and request details of how they'd approach the project. You can then choose a company whose workflow processes fit your requirements well.
Verify the Expertise of Your Shortlist
Before hiring a software development company, it's essential to carry out due diligence and ensure their claims of expertise are backed up by authentic success stories.
You should consult their website and read their case studies as the first approach. You may also want to contact companies they've worked with to verify their work quality.
Implement Project Management Processes
Project management frameworks and tools are crucial in organizing and tracking the progress of nearshore software development projects.
Using tools like Basecamp, Jira, and Trello improves overall communication with your development partners and ensures meeting milestones.
An organized workflow is essential, as project managers and team leaders can be assigned to guarantee that tasks are completed on time and that individual responsibilities are met.
Choosing a nearshore region for software development
When selecting a nearshore partner, assessing the country you plan to outsource to more comprehensively is essential.
Latin America is the fastest-growing region for software development outsourcing, boasting valuable indicators such as a high level of digital skills education, robust technology infrastructure, and excellent English language skills.
Once you've settled on a region, you should focus on what individual providers can offer.
A good nearshore provider can demonstrate a modern, disciplined approach to software development. Ideally, they should be able to demonstrate successful long-term engagements with other companies.
From the beginning of your partnership, the focus should be on quality assurance, with high test coverage and successful integration and delivery.
The likelihood of establishing a long-term collaboration is significantly increased by emphasizing the need for open communication.
Are there any risks regarding nearshoring?
With all its benefits, choosing nearshoring also carries risks that must be considered before deciding.
Additional Costs
The development of a product is similar to building a house. You never know what may come up or what may go wrong.
Software development may also be full of surprises, especially if your development team needs to learn your core business well; This is why extra costs can occur or completing the project can take longer than expected.
However, there is a way to protect yourself against these dangers – choosing the right type of contract, e.g., fixed price, frequent communication, and commitment to the project are the things that can work against any fears.
Confidentiality
To complete the project, your vendor must get to know your enterprise to some extent. How do you stay safe? Before deciding to outsource – prepare an NDA that will prevent your vendor from exposing any delicate information that may damage your business.
Language Barrier
When choosing a nearshore company, you must be prepared that, in most cases, their first language will be different from yours;
This, however, does not mean that you will be unable to communicate effectively at the language level, even when taught as a foreign language, which can be very high.
To better understand who you're dealing with, check your language version of their website, read through their materials, or book a phone or video call with the prospective partner.
Onshore software development
Onshore development means hiring software developers in the same country or region your company resides. It is usually the most expensive option of the three types, especially if you are in the US.
An increased need for digital transformation has created an unprecedented shortage of top talent, especially in the US market.
Gartner reports increases in job openings, turnover, time to fill open positions, and salary expectations.
Offshore software development
Offshore software outsourcing refers to hiring a development partner in a distant country to handle development, typically used with countries in Asia, such as China or India. Offshoring is the way to go if you are seeking the lowest-cost option. However, it does come with tradeoffs.
While language barriers are increasingly becoming less of an issue, other considerations must be considered.
The most significant challenges of Offshore development are the time zone difference, high turnover, and cultural differences. These factors can create communication barriers and negatively impact your team's velocity.
You can mitigate these issues by having your offshore teamwork during the night so you can share the day's work.
However, developers in countries like India now have a choice of where they work, given large corporations and local companies setting up shops in India to attract the best talent.
Why is it challenging to choose the right vendor?
As the number of software vendors in Latin America increases, so does the complexity of choice. If you have experience outsourcing your software development projects overseas, you know how difficult it is to pick a trustworthy vendor. With most companies blatantly promising outstanding results, speed, quality, and low prices, it can take time to determine who you can trust.
If you go to ranking websites like Clutch, you will see more than 2,100 listed software companies in Latin America. Choosing a reliable partner with such a wide selection is a daunting task. However, it can be easier to start by defining your search criteria. A general idea of a development partner you need for the job will help you narrow your search list and focus on the best options.
Nearshoring vs. Offshoring vs. Onshoring
Are you thinking about IT outsourcing? Before choosing which IT partner to work with, determine which approach could work best and learn about best practices for working with a nearshore software development company. If your company is interested in nearshoring, please contact us!