Software Development Outsourcing has become the most favorable business strategy lately and is pretty much in demand. 83% of businesses plan to maintain or increase spending on outsourced services in 2023.

Some companies are considering it for its cost efficiency while others think it is helping them in keeping up with changing operating model shifts and accessing new capabilities.

In software development outsourcing, there are three types of location-based outsourcing models, nearshore software outsourcing, offshore outsourcing, and onshore outsourcing. Software development companies prefer nearshore software development more often over the other types for several reasons.

Like the outsourced teams are in the same region, there is no or less cultural difference, less time-zone difference, easy access to the teams, and so on.

This article highlights about what is nearshore software development outsourcing model in detail and what is nearshoring and how it can supercharge your software development outsourcing.

Let’s start off with the introduction of the topic. 

Nearshore software development model is a location-based outsourcing engagement model. As per nearshore development model, the client can hire a nearshore development team that lies in the same geographical region with no or less time difference (2-4 hours).

For instance, if you are a company based in Canada, your nearshore development team can be from the US, Mexico, Costa Rica, or Argentina.

The nearshore software development is a type of outsourcing model that lets you leverage the advantage of geographical proximity and working in the same time zone ensuring smooth communication and collaboration while staying on budget.

Here’s how does nearshore development outsourcing model works:

• You identify and define your project requirements
• Then start looking for nearshore outsourcing partners
• After a thorough background check, you select a company and negotiate terms and contract
• Then comes the team integration step
• After this development process, continuous collaboration starts till the end of the project.

When you are working with the nearshore software development outsourcing services company make sure they provide proper risk management systems as insurance.

Nearshore software development outsourcing can be executed mainly through two types of collaboration models:

Nearshore IT Staff Augmentation:

As per IT staff augmentation model, the nearshore outsourcing company provides a team that works with your in-house team. Integrated teams are hired to support existing teams and fill the skill gap. These teams work remotely but are under the client’s control and work as per their instruction.

Nearshore Development Teams:

Hiring dedicated development teams means you hire an entire team of nearshore developers for a project. Such teams work independently, or the client has control over them to some extent. The reason for hiring dedicated nearshore development teams for a project is to spare the in-house teams for other work or share their workload.

Why do you need to hire a nearshore software development firm? This is the question that most of us consider before diving into the details of the nearshoring model. Here are some of the reasons that can back your decision to hire a nearshore software development company:

• Similar legal framework:

One of the main reasons companies go for nearshoring software development is similar legal regulations and IP protection. When working with offshore software development companies, you have to deal with specific legal requirements of the given countries that might not protect your interests sometimes.

But in the case of nearshore development, you get the leverage of similar legal frameworks. Hence no extra expenditure on hiring a legal counsel.

• Convenience of location:

Proximity makes communication and collaboration seamless. Most of business leaders prefer nearshoring because it’s convenient to reach the other team and maintain optimal control.

• Find Affordable providers in the region:

If you can find affordable providers in the nearby region, then there is no need to hire developers from countries far away that have considerable time zones and cultural differences.

• Better project oversight:

Travel convenience to the nearby region provides better project oversight opportunities. Be that in-person meetings, project kickoffs, or other on-site activities, nearshore software development makes it easier for it.

• The flexibility of Risk Mitigation:

In case of unforeseen circumstances, it is easier to manage nearshore teams and projects. You can reach the teams without worrying about distance or time difference.

Here we have enlisted some pros and cons of nearshore software outsourcing. because nothing can be flawless, Right?

Cost Effectiveness:

Nearshore software development teams might not be as cost-effective as offshore teams. But they can save costs as compared to the onsite teams. In this case, you also do not have to bear the cost of maintaining an in-house team.

No Cultural Clash:

Cultural affinity is one of the biggest plus points while working with nearshore teams. You don’t have to worry about briefing them about your country’s culture. Although you can educate them about your company’s culture, both of the teams are on the same page.

Minimal or No Language Barrier:

Since you are working with teams from the same region, there is no language barrier. This results in smooth communication and collaboration leading to the success of the project.

Ease of managing the geographically near remote team:

Due to proximity, it is easy to reach and manage the team. Even if you don’t visit them personally, the assurance is enough that they are in your reach. This can boost trust, transparency and confidence on both sides.

No time zone conflict:

Time zone can be a hurdle while working with the offshore teams. Most of the time, the developers must work midnight shifts leading to burnout. That can effective overall performance and productivity.

Also, when the time zones are not aligned, communication is disrupted. In nearshore software development, that is not the case. You can reach the nearshore software development teams as per your time.

Tax Saving:

It is understood that nearshore outsourcing companies must comply with taxes and regulations imposed by the government to support the industry. These taxes may vary from country to country. Nearshoring can help you legally reduce these taxes.

Scalability:

Scale the nearshore development team up or down as per the project requirement.

Quality Issues:

Cost saving is not the sole motive for nearshore software outsourcing. When you look for talent outside your country you’re expecting and looking for exceptional quality. Sometimes nearshoring can backfire, and you may get less quality of services and products let alone the same quality as your home country. This can adversely affect customer retention and trust.

Same political and economic issues:

Geographical proximity means that the political and economic conditions of the nearshore destination as no different as yours. You may face the same challenges working in another country as you face in your own country.

Access to limited talent pool:

One of the challenges of nearshore development is that the talent pool is not vast. You might face competition while hiring resources.

Challenges related to geographical concentration:

Geographical concentration can be challenging in case of natural disasters or any other local event. This can slow down the progress of the project

Onshoring, nearshoring, and offshoring are the three most common software development outsourcing models, suitable for different needs. Let Explore, What is the difference between nearshore, offshore, and onshore software development?

Currently, the hourly rates of US based nearshore software developers are very high followed by Canada and Europe. Therefore, companies are looking for nearby regions to find quality talent at affordable prices.

Regions like LATAM, Eastern Europe, Asia and Africa are favorite destinations of companies to get their work done.

Here is a table of nearshore software development rates:

Nearshore Software Outsourcing Rates in Latin America LATAM

To make nearshoring outsourcing works for you, first off, choose a region that is close to you. The next few things to consider are:

• Level of digital skills in the country
• Technology infrastructure
• Economic and political conditions
• English Language proficiency
• Tax regulation and IP protection laws
• The country’s reputation for business culture and government support

Once you have made sure the above points are up to par, the next step is to look for the right offshoring vendor:

• Make sure your nearshore service provider has a proven record of success and good reviews
• Choose a company that demonstrates a modern, disciplined approach to software development
• The company should be able to demonstrate successful long-term engagements with other companies.
• The focus should be on quality assurance, with high test coverage and successful integration and delivery.
• The company should support open communication.

Zendesk:

Zendesk is a software company providing software as a service product. These products are usually related to customer services, communication and support ticketing. The details of the nearshoring services are not publicly available, but the company has utilized this model for most of its software development and customer support services.

Revolut:

Revolut is a fin-tech giant based out of the UK that provides banking and financial services. The established a technology hub in Lithuania leveraging Lithuanian developers’ expertise to enhance its banking platform. The developers help them launch new features rapidly, ensuring a competitive edge in the market and manage their backend systems and application. Revolut chose Lithuania for nearshoring because of its Fintech-friendly business environment, smooth licensing process – and, of course, its vast pool of talents.

Grammarly:

Grammarly is an AI-based software that is used for grammar checking. Most of the software development took place in Ukraine and still the teams are working on continuous improvement and feature development.

CodeNinja is your reliable strategic IT outsourcing partner with a decade’s worth of experience in providing software development services and workforce to global clients from various industry verticals.

We have offices around the globe so you can hire software developers from us anywhere in the world.

Are you looking for end-to-end software development, IT staff augmentation, or managed IT services? Look no further and get

• Flexible engagement models and choices
• Highly skilled developers at affordable rates
• Cost-effective solutions

The above-mentioned benefits and features of the nearshore software development model prove how it can be a game changer for your business. By hiring a dedicated nearshore software development team, you can not only reduce many software development challenges faced during the process but also take your business to new heights.