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:
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:
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.
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:
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
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.
Scale the nearshore development team up or down as per the project requirement.
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.
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.
One of the challenges of nearshore development is that the talent pool is not vast. You might face competition while hiring resources.
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?
Nearby region or neighboring countries
Distant regions or countries
Same or nearby country
Less cost effective than offshore, more cost-effective than onshore
More cost-effective than both outsourcing options
Higher labor costs, hence little to no cost-effectiveness
Time Zone Difference
Similar time zone or little time zone
Striking time zone difference
Same time zone
Shared cultural practices
Significant cultural differences
Seamless communication with minimal chances of delay
Potential challenges and less Real-time communication
Convenient and real-time communication
Teams feel united but not like the onshore team
Collaboration becomes challenging due to time zones and cultural differences
Teams are more connected and teamwork spirit is high
Security and IP protection
Comparatively better IP protection than offshore
May vary depending on the country
Best IP protection
Better project management
Complex remote project management
Easier project oversight and management
Talent pool Access
Wide pool of talent with specialized skill
Suitable for various projects
Suitable for specific projects requiring specialized skills
Suitable for complex projects
Flexibility and Scalability
Flexible resource allocation
Flexible resource allocation
Less project allocation flexibility or scalability
Clearly defining your requirements is the main step. If the foundation of the process is set properly, nearshoring is definitely going to work for you. By clearly defining we mean being specific about your project scope, objectives, timeline budget, etc.
It is necessary to do in-depth research before choosing a nearshore country. Make sure the country you choose has stable economic and political conditions, a good business environment, competent and skilled labor, and low taxes.
Fostering a relationship of trust with your outsourcing partner is very important. This adds up to the success of the project. Make sure you have open communication with your partner and terms are clear from the start.
Establish clear communication channels by leveraging up-to-date tools and software. Keep up with the nearshore team through meetings, status updates, and help in issue resolution procedures.
Try to manage cultural differences. Although there are minimal cultural differences in nearshoring, these can’t be ignored.
Before contracting your business to a nearshoring partner, make sure they are following the rules and regulations. Also, take additional security measures to protect sensitive information and intellectual property.
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:
To make nearshoring outsourcing works for you, first off, choose a region that is close to you. The next few things to consider are:
Once you have made sure the above points are up to par, the next step is to look for the right offshoring vendor:
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 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 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
Nearshore software development means an engagement model of cooperation between a customer and an organization or a team of software developers from nearby or closest countries, located within a two to three hours time zone difference.
Companies can leverage nearshore development for various projects, but it is best suited for B2B, B2C, and SaaS Solutions. The reason is that these projects:
LATAM is the most favorable geographic location for nearshore development due to the following reasons:
Many businesses can vouch for the role nearshoring plays in developing successful MVPs. It is because:
Hiring the best nearshore software development company can make a huge impact on the project development. Here are some of the essential features of a successful nearshore software development company that can help you hire the best option in the market.
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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.
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