About 76% of businesses outsource IT services, in part or in full, to third-party providers — and have plenty of valid reasons for doing so:
– 57% of companies consider it an efficient way to cut costs,
– 51% find it helpful to respond to shifts in operating model shifts,
– and 49% use it to access new capabilities.
This strategy works out if you pick the right outsourcing model for your business.
Usually, the company chooses between onshore, nearshore, and offshore outsourcing, weighing in different factors. Each model has its advantages and disadvantages, and a business owner should know to choose the right one for the company and the project.
Since the demand for outsourcing is still in its prime with 83% of businesses planning to maintain or increase spending on outsourced services in 2023. In 52% of cases, they will turn to an outsourcing company. This is why we at UVIK decided to cover everything you need to know before partnering with a nearshoring vendor.
Today, we’ll discuss what nearshore software development is, why you should consider it, and the benefits this remote collaboration will bring.
What Is Nearshore Software Development?
The company may outsource in one of three major outsourcing models, depending on the business needs, budgets, and projects:
- Onshore: the tasks are delegated to third-party vendors within the same country. E.g.: from New York to Washington.
- Nearshore: the tasks are delegated to third-party vendors in the same or similar time zone. E.g.: from Germany to Ukraine.
- Offshore: the tasks are delegated to third-party vendors in countries with significant time zone differences. E.g.: from Canada to India.
Like any above-mentioned outsourcing model, the nearshore development model may be done in two types of collaboration:
- Integrated teams: you hire individual developers with specific skills as a part of your IT staff augmentation process to close the skill gaps. E.g., your team doesn’t have DevOps you need, so you may hire them from nearshore tech vendors.
- Dedicated teams: you hire a full-stack development team for the whole project. E.g., you don’t have any tech department to create the product you want to sell, so you hire the whole team to create it for you.
Let’s see why you should consider a nearshore software development strategy.
Reasons for Choosing Nearshore Software Services
Outsourcing benefits businesses in many ways (and we’ll talk about them in detail below). There are also specific reasons to consider nearshore outsourcing. Here are a few.
Decreased costs while increased budget flexibility
The nearshore programming model allows you to spend less on the skills you need if you hire software engineers from nearby countries. According to the Accelerance report, nearshore or offshore software development firms can save businesses from 40% to 70% of overall costs.
Moreover, hiring an outsourced team will be way cheaper than expanding your in-house on-premise team. An Upwork study finds that the in-house employee will cost the company 1.25 to 1.4 times more than a freelancer or an outsourced specialist.
The nearshore providers abroad may have more affordable options than you may find in your country. The best part? Partnering with them, you won’t experience huge work ethics issues or cultural differences. And the latter may be a stumbling block for project management and smooth communication.
Fast scaling up or down and working on a few projects simultaneously requires a lot of human resources and hardware. Sometimes just setting up an extra office could cost you a fortune. Imagine the bill if you need a few of those.
With the nearshore software development model, you can add as many people as you need faster and have zero worries about the office rent, environment setup, hardware, etc.
Here are a few projects that will benefit the most if you decide to partner with a nearshore software outsourcing agency:
- B2B, B2C, and SaaS projects
- Projects requiring real-time collaboration and discovery but not necessarily face-to-face
- Agile-based projects
- Development of new software solutions
- Modernization of complex legacy software
Real-time collaboration between the teams
In the case of the nearshore software development model, the time difference between the client and the contractor varies from one to three hours, making real-time collaboration and prompt communication possible. When you outsource the processes that require supervision or collaboration here and now, nearshore outsourcing will be much easier to manage for both teams than offshore.
In addition, you can react to any changes that require the immediate involvement of the tech team fast. With offshore outsourcing, this can take a few days.
At this point, you’d like to know the key advantages of hiring software developers from neighboring countries. We’ll cover this in the next chapter of the guide to nearshore software development.
Key Advantages of Nearshore Software Development
Nearshoring has plenty of advantages for the business in terms of finance and processes. Let’s describe what you will get from nearshore cooperation.
Fast project kick-off and time to market
If you don’t have the right person for the job, the work will not be finished within the expected timeframe. Hiring the full team of engineers with specific skills from scratch may take months, which postpones the product’s time to market.
When hiring vetted engineers nearshore, you won’t need to go through every round of recruiting and hiring and will have the needed employees ready to start working. As a result, your solution will have more chances to see the market on time.
Access to resources and a versatile talent pool
Nearshore outsourcing is a great way to sift through the best from a talent pool in more than one country. For example, if you’re a German business working on a few mobile apps, you may limit yourself to looking for Germany-based engineers only or consider software developers from Poland, the Czech Republic, or Spain. By widening your search area, you will not only have more developers to choose from but also hire them for less.
New business relationships abroad
According to the Clutch 2021 Small Business Survey, 15% of small companies in the U.S. work through nearshore outsourcing, mentioning the ability to contract with domestic and foreign companies as the biggest advantage.
For such companies, establishing new relationships can be an integral part of their market expansion and growth strategy.
When you outsource your project to bordering third-party companies, there’s more chance they know about or use the same regulatory framework regarding software development.
For example, if you outsource software development of the EU-targeted product from the Netherlands to Poland, you will use the same GDPR guidelines. In this case, the developers won’t spend much time figuring out the regulations as their development processes are already based on them.
Smooth real-time communication
As the business and nearshore tech companies are conveniently located and don’t have drastic time zone differences, they can schedule a real-time collaboration that will be comfortable for both parties. This practice is important for the processes requiring simultaneous involvement of in-house and nearshore teams.
Disadvantages of Nearshore Software Development
While nearshore software development outsourcing has plenty of advantages, it also has some drawbacks you should know.
Here are a few things to consider and manage before teaming up with a nearshore vendor.
As the nearshore software development definition goes, all development tasks are delegated to a third-party vendor as defined by the contracts, service level agreements, and NDAs. This process may involve sensitive information that requires proper processing.
Moreover, the data handling may be extremely regulated, especially in data-heavy industries like fintech or healthcare tech. From this perspective, you should carefully analyze if the tech vendor from a nearby country can comply with these regulations.
Intellectual property risks
Any outsourcing comes with the same risk: intellectual property theft. It can cost the company its budget, reputation, and in some cases — license. To avoid it, make sure you partner with the trustworthy agencies and hire a good lawyer to double-check the agreement and contract clauses.
While nearshore outsourcing is cheaper than onshore or in-house hiring, it still costs more than offshore outsourcing. The map below shows the costs a U.S. company may save when outsourcing software development to Ukraine instead of nearshoring the IT tasks to Latin America.
With cost-saving being the defining factor, companies should consider the nearshoring option when it comes to outsourcing IT processes. Here’s a short nearshore software development guide on what to consider when choosing the right tech vendor.
How to Choose the Right Nearshoring Company
Choosing a reliable provider of outsourcing services requires some work from a business to ensure they team up with the company that can deliver the promised. According to the Deloitte Global Outsourcing Survey, businesses value transparency (54%), trustworthiness (41%), and understanding of their business (40%) are the top three expectations when looking for a partner.
When you search for a tech vendor to develop or assist with any project, you want to make sure it’s the right one for the job. Here’s the basic list of features a reputable nearshoring agency has.
They have experience building similar products or they work with the same technologies
The success of your project is mostly defined by the skills of people involved in it. The experience of building a similar product or working with the technologies necessary to create yours is a number one thing to look for in a tech partner. For example, if your product requires .NET or AR/VR deployment, you should choose a nearshoring company that uses such technologies regularly.
They follow an Agile approach
Teams that have embedded the Agile approach in their processes ensure bug-free development and product quality throughout the development lifecycle. For a business, it will translate into fast issue resolutions and continuous monitoring for impeccable performance, which is critical for MVP evaluation.
Their hiring process is tough
The promise of easy hiring often means recruiting inexperienced junior specialists or misinterpreting a candidate’s skillset.
A reputable company always tests the candidates for their technical skills, problem-solving capability, and soft skills. This way, you don’t spend extra time figuring this out on your own. However, if you want to double-check, it shouldn’t be a problem for the company to organize additional independent testing for you to have peace of mind.
Their Employee Retention Rate is high
Professionals will stay if they’re valued, if their input is properly compensated, and if they have room for growth. If a nearshoring company shows a low retention rate, chances are they’re not as good at managing their outsourced teams to make the developers stay with them.
They are known in the industry
Plenty of great companies currently don’t have much media exposure but have proven experience and verified testimonials from current or past clients. A great way to check the company’s experience and background is to look them up on tech-specific websites like Clutch or Techreviewer.
But choosing the right nearshoring company is only 50% of success. The other 50% is how you organize this process. Here are a few working tips to make it smooth.
3 Tips To Make Nearshore Outsourcing More Effective and Trustworthy
Nearshoring the whole development process or its part abroad will require different preparation on the part of the business. However, there are a few working tips for both scenarios.
Determine what you will outsource
Before choosing nearshoring or any other outsourcing model, ensure you know the tasks that you want to delegate, their complexity, and possible issues. Settling on these tasks will help you choose the most cost-efficient model while exposing the project to the minimum risks.
Appoint a supervisor
The nearshoring teams might need less onboarding time, but they still need to go through this process. Make sure you have a trusted intermediary who understands the working environment in both teams and is always there to facilitate issue resolutions. Some companies, like UVIK, offer a project manager as a part of the team who will update you on your project progress and work with the teams.
Create and advance trust
Before signing a contract with any nearshore software development company, clearly communicate your preferences and expectations on the working process and ask how they will deliver it.
While the vendor may understand the workflows typical for developing a specific product, they may need to learn your business approach. For example, if you want to fully control the development and receive updates after achieving certain results, you need to ask your vendor to schedule the reporting sessions.
UVIK is ready to team up with you and provide you with top-skilled developers to maximize your team’s potential. Here’s why you should choose us.
UVIK Is Your #1 Nearshoring Partner
With offices located in Poland and Estonia, we’re a perfect nearshoring partner for European businesses. Our developers follow the Agile approach in their workflows and we comply with the legal regulation regarding product development and data handling. Here’s the list of services we provide for enterprises:
- MVP design and development
- Web development
- Cloud migration assistance
- Support and maintenance
- IT infrastructure deployment
- Long-term project development
- Lingering IT issue resolutions
You can access fixed-price and hourly hiring models and choose the one that best suits your project and budget.
We also offer project consulting, which will help you find the best solutions to create quality products. If you’re ready to boost your team performance and discover a more cost-efficient way to product development, contact us today and schedule a consulting session!
Nearshore outsourcing is a great option for companies to save money, optimize their development processes, and maximize the productivity of their teams. It allows businesses to tap into new markets, form lasting partnerships abroad, and diversify their workforce without legal risks.
If you’re looking for a trusted nearshoring partner within Europe, UVIK is ready to provide its development services. Schedule a free initial consultation and let’s discuss how our web agency can help you maximize the value by decreasing costs!