nearshoring pros and cons
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What Are the Biggest Benefits of Nearshoring

Nearshoring in business is a trend with a granted type of attention. Some entrepreneurs find it useful and profitable, but for others, it is still an unexplored area. One of the first benefits of nearshoring is the ability to cut costs and concentrate on more competencies of the performers you hire. The outer nearshoring companies are to handle business functions of the client: customer care, human resources, collections, and software development as well. It works especially well in case of the companies, which need IT products like website or application but have nothing common with the IT sphere.

But before we go to the nearshoring benefits, let’s find out what it really is. Nearshoring is a model of outsourcing which allows companies to delegate business processes including software development to the companies or freelancers in the nearby countries.

In the USA business owners use nearshore outsourcing benefits already since the 1990s. They expected cost savings of up to 80% from it. However, now it is more likely to be about 20-40%, depending on the country you choose as an outsourcing destination.

Benefits of Nearshoring According to the Statistics

Nearshore development provides many of the same positive sides of offshoring, at the same time allaying a row of its concerns. And nearshore benefits assure the further growth of this model of work. The statistics also show the popularity of the nearshoring model around the world. For example, according to the data from Stastista website, in 2018, the amount of the global outsourcing market, including nearshoring, reached 85.6$ billion.

nearshore outsourcing benefits and revenue

The leading countries in outsourcing are America and European countries. The smaller part of the projects came from the Asia Pacific region. In the TOP-20 of the nearshoring destinations, there are Poland, Bulgaria,  Romania, United States, Latvia. Ukraine, Belarus, the Czech Republic, and Hungary are also popular countries for outsourcing in Eastern Europe. The statistics of the financial attractiveness, people skills and availability, and business environment, looks like the following:

benefits of nearshoring statistics

According to the type, you can divide all the outsourcing work into two categories:

  1. Business process outsourcing.
  2. Information technology outsourcing.

In 2018 the nearshore business process outsourcing brought the revenue of 23.6$ billion. The delegation of work in the IT sphere appeared to be more popular during the last 8 years. For example, in 2018 it generated the revenue of 62$ billion.

advantages of nearshoring and stats

More and more countries every year estimate the nearshore advantages as something worth trying. This type of work is used either as the primary delivery model or as a part, combined with onshore resources. It is practiced so often mainly due to the similar or even the same time zone. And also it is difficult to overrate the benefits of nearshoring in cost-effectiveness.

How It Works: a Smart Way to Use the Advantages of Nearshoring

If you want to get all the advantages of nearshore development, you should know for sure, how it works and where you can find the programmers. As we already found out, there is a well-known practice among the companies to outsource the software development tasks to the dev companies with greater knowledge and experience in this field. If you choose the company from the neighboring or very close country, we call it nearshore outsourcing.

When a company chooses nearshore outsourcing, it should be ready for the hard work, because outsourcing it is not such a simple process as it seems to be. If you are about making the decision now, we have some guidelines for you. With these simple pieces of advice you will get only nearshore outsourcing advantages and avoid pitfalls:

  1. Think about the product you need. Distinguish the main features of your future website, application or anything you need: why do you need it, which functions it should perform, which needs it should satisfy, how it should look like, which profit or result you want from this product.
  2. Find out who will work at this project. If you want to hire a single developer, you may not get all the advantages of nearshoring, because you still have a piece of work to do. The other option is the hiring of a dedicated team. It usually works under the guidance of the project manager, who coordinates the coders’ work and communicate with the customer. It makes work faster and more efficient.
  3. Wind out which skills you want the performer to have. If you need a website, search for the specialists, proficient in HTML and CSS. A programmer with JavaScript skills will create a functional application. For big data projects, you can choose a Python developer.
  4. Communicate with future performers. You can find them, posting a vacancy on the international job portals or just write in Google something like “Java developers in Ukraine”. Get in touch with the developers, discuss the details of work and price, choose the performer and enjoy the nearshoring advantages.

The process doesn’t look too difficult, isn’t it? In fact, it is very easy to start working with remote developers. But only if you are aware of the pitfalls.

Nearshoring Advantages and Disadvantages: All You Should Know Before You Start

All the spheres of work have positive and negative sides. And if you are ready to fill all the advantages of nearshoring, pay attention to the pitfalls you may meet on your way. Both the experienced offshorers and companies, who are only planning to go this way want to know about the pros and cons of onshore nearshore and offshore models to estimate the risks. We’ve distinguished the TOP-3 pitfalls of the nearshore development:

  1. Relations difficulties. Collaborating with the company from the neighboring country can give an impression of “us and them”. This feeling can appear because of the mentality, way of thinking or even way of talking. The prejudices also add to it. As a result, the cooperative work at one project doesn’t go well. How you can cope with it? Get to know the people you are working with. Communicate every day and discuss the workflow to avoid problems with nearshoring.
  2. Not enough preparation. Work with the remote developers differs a lot from the in-house work. Prepare to have Skype sessions several times a week (or more often), agree on the standards, develop a rhythm of work and nail down the responsibilities of the employees – and the work will become more efficient.
  3. Poor organization. It is impossible to give a task to the dedicated team of developers, agree on the budget and leave them with it for a couple of months. Such work needs you to be constantly involved. And it is also crucial to be ready to changes.

However, you can find many companies using nearshoring pros and cons for their success. Startups, corporations, and businesses can get profit from this model of work, and we have some stories of success:

WhatsApp©. The cross-platform messenger has been launched in 2009. The creators of the project have delegated practically all of the development process to the programmes from Eastern Europe. As a result, we can make voice and video calls, send messages, multimedia files and documents through this application. Today the company costs $19 billion.

Basecamp©. A tool for project management has been created in 2004. It includes such features like corporate messenger similar to the forums, to-do-lists constructor, time tracking, file sharing and more. Many of the business areas of this application have been outsourced. Now the amount of active users is about 15 million, and the approximate cost is $100 billion.

GitHub©. An online repository hosting service was founded in 1999. It was created to share the code among programmers. Basically, it is a service made by outsourcers for outsourcers. In the beginning, the founders only got consultations from the remote coder, but finally, the remote worker has developed the backend of Git. Now Github costs about $2 billion.

Nearshore outsourcing advantages and disadvantages are also well-known for the other big and famous startups. We bet you know these projects, and they are built using software development outsourcing:

  • Slack – a company built on outsourcing from the very beginning now costs about $3 billion.
  • Fab – the startup started work with the remote developers after the first signs of growth of their business.
  • Skype – the company used a dedicated team from Estonia to run the business.
  • AppSumo – the company cooperates with freelance nearshore workers in marketing, content and IT spheres.
  • Opera – the company relied on the developers in other countries to create their platform. Who knows, maybe they also have faced some disadvantages of nearshoring.
  • Mindspark – this company creates mobile applications and uses an outsourcing model of work.

As you already know about nearshore outsourcing disadvantages, we can proceed to a more pleasant part. Why do so many businesses choose to outsource software development to people from neighboring countries? They know about the positive sides of it.

The biggest benefits of nearshoring:

  1. Lower cost. The companies usually delegate software development to the countries, where prices for these services are lower. It is a popular way to save the budget.
  2. Qualified performers. Choosing nearshoring you don’t have to worry about the quality of work. The development teams consist of skilled professionals, who pay all the attention and effort to the software creation.
  3. Few language and cultural barriers. Most neighboring countries have something in common in the way of thinking and work. And if you cannot communicate in one or another language, there is always English.
  4. Time zone. The neighboring countries often are located in the same time zone. And even the difference about 1-2 hours is not a problem.
  5. No more long trips. Sometimes it is very important to meet your foreign partner face to face. And if you outsource the development process to some far away country, it may be a long and expensive flight.

Nearshoring Pros and Cons in Short

Now we can put nearshoring advantages and disadvantages together and find out if it is an option you need:

Nearshoring Advantages Nearshoring Disadvantages
Comfortable time zone – you don’t have to work late at night or early in the morning. Low proficiency – bad luck, if you are living close to the countries where it is difficult to find an IT specialist (like Argentina or Costa Rica)
Lower price – possible to choose the country, where the development is cheaper than at home. Higher price – the close country may offer more expensive services than the offshore one as well.
Qualified developers – choose the coders, who are true professionals in their work. The atmosphere of “others”  – who are those strangers working at our website?
Few cultural barriers – neighbors are almost like brothers. A feeling of the “employer” – often for the successful cooperation you need not the subordination, but a partnership.
Few language barriers – people from close countries often know or at least understand the language of the neighbor. Not enough preparation – outsourcing needs more work and attention than the local work.
No far trips – don’t waste time and money for the long flights. Poor organization – either pay enough attention to the workflow or hire the project manager.

Why It Is Useful to Choose Nearshoring

Now you know about the main nearshoring advantages and disadvantages and can decide if it is an option for your business. While many people still think that outsourcing is only about offshore development, you have one more option – outsourcing to the close country with some local benefits. The main reason many business owners choose it for work is an ability to save a significant amount of money and make everyday work and communication with the developers much easier.

The choice of the outsourcing company depends deeply on your project’s features and goals. If you want it to be a success, remember about nearshoring pros and cons, be ready to make compromises and solve unusual problems. Finally, it is a true opportunity to get an outstanding result!

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Angelika is a Blogger and Content Marketer passionate about the topics covering IT resources optimization, building R&D centers in Eastern Europe and outsourcing.