How Nearshore Outsourcing Can Transform Your Business
Thriving in today’s tech-driven world requires agility, smart time management, and resource optimization. A lot of large and small-scale companies are moving towards the option of NearShore development Companies to save financial resources while getting the best talent. However, while shifting towards this cost-effective and highly productive method, one must have the right knowledge about this trend and must be critical while selecting the best nearshore software development company.
What You Will Find in This Article
- What Does Nearshore Software Development Mean?
- Different Types of Software Outsourcing
- Working Principles of Nearshore Software Outsourcing
- What are the Three Main Outsourcing Software Development Services
- Comparison of Cost Between NearShore, OnShore, and Offshore Development
- What are the Advantages of Nearshore Software Development
- What are the Differences Between Nearshore and Offshore
- Top 5 Places to NearShore in Latin America
- Nearshore Software Outsourcing Frequently Asked Questions
What Does Nearshore Software Development Mean?
The term Nearshore software development means that a company outsources its work to other software development companies or teams that are in the same time zone. For example, a US-based company might contract their work to a software development team or company in Latin America, and the same applies to nations in Asia where they collaborate with a third party to help them with the workload.According to a report done by Clutch, it was found that in 2021 almost 90% of all small businesses outsource small departments such as IT and software projects. The ratio of projects given to nearshore outsourcing companies increased from 15% in 2021 to 21% in 2022.
Therefore, this handbook article will cover all the aspects that one should know about Nearshore software development before utilizing it for one's own business, including its working model and the sorts of projects that can be done with this type of software outsourcing. Furthermore, we’ll also cover the advantages and disadvantages of using the service of Nearshore software development companies and its possible alternatives. So, let's get started without any further ado.
Different Types of Software Outsourcing
The main three types of software outsourcing are:
- Onshore
- Offshore
- Nearshore
Onshore
In onshore outsourcing, software developers are hired within the same region or country where your business is located. This particular type of outsourcing is oftentimes considered the most expensive of all, especially if you’re located in the US. However, due to the digital transformation of the business and industrial sector, there is a scarcity of skillful developers in the US market.Projects that can be easily done through onshore development outsourcing require consistent in-person collaborations. Furthermore, projects related to data privacy limitations based on the developer's location and tasks that require physical input to a software solution, such as smart machines or IoT sensors, are all done through onshore outsourcing.
Offshore
When a project is given to vendors based in another distant country to handle the software development task, particularly in another region like Asia or Eastern Europe, it is known as Offshore software outsourcing. For instance, a company based in the US will outsource its project to a development company located in India or China.Most people choose offshore outsourcing because it is relatively cheaper than other methods. However, issues arise related to different time zones, greater turnover, and cultural barriers. The time zone difference hurdle is often fixed through the Offshore development employee working at night time to match the workflow by keeping up to the US day time. Furthermore, large companies have set up their offices in regions like India to hire the best talents, allowing project managers and developers to work with their desired companies.
Projects that are best handled by the Offshore development mode include tasks that are repetitive such as non-automated processes, tech support, and projects that need less collaborative efforts, which aren’t influenced by a high turnover rate.
Nearshore
As the name says, Nearshore outsourcing refers to when your development requirements are met by teams located in the same timezone or continent. For US-based companies, development projects are given to teams based in Latin America. For companies in Western Europe, their projects are handled by teams in Eastern Europe, such as Ukraine and Poland.The biggest advantage of offshore outsourcing is that you will no longer need to worry about having different time zones, making working hours easily manageable and giving a higher collaboration rate. Additionally, having the same culture with less language and other social barriers allows employers and employees to get along just fine, creating a friendly, safe space and working environment with a lower turnover rate. Due to the COVID-19 epidemic, several US companies have shifted towards Nearshore outsourcing and opted for Latin America to distribute their work to a vast local Latin talent pool.
Projects that are best suited to be done through nearshore outsourcing include tasks related to SaaS Solutions, B2C, and B2B. Projects related to real-time collaboration, agile work approach, strategic development execution for new software solutions, and complex software development tasks are also executed well by Nearshore outsourcing.
Working Principles of Nearshore Software Outsourcing
The core idea behind Nearshore is to provide flexibility to companies so they can work with their development teams in nearby countries and have the same daytime working hours. Through nearshore companies, you can access software development tools, which may be highly costly or limited to your demographic location. Nearshore software development companies ensure high work efficiency, greater work output, and fluent communication to overcome project barriers. In fact, due to the very little cultural difference, it is easier to attain a focused workflow.Although not very common in Latin America, several US-based nearshore outsourcing companies provide Errors and Omissions (E&O) insurance, which gives employees protection and mental peace, allowing greater work output and yielding successful project results.
What are the Three Main Outsourcing Software Development Services
Whenever you want to outsource your software development services, keep in mind the three major types, with each having its own advantages, and proper utilization depending on your business partner.
Staff Augmentation
In staff augmentation, you involve your nearshore software developers in your core team, allowing them to work side-by-side following the same time zone and work schedule. However, as employers, it is necessary to give your nearshore developers guidance and the outcome that is required to achieve.By hiring developers on fixed monthly contracts, nearshore staff augmentation allows one to reach talented Latin American workers with a refined and well-structured hiring process to bring the best of the best on board.
Devoted Agile Teams
Agile teams are dedicated teams that are hired for a specific requirement of a project and have the massive advantage of having the turnkey ability. These teams ensure that the task is accomplished within the given deadline, making it highly efficient and well-executed. By hiring this type of software development company, you can be stress-free and get a lot done without exhausting your own resources and diverting your internal developers from other projects.Agile teams are hired at a monthly price, allowing companies to budget their financial resources for a project with ease.
Outcome Based Projects
If you want to achieve your specific business goal no matter what, then outcome-based project outsourcing is best for you. Through this approach, there is a strong significance given to deliver the desired outcome. Moreover, outcome-based projects are more prone to consistent and early value realization along with a gradual upscale while bringing in new teams if required.Comparison of Cost Between NearShore, OnShore, and Offshore Development
The cost of all three types of outsourcing varies; however, countries like China, Pakistan, and India offer the best rates. For further details on the price per hour for different job types, check the information below.Architect
- Onshore: between $140 to $190
- Nearshore: between $72 to $90
- Offshore: between $47 to $95
Business Analyst
- Onshore: between $110 to $190
- Nearshore: between $110 to $154
- Offshore: between $31 to $81
Scrum Master
- Onshore: between $120 to $153
- Nearshore: between $50 to $79
- Offshore: between $44 to $74
UX/UI Designer
- Onshore: between $85 to $130
- Nearshore: between $48 to $75
- Offshore: between $29 to $71
Lead Developer
- Onshore: between $160 to $210
- Nearshore: between $66 to $82
- Offshore: between $41 to $82
Associate Developer
- Onshore: between $80 to $120
- Nearshore: between $41 to $53
- Offshore: between $21 to $53
What are the Advantages of Nearshore Software Development
The following is the list of advantages of nearshore software development in Latin America.Effortless Collaboration
The most significant advantage of doing nearshore software development is that by having the same time zones, there is a constant flow of work without any 12-hour ahead or behind time difference. If any problem or concern arises, communication can be done instantly without worrying about waking up your developer at midnight.Also, nearshore outsourcing allows employees to attend monthly or annual meetings with the entire company since the distance is that far compared to being in another region of the world. As you can imagine traveling to the US from China can be very hectic and costly if the company wants to conduct monthly in-person meetings.
Great Talent at Lower Rates
It is no secret that there is a scarcity of good developers in the US, and since there are very few talented developers in the US, they demand a hefty amount for their services. In this case, Latin America is the go-to place for every company for software developers who are not only talented with a larger pool but also work at lower rates than native American developers.Similar Culture and Language Proficiency
It is important that each worker in the company gets along and their norms, values, and beliefs align with one another to create a positive space for greater work output. Latin America and the US, being neighboring countries, share the same values and norms, reducing many cultural barriers. That is why most US companies prefer nearshore outsourcing, as it is easier to get along with Latin Americans than with software development companies based in the UAE or Asia.What are the Differences Between Nearshore and Offshore
The following discussion below covers some of the major differences when it comes to the comparison between nearshore and offshore outsourcing.Collaborations
Nearshore time zones are similar, allowing for more effortless collaboration. In contrast, offshore time zones are different, making it difficult for developers to collaborate in real life to solve complex problems.Cultural Similarity
Nearshore provides a similar culture, thus a greater possibility for a positive, safe space environment. However, there is a high cultural difference between nearshore and offshore outsourcing.Traveling
Nearshore provides greater traveling accessibility since most flights take a maximum of 5 hours to reach a destination in the same time zone. On the other hand, offshore, with different time zones, have very little travel accessibility as the flights are longer, sometimes even stretching to 10 hours more.Cyber Laws
Data privacy is a very sacred and serious thing for many software development companies. In nearshore outsourcing, the developers living in the same region have more or less similar cyber laws allowing the outsourcing company to take action in case of data theft or privacy leak. However, in offshore outsourcing, the cyber laws might be different, making it impossible for software development employers to take any legal action in case of any infiltration of their terms and conditions.Cost Effectiveness and Quality
The average project cost onshore is between $25 to $50 per hour, whereas for offshore, it is $15 to $100 per hour. Although offshore outsourcing is more affordable for US companies but it is very hard to recruit software development employees.Top 5 Places to NearShore in Latin America
Since we have established that for US-based companies, onshore outsourcing might be the perfect option, and considering Latin America, which has a strong pool of talented developers and a similar time zone, one can’t go wrong with it. In fact, according to a study done by Deloitte, many multinational companies related to banking, manufacturing, tech, and consumer goods are making an engineering strong foot in countries like Mexico, Colombia, Brazil, and Puerto Rico due to their hard-working, talented workers.But the question arises which country one should go for? Read the list below to know the top 5 potential places where you can look for the perfect outsourcing software development companies.
