Nearshore software development is the outsourcing of business processes to specific companies located near your country.
Nearshoring companies are located in countries with similar time zones, so they can move their operations to a cost-effective location where the time difference between the two companies should not exceed 1 to 3 hours. Thanks to the proximity and fewer cultural and time differences, communication reaches a higher level in nearshoring. This type of compatibility makes coordination and collaboration much easier.
For example, nearshore software development from European countries such as Serbia, Croatia, Romania, and Bulgaria is especially suitable for economically developed European countries such as Switzerland or England because it offers many favourable opportunities to save travel and time costs and because there are no major cultural and language barriers that can affect quality, speed and work productivity.
So when you hire teams in these countries, it only takes a few days to get on a plane, meet with the development team, and fly back home.
Typical nearshoring examples
There are many successful nearshoring examples that can help you better understand this process. Companies in the U.S. started nearshore outsourcing in the 1990s. Many companies in North America outsource IT services from Mexico, Argentina, and Brazil, and companies in Western Europe outsource their services to Eastern Europe.
The most popular software hubs are in Poland, Serbia, Croatia, Romania, and Bosnia and Herzegovina. The countries outsourcing software development from these regions are Western European countries such as Germany, the United Kingdom, France, and Italy and Nordic countries such as Denmark, Sweden, Norway, and Finland.
In these countries, there are nearshore software developers who are highly skilled, speak English well, and provide top-notch service at incredible prices. According to Statista, the outsourcing sector of IT services is on the rise and grew to $2,312 million in Poland last year.
Typical nearshoring examples that have already reaped the benefits of nearshore services include global giants such as Google, Tesla, Porsche, IBM, and Johnson & Johnson.
Choose the right one for your business: offshore or nearshore software development
Nearshoring and offshoring are the two most common outsourcing models, which are becoming increasingly popular due to the shortage of technical professionals and high costs in the IT industry. Therefore, many companies are looking for skilled software developers abroad, and which type of outsourcing is chosen depends on the company’s business needs.
Offshoring is the full employment of the development team from distant countries, usually located on other continents. This is considered the most cost-effective method because the talent pool is full and labour costs are very low. Although offshoring offers many financial benefits, there are also many drawbacks to this labour model, such as time zone differences, cultural and social barriers, communication issues, and security.
For example, hiring an Indian IT engineer may be less expensive than hiring a comparable employee in Europe, but you are more likely to experience cultural and language differences among your employees, and different time zones can affect the speed and productivity of work.
That’s why nearshoring improves many of the limitations of offshoring. So, offshoring can involve different time zones, high travel costs, communication problems, and cultural barriers. This leads to communication problems and makes it difficult for a company’s internal and offshore teams to work together. On the other hand, one of the biggest advantages of offshoring over nearshoring is the large pool of experts and talent around the world, while nearshoring is limited to nearby countries.
Both of the mentioned outsourcing models have their advantages and disadvantages. Which one is best for you depends on your business needs, the nature of the project and your budget.
Offshoring can be an effective solution for smaller and short-term projects, while nearshore outsourcing is better suited for long-term and complex collaborations.
Benefits of nearshore software development
Nearshore software development reduces the risks of other types of outsourcing. It provides highly skilled professionals at a low cost while minimizing the problems of offshoring in terms of time zones and communication issues. Some of the key nearshoring benefits are:
1. Cost reduction compared to in-house software development
Working with a nearshore software development team can be a very convenient solution for companies in economically developed countries, as it is very expensive to hire professionals in their home countries. For example, employing internal IT experts in Germany or the Netherlands can cost about $ 90,000 per year, but if you nearshore a professional team from Serbia or Croatia, where the standard of living is lower, you can pay almost 50% less.
2. Time zones and cultural differences
If the nearshoring team is in the same time zone or 2-4 time zones difference like you, it is likely that they are also familiar with your culture, language, and customers. In addition, nearshoring allows companies or individuals to operate their external teams during the same working hours so they can respond as quickly and efficiently as possible.
Geographic proximity provides the opportunity to collaborate in real-time, which allows for high-quality face-to-face communication, timely decision-making, and ease of workflow. For example, most Europeans are more familiar with other parts of Europe in terms of language, vacations, and culture than with far-off countries such as Asia or America.
3. The opportunity to work with highly skilled experts
The shortage of developers makes nearshoring an important solution for technology companies. Considering that the Dutch economy grew by 3.8% in 2021, the number of jobs in IT has increased, making the shortage of developers even greater. Nearshore software development offers the solution to this problem, as it allows companies to find top talent and experts that are not available in their region.
4. English proficiency
Nearshore software development teams in Europe are usually proficient in English and speak with a similar accent to contractors. Therefore, they can communicate fluently and easily in order to understand their work tasks and goals.
Is nearshore software development for you?
Nearshoring can boost your business if you choose the right time, outsourcing company, and the most suitable country. If you are having trouble finding experts in your country, if you are paying too much for labour and resources in your country, or if your team is overworked, you should consider nearshoring. There are some important criteria to consider when choosing the right nearshore software development company:
- company’s portfolio and customers;
- location;
- expertise in your field;
- size of the nearshore software outsourcing company and how long it has been in the market;
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