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Nearshore Software Development Solves Your Offshoring Problems

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What is Nearshoring and why does it solve offshoring’s problems?

You have probably been hearing a lot about nearshore software development recently. Companies in need of software development have been outsourcing and offshoring development for years, so you may be wondering what this new terminology is all about. So what is nearshore software development?

Let’s start with exploring the definitions of each of these terms.

Outsourcing

Many confuse outsourcing with offshoring. Outsourcing is simply when a company delegates a third party to handle part of the company’s functions, regardless of the contractor’s location.

This may be for a variety of reasons, such as

  • Handing off functions to a more specialized company while your company focuses on its core business
  • Only paying for workers when you need them
  • Lowering costs, because sometimes specialized outsource companies can perform functions at a lower cost than your company can
  • Acquiring access to talented developers in a tight labor market
  • Increasing scalability

Companies in virtually every industry today are outsourcing at the highest rate since the Great Recession. Outsourcing can happen with almost any aspect of a business; even seemingly core functions like HR are now outsourced.

There are two business necessities which tend to be outsourced at higher rates than most: IT security and application development.

In just one year from 2016 to 2017, outsourcing increased from 10.6% of the total IT budget to 11.9% IT security is the fastest growing area, but application development is the function most frequently outsourced. It’s clear that outsourcing IT development is here to stay, and 37% of companies that outsource intend to increase it. For IT departments scrambling to find developer talent, outsourcing is an increasing necessity in today’s competitive market.

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Offshoring

Offshoring is outsourcing work to a far-away foreign country, usually one on the other side of an ocean and with a reversed schedule of day and night.

Countries on the other side of the world, many still in the earlier stages of economic development, tend to have large workforces of technically trained programmers with - by Western standards - dramatically cheaper labor costs. Companies often offshore software development instead of outsourcing domestically in order to take advantage of these lower labor costs, though lack of enough talent at home is also sometimes a reason.

From a Globalist perspective, offshoring software development feeds a virtuous cycle: it produces lower-priced goods that are available to more Americans while at the same time helping to strengthen the economy and build sophisticated capacities in emerging countries. Software development is often offshored to India and Eastern Europe, though other regions such as Southeast Asia and Africa are also used. Offshoring is so common that it has provided a major boost to the Indian IT industry.

But offshoring has not come without its challenges. Communications and cultural issues can cause offshore IT projects to fail. Language and cultural differences can pose obstacles, and the flipped day and night schedules of teams trying to collaborate from opposite ends of the earth creates its own set of problems, no matter how many cool communications and workflow tools you may have at your disposal.

This is why more and more companies are turning to nearshoring for software development.

Nearshoring

Nearshore development is outsourcing some of your software development to a nearby country rather than to a country on the other side of the world. For companies in the United States and Canada, nearshoring usually means partnering with companies in South America or Central America. Nearshoring offers cost savings and fresh talent pools, but without many of the problems that can sometimes cause offshored IT software development projects to fail. Many businesses say that nearshoring helps to keep software development projects on track, on budget and on deadline. Here are some of the advantages they cite:

Same or Similar Time Zones Enable Collaboration

Though offshore companies in Asia and other far-flung locales tout the advantages of their developers working while the client company sleeps, in reality, extreme time zone differences make communications more difficult and less frequent. When collaboration decreases, so does the likelihood of success.

Working seamlessly is particularly important to organizations that practice agile software development, and that’s a lot of companies. 71% of companies report using agile approaches for their projects at least part of the time Though certainly it’s possible to offshore software development to countries where clocks run 12 or so hours later than one’s own, it presents one more challenge to beat when you should be focused on beating your competition.

Besides, It’s hard to gather a scrum in real time if half the team is sleep-deprived.

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Personal Contact Enables More Accurate Communication

There is a lot to be said for personal contact when starting a project and when facing unexpected hurdles. Issues that can be opaque over the phone or email can often be successfully hammered out in person. If you are nearshoring, you or your nearshore partner are only a few hours away by plane. Geographic proximity enables occasional face to face contact especially for critical meetings.

On the other hand, should you feel it necessary to visit an offshore partner in Asia, Africa or Eastern Europe, you are looking at a much bigger time commitment than if you are nearshoring. If you’re a busy I.T. executive, this is critical time that can slow down your project and leave you with jet lag for a week or two. The reality is that long distances often make it impossible to meet except under the most urgent circumstances.

Nearshoring Minimizes Confusing Cultural Differences

The closer a nearshore partner is to the United States and Canada geographically, the less likely it is that a project will be sidelined by cultural differences. For example, in some Asian countries, there is a cultural barrier to telling bosses or clients “No” or reporting problems. Western executives not tuned into the nuances of communication in those cultures can find themselves facing nasty surprises when projects are nowhere near ready as shipping dates approach. Though companies may face some cultural differences when nearshoring, they are not likely to be nearly as significant or as threatening to the success of a software development project.

Nearby Countries Often Have More Dependable Infrastructures

You may be able to hire software developers for a song from some countries but one must consider the hidden costs. In many underdeveloped countries, Internet and communications are inconsistent at best. Your project could be put on hold at a critical time due to infrastructure issues if you offshore.

Is Nearshoring Right for Your Company?

If you are considering outsourcing some of your IT functions or projects, nearshoring may be a solid choice for your company.

Though offshoring may seem cheaper at first glance, nearshoring offers you better communications, cultural affinity, proximity to your partner and more control overall. These are critical aspects that can make the difference between success and failure, and save you money in the long run.

As a fast-growing nearshore development firm with branches in several South American tech hubs such as Quito and Medellin, we’ve learned a lot about the advantages of nearshoring, and being responsive to our North American neighbors’ requirements. With perfect English and shared cultural norms, we hear you. And we’ll be right there for you, when you need us.

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Mar 12, 2018