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Nearshore outsourcing: what is it and what are its benefits?

Written by
Łukasz Warchoł
Published on
February 6, 2023

Explore the cost savings, improved communication, and access to skilled talent that nearshore outsourcing can bring to your business. Learn about these and other advantages of outsourcing close to home in this article.

Łukasz Warchoł
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Nearshore outsourcing has been a popular business solution for companies around the world. Companies have expanded their production capacity by sending their operations overseas.

Therefore, the most advantageous alternative is to recruit local junior talent and an experienced team leader from adjacent countries. However, this requires time, and time lost means money lost. Hiring developers and architects nearshore is currently one of the most popular choices.

This article answers questions about the benefits of nearshore outsourcing companies for SMBs and startups.

Nearshore software development: what is it?

Nearshoring is the process of outsourcing software development to countries that are geographically close to your own. Nearshoring can be an effective way for companies in the United States and Europe to work with developers in India and China at much lower costs than if they were to outsource to Eastern Europe or South America.

Nearshoring has been around for a long time; however, it wasn't until recently that it became a viable option for many companies. The main reason nearshoring became so popular was technological advancements over the last decade. Nearshoring allows companies to build solutions without sending employees overseas or hiring expensive consultants from overseas firms.

37% of small businesses use nearshore development to manage at least one of their business processes. Companies outsource accounting (37%), digital market (34%), and IT operations (37%) the most commonly.

Long story short, nearshore services are a popular option for companies seeking to outsource certain business functions, particularly in the technology and software development sectors. Nearshore development services involve technical partnerships with a nearshore outsourcing company, which is a company located in a country that is near the outsourcing company.

How does nearshore outsourcing work?

Nearshore outsourcing companies work best with those who want a reliable workforce but want to avoid paying the high costs associated with offshore outsourcing. Nearshore outsourcing allows businesses to have more control over their project requirements and outcomes at a lower price than full-service offshore solutions.

For example, if your company needs help building an eCommerce website. You may find it cheaper and easier to hire an in-house team of developers rather than pay for full-service offshore development using multiple freelancers who may need to become more familiar with each other's work or your company's goals.

Benefits of nearshore outsourcing

Regarding nearshore development, most businesses consider the benefits of sending their work overseas. However, a new trend is emerging in business circles: nearshore outsourcing.

Here’re some key benefits of hiring a nearshore company:

Faster turn-around time

When you outsource your project to another country, you will have to wait longer for it to be completed because communication between both parties takes time. In nearshore outsourcing, there is much less time spent on communication because both parties are close to each other, making it easier for them to communicate promptly and effectively. This results in a faster turnaround time for your project, which means less waiting for you!

Lowered risks

Since you're working with a local team, you have more control over the work. You can monitor progress and provide feedback on what needs to be done next. Nearshore outsourcing companies allow you to keep an eye on quality and ensure that your deadlines are met.

Improved communication

Working with a local team means better communication between team members and management. Communication is one of the most important factors when it comes to successful projects, so having a good relationship with your remote employees will help ensure that everything goes smoothly.

Cost savings

The most significant benefit of hiring a nearshore company is that it helps save money. This is because offshore workers are often willing to accept lower wages than their onshore counterparts so that companies can hire more people for less. 

In addition, nearshore workers tend to be more flexible in their working arrangements than those based in other countries or continents. As such, they can work longer hours without demanding overtime pay or asking for extra days off work during busy periods.'

Time zone compatibility

Because you outsource a small portion of your business, you can maintain time zone compatibility. If anything goes wrong, someone will be available to help in the same time zone as you. This also means that you can communicate with your team more easily than if they were overseas.

Cultural compatibility

Hiring a nearshore company has many benefits, but cultural compatibility is perhaps the most important one. Outsourcing internationally can be tricky if there isn't a common language or culture between the two parties involved in the project. However, outsourcing locally is fine because both parties share similar values and beliefs, making communication easier.

Related Read: Remote Work-Life Balance? Lessons From 6 Months of Working From Home

Disadvantages of nearshore outsourcing

The advantages of hiring a nearshore company are plentiful. However, there’re also some significant drawbacks to consider as well;

Cultural affinity

The first disadvantage of hiring a nearshore company is cultural affinity. While it may seem like an excellent idea to work with someone from your own country or region, the reality is that the employees you hire may have different expertise or experience than those you could employ from further away. 

Suppose you’re looking for high-level services in particular. In that case, you may find that hiring someone farther away will yield better results than hiring someone who doesn’t have the necessary skills or experience nearby.

Harder to sync deadlines

Because nearshore teams are geographically closer, it’s easier for them to sync with your deadlines. However, if you go too far from home, it can be more challenging for the team to get up to speed on your product and meet deadlines.

Close isn’t always better

Going too close may not be the best choice if you’re looking for creative solutions from an outside team. A team that is too close may not be innovative enough or have enough perspective on your product or industry. At the same time, if they are too far away, then they won’t understand what it takes to develop products in your market.

Feeling of ‘us’ vs. ‘them’

If you’re based in the US, UK, or Australia, you probably don’t want to work with someone from another country. The closer your outsourced team is to home, the better. This is because employees will feel more connected to their company and less likely to take risks with sensitive data.

Lack of specialists in the job market

If you need an expert in a particular industry or technical field, then nearshoring is not an option. There aren’t enough qualified people in this region who are capable of doing the job as well as someone who lives in New York or London would do it. If you consider nearshoring to Colombia, you can tap into a pool of skilled professionals who can deliver high-quality work comparable to experts in New York or London.

Not ready to empower the teams

Some companies may need more time to be ready to empower the teams to work independently. If your company is prepared to give up control over its projects, then nearshoring could be a good idea.

Factors for choosing nearshore services

Consider several factors before deciding on nearshore services. These include:

Reputation and experience

The first step in selecting a nearshore outsourcing partner is researching their reputation and experience. You want to ensure that your partner can deliver on all aspects of the project, from software development services to testing and QA. Look at what other companies have done with them in the past, read testimonials, and check out their portfolio of work.

Contract and agreement terms

You must also consider the contract terms you will sign with your nearshore outsourcing partner. The contract should clearly define your requirements, including timelines and specifications for each project stage. It should also include information about how disputes will be resolved if they arise during or after development. If there are any legal issues regarding intellectual property rights (IPR), this should also be clearly stated.

Communication and collaboration capabilities

Outsourcing is about collaboration between the client and vendor, so they must have excellent communication capabilities. The service provider should be able to respond quickly to requests and inquiries during business hours.

Security and data protection measures

Security is one of the most significant aspects of nearshore outsourcing services because it involves transferring sensitive information over the internet or phone. It's crucial to block remote phone access to prevent unauthorized access and ensure data safety. Your provider must have secure servers that protect data against unauthorized access, theft, or loss. They should also use encryption software and other measures to protect sensitive information during transmission across networks.

Cost-effectiveness and value for money

Nearshore outsourcing can be cheaper than other options, but plenty of companies out there charge too much for what they offer. Finding a partner who offers good value for money without cutting corners on quality is essential. Look at their price list carefully and ensure everything is clearly defined before signing any contracts.

Future of nearshore outsourcing in the current home office trend

The future of nearshore outsourcing has become very bright with the growing popularity of home offices. The future of nearshore outsourcing will be dominated by home-based workers or employees working from the home office, which can be easily trained and managed cost-effectively.

In today's world, many companies have taken up this concept of hiring people at home and managing them from remote locations. This trend has gained popularity because of the various benefits it offers, such as;

Increased flexibility and cost-effectiveness

The use of technology has made it possible for companies to operate with greater efficiency and at lower costs. It’s especially true when it comes to managing projects that require high-skill workers. With cloud computing services and other tools, companies can now outsource projects to locations offering lower prices for skilled workers.

Access to a broader talent pool

With the rising popularity of remote work and home offices, companies need to outsource their business processes to countries with an extensive collection of talented people who can be hired quickly. This will give companies access to high-quality talent within their budget limits and better quality control over their processes.

Enhanced security and data protection

Most organizations are concerned about their data being compromised or stolen by hackers. With nearshore outsourcing, you get access to a vast pool of talent your security team has thoroughly vetted. 

This ensures that there are no security threats posed by foreign workers working in your organization, protecting your company's sensitive data from being compromised by unauthorized individuals.

Nearshore outsourcing – the final words

Nearshore outsourcing is much quicker, more affordable, and delivers higher quality outcomes than offshoring. Although it has a somewhat negative connotation in the outsourcing world because it has become synonymous with cheap labor and low-quality work, nearshore outsourcing companies are becoming popular because of their enticing mix of cost-effectiveness and high productivity.

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