Outsourcing certain aspects of a project is a suitable option for companies looking to save money or scale up quickly.
But you might be wondering, do I always need to outsource to a country located on the other side of the world? Can it be done closer to home?
If you have similar questions, you’re in the right place.
Yes, you can outsource your software development and other tasks to your neighboring country. It’s called nearshoring, an increasingly popular service in the US and other parts of the world.
In this article, we’ll discuss all the aspects of nearshoring services, including their benefits and drawbacks. We’ll also give you a list of four excellent agencies that provide nearshoring services.
This Article Contains:
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- What is Nearshoring?
- 5 Benefits of Nearshoring Services
- 4 Drawbacks of Nearshoring Services
- 4 Professional Agencies for Nearshoring Services
- 4 Things To Remember When Selecting A Nearshoring Company
What is Nearshoring?
Nearshoring (or nearshore outsourcing) is the practice of transferring your business operations to a nearby country.
Essentially, nearshore outsourcing is about delegating certain tasks to companies located in neighboring countries with a common time zone and cultural similarity. This eases the communication and collaboration among team members.
For example, US-based companies can consider nearshoring to Latin America and sometimes to Canada. At the same time, countries like France and Germany can rely on Ukraine, Poland, and other countries in eastern Europe for nearshoring services.
But what can you outsource to nearshore countries?
While you can outsource any non-core aspect of your business process, the most common tasks include:
- Manufacturing operations.
- Software development.
- Website development.
- IT outsourcing, etc.
Offshoring vs. Nearshoring
Traditional offshoring involves outsourcing tasks to countries that are farther away from national borders (often in a different continent) for cost savings.
For example, American companies generally prefer outsourcing their manufacturing processes to offshore Asian countries due to the lower cost of labor, manufacturing, etc.
However, managing travel and logistics to an offshore country can be tedious and hectic and may affect the overall efficiency of the work processes.
Additionally, different time zones, cultural differences, and language barriers can lead to inefficient communication and workflows.
In contrast, outsourcing to a neighboring country can significantly reduce these differences and help streamline workflow — resulting in a quicker turnaround time. That’s why many companies now prefer nearshoring services.
Note: Keep in mind that nearshoring is different from onshoring. An onshore company is located within your home country.
5 Benefits of Nearshoring Services
Let’s look at the benefits of nearshoring services in detail:
1. Geographical Proximity
Nearshoring partner companies are in close proximity to your company and may often share a border with your country.
That’s why, if you need to travel frequently to a third-party company during the project, a nearshore company will significantly reduce your travel expenses.
And if the nearshore location is just a few hours away, it can lead to higher cost savings as you don’t need to spend money on hotel rooms.
2. Time-Zone Similarities
Being in close proximity to your home country, a nearshore company will most likely be in the same time zone.
Reducing the time zone differences ensures that you can work with the hired nearshoring team the minute you encounter any issue.
For example, if you find out that the app created by the nearshore team has various glitches while using it on a tablet, you can immediately notify the team.
Due to similar work hours, they can instantly fix the issue, and you can roll out your app on the decided day. This wouldn’t have been the case if you had hired developers from Asia, as you might have had to wait several hours for them to start their workday.
3. Fewer Language and Cultural Differences
Similar languages and cultures will strengthen your relationship with your partners and ease some operational decisions.
For example, if you and the third-party company share common holidays, it’ll be easier for you to plan your schedules and deadlines around it.
4. Broad Skills and Expertise
Outsourcing a business process to nearshore countries means that you don’t need to rely solely on the skills of professionals within your country.
You can get work done from industry experts, irrespective of their location.
For example, you can hire a highly skilled software developer to develop a complex healthcare app, even if they’re located in Latin America or Canada.
5. Higher Efficiency
If you have a massive software project but don’t have the required skills, a nearshoring partner can help reduce some of the workload.
And if you lack sufficient team members, you can outsource certain secondary tasks to a nearshoring team, enabling your team to focus on the core tasks. This type of collaboration can increase your company’s efficiency and flexibility.
Additionally, you can communicate issues with the outsourced team in real-time and get them resolved without too much rework.
4 Drawbacks of Nearshoring Services
While the benefits may make nearshoring seem like the best way to go, you should be aware of the challenges you might face when employing a nearshoring solution:
1. Higher Costs than Offshoring
One of the major disadvantages of nearshoring is its high operational costs.
On average, the cost of nearshoring services can be significantly higher than offshoring to cheaper countries. The hourly rate of nearshore services has been reported to be 30% – 50% higher than offshore companies.
However, considering its advantages, you may find nearshoring to be cost-effective in the long run, even if it means paying a little more.
2. Lower Resilience
Resilience means a company’s capacity to recover from disasters such as natural calamities, recessions, etc.
Lower a country’s resilience, higher the risks your business may face during disasters and other issues if you offshore to that location.
The FM Global Resilience Index ranks Mexico at the 67th position in global resilience across three categories: supply chain, economics, and risk quality. On the same index, offshore destinations like India, Romania, etc., rank significantly better than Mexico.
This index assesses the country’s risk level and also its ability to tackle these disasters.
3. Confidentiality and Data Protection Issues
As is the case with any outsourcing model, you may face data privacy issues even with nearshoring services.
Nations (even those on your border) that don’t have strict IP (Intellectual Property) and data protection laws may not be the best options for selecting an outsourcing partner.
4. Not Many Service Providers
Since there may be just one or two nearshore countries available to you, it drastically limits the pool of nearshore service provider companies.
This means that you may not have the luxury of choosing from the available options — as you would have with outsourcing.
You may have to compromise on a few aspects like a higher cost, increased risk, etc., if you’re keen on getting work done only from a nearshore location.
4 Professional Agencies for Nearshoring Services
Finding a good and reliable outsourcing partner for a particular service can be challenging, especially if there aren’t many options.
That’s why we’ve listed four of the best nearshore service providers below:
NeuroSYS is a nearshore software development company that provides customized IT services.
Its headquarters are in Poland, making this a great outsourcing company for European businesses looking for nearshoring services.
- Provides multiple software development services such as AI (Artificial Intelligence) consulting and development, cloud computing consulting, etc.
- Uses a Scrum-based production schedule to meet all deadlines.
- Updates clients regularly regarding their projects’ progress.
- Transfers the copyrights and source code to the client for ease of use in the future.
- Offers offshore development services to countries outside Europe as well.
BairesDev is a nearshore software outsourcing company that provides expert programmers to accelerate your digital transformation.
The company employs some of the best software developers and other IT experts from Latin America. It has the same time zone as the US and major western European cities like London, Berlin, etc.
- Offers solutions for e-commerce, design thinking, and other nearshore software development services, etc.
- Employs bilingual engineers that have a high proficiency in English.
- Provides on-demand talent for specialized or temporary positions.
- Builds tailored development teams consisting of multiple or even a single software developer depending on the client’s needs.
- Has provisions for disaster recovery in order to restore business operations.
Perficient is a nearshore software development and offshore outsourcing company located in Latin America.
They aim to provide the highest quality software by following the Agile development process from their nearshore development centers.
- Builds a customized nearshore team for client’s specific needs for better bonding and collaboration.
- Offers IT outsourcing services such as blockchain, test automation, chatbots, and more.
- Employs bilingual developers with strong English proficiency and communication skills.
- Complies with strict information security regulations and IP protection standards.
- Has 15+ years of experience working with US-based clients.
Tiempo is one of the leading software engineering companies in North America. The company operates various nearshore software development centers in Mexico.
- Offers solutions such as product management, app integration, microservices, data science, etc.
- Developers are proficient in Java, Python, MySQL, and various other programming languages.
- Combines deep expertise, Agile methodology, and advanced talent management to deliver accurate results.
- Recruits new professionals if your existing talent pool doesn’t have the necessary skills for a particular project.
4 Things to Remember When Selecting a Nearshoring Company
Consider these four important factors before you finalize any nearshoring partner:
When choosing an outsourcing partner, you should look for those that have significant relevant experience.
Third-party vendors with specialized expertise will understand your needs better and deliver a high-quality product.
For example, if you’re developing software for a college, a company with prior experience designing and implementing educational software will know the nuances of the task.
Their software development team can then handle issues better and give you a product that lives up to your expectations.
You should also look for companies with great remote team collaboration experience. This will save you the hassle of traveling to the nearshore site to address any pressing concerns.
2. IP Protection
Another crucial factor you should consider about your nearshore service company is their policy for protecting your IP.
The US has strong IP protection laws. This has led to a significant rise in the number of software development companies in the country.
IP protection becomes extremely important, especially when you outsource your project management to a different country. Adequate policies for protecting your IP are important for enhancing innovation and increasing your market value.
Mexico also offers similar strong IP protection laws, especially regarding patents and trademarks.
Additionally, Mexico and Canada are also members of various multinational agreements that provide IP protection, including:
- USMCA (United States-Mexico-Canada Agreement)
- WIPO (World Intellectual Property Organization)
- Paris Convention for the Protection of Industrial Property
The third-party nearshoring team needs to have efficient and effective communication systems.
They should be able to use various collaboration tools to communicate the status of the project, troubles implementing a particular task, on-the-spot modifications, etc.
Clear communication is essential for understanding where the problems lie and for delivering a high-quality product on time. It’ll also go a long way in building your relationship with that company.
4. Quality and Productivity
Just because a company shares your culture and time zone doesn’t mean that you should settle for lower quality products and services.
While opting for nearshore software outsourcing, ensure that the company and team members share the same work ethics as you do.
You should also ensure that they utilize their work hours efficiently and deliver your product on time. Determine whether they have an appropriate time tracking software like Time Doctor to measure team performance.
Remember, you shouldn’t compromise on the quality of deliverables. Quality and productivity should go hand-in-hand while creating a superior product.
As newer technologies emerge, various companies develop unique ideas that can help to ease our lives.
However, not all in-house teams might be able to complete the project on their own.
At such times, outsourcing to nearby countries can help you build a comprehensive team and achieve your goals. Your workforce can collaborate and communicate easily thanks to the geographical proximity of the nearshore partner.
We hope these tips and services help you narrow down a suitable nearshoring company for your business. Good Luck!
Liam Martin is the co-founder of Time Doctor—one of the world’s leading time tracking software for remote teams. He is also the co-organizer of Running Remote, the world’s largest remote work conference.