What is Nearshore Outsourcing, and Why is it Important?
Everything You Wanted to Know About What is Nearshore Outsourcing, and Why is it Important?
Nearshore software outsourcing services are a business model that hires nearshore team members from nearby countries. It is an effective nearshore software services model with positive reception and a lot of pending questions, as discussed nearshore software services below:
Frequently Asked Questions About What is Nearshore Outsourcing, and Why is it Important?
What is nearshore outsourcing?
Nearshore outsourcing services definition is similar to nearshoring services. It is the process where a company delegates parts of its IT-related work to companies in its neighboring nearshore countries. The jobs might include nearshore software development services aspects like mobile application development. Take, for example, an IT software company that operates in California and wants to delegate parts of its software processes that can’t be done in-house to an experienced software team in the nearshore neighboring country. Click to see some nearshoring examples of companies using this model today.
The software company would consider nearshoring services process to a country like Mexico because it will not only cut costs but won’t also be affected by differences in time zones.
According to LinkedIn author Elliot Linton (1):
“While distance can be a disadvantage for some, it is an unforeseen factor that allows remote or outsourced workers to outperform in-house teams.”
Nearshore vs. onshore vs. offshore outsourcing: Is there any difference?
Suppose you operate an IT software services company and are contemplating nearshoring part of its services. In that case, you should compare the nearshore services approach to the two other strategies to understand the differences and adopt the best nearshore software services method for your company. The following are the simplified definitions of the three:
Nearshore outsourcing: Nearshore outsourcing services mean that your company operates in a country like the USA, but you hire a nearshore qualified team services from a neighboring country like Mexico. It is a popular model because there are minimal time zone nearshore differences and shorter travel distances. The approach allows a company to sap experienced nearshore software developers’ services at a lower price and thus maximize profits while minimizing costs.
Offshore outsourcing (2): Offshore outsourcing means that your company operates in a country like the USA, but you hire a software team from an overseas country like China. This model is suitable for cutting costs and optimization of workflow. Despite the disadvantage of time zone differences, entrepreneurs use this to their advantage. The significant time zome differences between the two countries would allow the company to operate software services in a round-the-clock cycle.
This is the most common method for outsourcing within the United States. Many well-known companies like Google, and WhatsApp hire from overseas to fulfill roles within the business. We’ve put together more great examples of outsourcing for you to look at in this: article.
Onshore outsourcing: Onshore outsourcing means your company operates in a country like the USA, and you hire a separate software team from within the same country. The advantage of this outsourcing approach is that the two teams operate within the same time zone and probably speak the same language. It is also beneficial because it gives software developing specialists from your country opportunities to gain more experience.
What are the pros and cons of nearshore outsourcing?
The following are the advantages of nearshore outsourcing:
Closer geographical proximity
The closer geographical proximity between the employer and the nearshore employee allows for fluid operation. Although a company has outsourced some of its operations, it doesn’t mean that the nearshore software teams don’t have to meet occasionally. The closer geographical proximity allows for accessible face-to-face meetings because you spend less time on flights.
Although offshoring is ideal for saving software costs, nearshore software development is still an excellent approach to saving on expenditure. It allows you to save on lower wages and cut travel costs.
To learn more about how we at Sonatafy approach nearshore software development, click for more information.
Larger talent pool
Nearshoring allows for a larger nearshore talent pool for better software development. Nearshoring allows a software development company to access a professional workforce within closer geographical proximity. The approach allows for maximum concentration because individual professional teams handle every step of the software development process.
The following are the disadvantages of nearshore outsourcing
Communication is critical for effective software development. However, despite the close geographical proximity, countries like Mexico and US do not necessarily speak the same language and thus jeopardize the fluidity of software operation.
Not as large of a talent pool as offshore outsourcing
The cultural similarities between countries within close geographical proximity neutralize the strength of software nearshore talent pooling. Nearshoring, therefore, offers not as large of a software talent pool as offshore outsourcing. Offshoring means the outsourced software team has a relatively different culture and injects fresh experience into an outsourced software development company.
There is a remarkable degree of less convenience in the nearshore outsourcing approach. A company’s secret is one aspect nearshoring jeopardizes. There are in-house aspects that a software company might not be willing to share, but because they have to outsource elements of its operation, there is no excuse for them not to share its secrets. The lower communication between the two teams in two countries makes it hard to synchronize aspects like software datelines.
What are the benefits of outsourcing software development?
A review of some empirical research articles indicates that nearshore software development outsourcing can produce positive, negative, mixed, moderated, or no significant impact on the firm (Lahiri 2016, 490)
But did you know that software development is considered a “back-office” position? In the world of business, you have roles that work with customers directly, and roles that work behind the scenes. Information technology dominates the outsourcing industry when looking for team members related to support and programming.
Here is a common question we answered in another article: What is the difference between back office and front office outsourcing?
The following are the five core benefits of outsourcing software development:
Any company would love to make profits and would do anything to minimize expenditure and maximize profits. Outsourcing software development is one technique where companies outsource aspects of their software development processes to developing countries. It means that the software development cost in those countries is cheaper and would save the company some money than if they operated in their own country.
Quick Time to Market
Outsourcing aspects of software development to countries with a vast pool of resources means that customers can access the software development resources quickly. The time zone difference also poses a great advantage because it allows the software development company to operate in a 24-hour cycle, thus boosting its production.
Pooling of top talents with minimal cost
Outsourcing allows small companies to delegate part of their production to a talented team of experts. Therefore, the software development company will stay on par with larger companies despite their lower financial standing. The company doesn’t necessarily have to purchase expensive software licenses and software subscriptions or endure the costly costs of equipment maintenance.
Advantages of time zone differences
Time zone differences offer immense advantages to software development companies. Having office locations in various parts of the world means your company can gather for any overlap in time with all clients from all corners of the world. It allows clients to use the software from the outsourcing teams close to their countries. Covering all the necessary time zones means better client satisfaction that improves a company’s generation of profits.
Having a great team of software developers in your company doesn’t mean you have to task them with working on every aspect of software development. A company should not delegate trivial aspects like IT software support to your top talent because it is not cost-effective. Top software talent should concentrate on issues directly contributing to your company’s goals. Outsourcing is an avenue for you to optimize resources since reliable outsourcing software companies offer software teams that focus on a specific aspect of software development. Thus, it saves you time and resources to train new employees for a particular software course.
What is the difference between offshore vs. nearshore? What is the best option, then?
The main difference between offshore and Nearshore is the different proximity between the two countries. Nearshore outsourcing implies outsourcing aspects of software development to a team of experts in the neighboring country. On the other hand, offshore outsourcing means delegating aspects of software development to a faraway overseas country.
Mihalache and Mihalache (2016, 1105) define offshoring ‘as the assignment of business activities to locations outside a firm’s national borders. Therefore, the former means that the two countries share the same time zones, while the latter implies a difference in time zones. Offshore outsourcing is the best option because it poses the following advantages over nearshoring:
- The time zone difference allows a round-the-clock work cycle.
- The cultural differences
- Higher savings on operation costs
- Access to a larger pool of talent
- It opens up opportunities in new locations
These advantages should be highly considered when choose an nearshore outsourcing business model. However why does companies choose to outsource? We’ve discussed it mainly has to do with reducing overhead within the business. However, they’re other reasons you may not have thought of. To learn more about this click on the following link (https://sonatafy.com/why-do-companies-choose-outsource-work/)
What are the things to take into account when choosing Nearshore IT services?
Before deciding to nearshore part of your company’s IT services, the following are the things to take into account to minimize risks and improve results:
Cost is one of the determining factors during the selection of an IT outsourcing vendor. Most outsourced IT specialists use the standard model of pricing per hour. It is your role to compare the prices and adopt one that you deem fits your business financial ability.
Speaking of reducing overhead (3):
“Outsourcing abroad has already saved Mike Scanlin half a million dollars. “
– CNN Business
Culture and Professional Culture
Culture is also a critical aspect to take into consideration. A company’s cultural fit engineers a transparent and fluid working relationship. Without an excellent cultural agreement, constant communication breakdowns will undermine efficiency.
The technical expertise of a team assigned with a crucial element of software development is vital. Setting a task directly affecting the company’s goal to a team that lacks the necessary hard skills is a doomed path. It is, therefore, the role of the IT outsourcing company to only adopt a team with the relevant expertise to steer the company forward.
The team’s experience with significant software development aspects will determine the project’s success probability. It is always crucial to go for a team with high experience because it means they have worked on similar software development projects and, therefore, have the relevant expertise to negotiate any challenges they might face.
- “While distance can be a disadvantage for some, it is an unforeseen factor that allows remote or outsourced workers to outperform in-house teams.” – LinkedIn Quote
- Offshoring definition
- “Outsourcing abroad has already saved Mike Scanlin half a million dollars.” – CNN Business Quote