Last updated on March 18th, 2020 at 05:05 pm
Many businesses are always adamant to pursue outsourcing services because of their many perceived threats. However, when done correctly, this business model can help businesses get premium digital products at a minimum cost, as well as venture into new markets.
It’s always the wish of business owners to get their digital products developed by the most qualified software development team possible. However, taking into account emerging technologies and the real cost attached to creating an in-house team or hiring software engineers, IT outsourcing always seems to be the right choice. Unfortunately, this hiring model has given birth to other concepts like nearshoring and offshoring, making it hard to choose the best.
In this article, we are going to look at the difference between offshoring and nearshoring IT services. We are also going to look at the benefits of each to help you decide which of the two suits your business model.
But first, what is nearshoring?
Outsourcing simply refers to a situation where a company partially or completely contracts work to an external firm which is located outside its national boundaries but within the region. At the simplest, it includes the neighboring countries.
At the very least, nearshoring helps a company to reduce costs related to travelling and greater degree of control throughout the entire development process. Furthermore, the proximity between the two parties presents fewer cultural differences and overlapping time zones.
According to a 2018 report by Stastista website, it is estimated that the entire outsourcing market raked in $85.6 billion. During the same period, the neashoring market accounted for $23.6 b, with countries like America, Europe, and Asia being the largest consumers of this work model.
Offshoring, on the other hand, refers to the relocation of development process by a company to a distant location. Just like offshoring, decision to offshore is largely influenced by a number of factors including lower development costs, large talent pool, and enhanced productivity due to difference in time zones.
Pros of Nearshoring over Offshoring
Despite nearshoring and offshoring allowing businesses to enjoy a myriad of benefits, many questions still remain unanswered. For example, other that the lower costs, what other benefits do they present? Are there any hidden pitfalls?
Let’s take a closer look at the advantages and drawbacks you may encounter.
In the world of software development, in-person communication is important. It can largely influence the team’s output and at the same time help mitigate unforeseen expenses that arise from miscommunications during the workflow.
One of the biggest advantages of nearshoring is the benefit of geographical proximity. It allows your company to save in terms of expensive trips and costs associated with frequent face-to-face meetings. For example, a company located in Belarus would find it less expensive to send an off-site project manager to Ukraine, compared to visiting an offshore team on a different continent.
Control and Influence
While offshoring, the remoteness of the team may mean minimal control over the actions of your team. You may have to occasionally take time-intensive trips or spend countless hours on the phone with the team trying to establish their progress. Nearshoring, on the other hand, guarantees full control over your project and timely decision-making, all thanks to the uniform time zones and the benefit of adjacency.
Closer Cultural Compatibility
Every geographical region have a different culture and work ethics. You wouldn’t be happy to learn that your development team is about to abruptly take a long break in the middle of your project. Or would you?
The immediacy presented by nearshoring reduces the possibility of crashing cultures between you and your development team. Additionally, you may also find that they speak similar language as you, making communication faster, easier and effective. Needless to say, countries within the same geographical location have similar tax and financial laws, which in turn reduces bureaucracy.
Cost – Quality Balance
Of course, offshoring is cost-efficient. However, software development isn’t one of those areas where you would sacrifice quality in the altar of cost. Otherwise, software fixing and improvement may cost you even more in the future.
By choosing nearshoring, the quality of work is guaranteed as outsourcing companies hires skilled professionals who are capable of actualizing a project from paper to a fully-fledged digital product.
Every business deals with invoice details, customer records, and other sensitive intellectual property information. In the course of development, you may be required to relay such information to the outsourcing team.
With offshoring, the security of such data security can’t be guaranteed in far-flung places as it would in nearshoring. And in the case of data breach, the incurred implications– to the balance sheet as well as to the reputation – could easily surpass the initial savings made by offshoring. However, operating in areas like EU countries where same data protection laws apply is a safe bet.
Top 2 Pitfalls of Nearshore Development
Some challenges of nearshoring include:
Relations Difficulties: Collaborating with companies from a neighboring country can create the “us and them” impression due to mentality or prejudices. As a result, discord and superiority wars may arise, affecting the project’s progress. To cope with this, you need to encourage daily communication and discussions between team members about the project’s workflow.
Insufficient Preparation: Working with a remote team is completely different from working with an in-house team. You need to organize Skype communication sessions at least four times a week to establish the working parameters, develop a work schedule, and delegate tasks to respective team members. On then can your development team improve efficiency and productivity.
Tips for Creating a Successful Nearshoring Team
There are many moving parts that come into play when working with a nearshore team. However, the milestones of successful nearshore team building boils down to these 6 key factors:
As earlier indicated, communication can make or break any nearshoring project. Hiding one problem only goes towards creating many more, which is why having a good communication strategy is important. By having a fluent and clear link between you and the vendor, many problems are essentially eliminated allowing the team to thrive. As an added bonus, correcting any possible communication misalignment right from the beginning of the project helps maintain high standards throughout the development process.
Clearly Define the Scope of the Project
Lack of a clear project scope is one of the Achilles heel of IT project management. It helps the team to lay out their action plan as well as create a rigorous work distribution plan. For this, you need to clearly articulate your project’s needs and the desired outcome, ensuring that everyone is on the same page. On top of that, set clear deadlines in writing and also quote the consequences of a missed deadline. You can also breakdown the entire project into small sub-tasks and work progressively on each.
Create a Mutual Relationship
All relationships are built on trust and without it, cooperation towards a common goal would be difficult if not impossible. If you are going to share confidential information with the outsourcing company, always introduce a clearly laid out NDA. furthermore visiting the team and organizing social events will help build a good relationship, as well as give a face to the name.
Not to mention, you should have a system in place to check the status and progress of your project, as well amending the progress if need be. And since nearshoring translates to proximity, you can easily and cheaply travel without complicated visa requirements for areas like the EU.
Build a Winning Team
Your success in building a winning team is majorly pegged on two factors…trust and close cultural proximity. Otherwise, the winning team attitude essentially disappears. While at it, always prioritize people over technology and processes because at the end of the day, everything boils down to human communication and interaction.
Focus on Leadership and Project Management
Another factor that determines the success of your nearshoring project is the management aspect. Effective decisions, better problem resolution, project scope control, and timely delivery can only be made possible by a responsible and reliable project manager. By hiring a good project manager, you are able to have increased control over your project, as well as decrease risk factors that may arise. Moreover, it also translates to a happy development team that isn’t struggling to reinvent the wheel.
There are many challenges that come into play when nearshoring your IT projects. By maintaining your organizational agility, you are able to master the changes, tackle multiple problems, and manage risks. Additionally, you are also able to benefit from increased productivity by having your human resources in stand-by whenever you need them and swift software iteration.
A good outsourced IT team not only blindly follows everything you say, but will occasionally propose alternative solutions for your project. Always remember – the more questions either parties ask, the better. Lastly, ensure they are willing to adapt to accommodate changes in your projects, meaning you have to source for a team with the right mix of experience, competencies, energy and flexibility.
When handled correctly, outsourcing can help support the growth of your enterprise, improve efficiency, and reduce operational costs. However, most of these goals can only be best met through nearshoring. Whether you are a seed startup with limited staff handle your development project or an established corporation that needs to focus on core competencies, nearshoring can help you bridge the skills gap and meet your needs.
However, the key to running a successful partnership inherently lies in sourcing for the right partner and then tailoring it to meet the demands of your project. And with the above guide you shouldn’t have a problem doing that.