Nearshore Outsourcing: What Is It and How Do You Use It?

Nearshore Outsourcing: What Is It and How Do You Use It?

Updated – May 04, 2022

Businesses from the US, Europe, and Australia hire companies nearshore and transfer a lot of processes and tasks to them. In this way, they save time for core business goals and significantly cut down the budget. Also, when leveraging nearshore services, companies get access to vetted developers and strengthen their capabilities.

What Is Nearshore Outsourcing?

First, let’s clarify the nearshore outsourcing definition.

So, what does nearshore mean? Nearshore outsourcing is a process of delegating some tasks, particularly software development and some business processes, to companies in neighboring countries to get better control over operational expenditures. 

Other benefits of nearshoring include the following:

  • cultural proximity
  • convenient location 
  • same or similar time zones and languages

Argentina or Mexico are nearshore countries for the USA. Meanwhile, Ukraine is a nearshore destination for Western European countries (Sweden, Norway, Finland, Germany, United Kingdom, Denmark, Netherlands) and Bulgaria — for the Middle East (Israel, UAE).

As an addition to the nearshore definition, we must say that some companies also started outsourcing to neighboring countries with the idea of cutting the distances and convenient time-zone overlaps.

They transferred work to organizations within their own regions, which allowed them to save costs and/or find resources for tasks that couldn’t have been handled in-house.

With the rapid development of transportation and technologies, the world was becoming “smaller” every day. This made the so-called offshore outsourcing (sending IT-related work anywhere in the world) possible. 

Though, soon enough, management problems, cultural differences, and time-zone issues started emerging, causing headaches and, in some cases, interfering with business. But, as you can understand from the definition of nearshore, this option became a solution to the mentioned problems.

Moving from this recap of nearshore software development services’ emergence, let’s compare it with some alternatives.

 

What Is the Difference Between Nearshore Outsourcing and Offshore Services?

Offshore Outsourcing

what is offshore software development
The Definition of Offshore Software Development

The primary function of offshore development is to save money while hiring first-class engineers and developers in other countries.

An offshore team will deliver a quality product and cut your time and financial expenditures.

Costs and quality of engineers are the only significant factors that determine offshore development. In most cases, offshore companies may be located in another part of the world. A good example of an offshore for the US is Ukraine and for Germany Mexico.

 

Nearshore Services

what is nearshore software development
The Definition of Nearshore Software Development

The notable features of nearshore software development are close locations and minimal time and language differences. Let’s move to nearshoring examples. A great example of a nearshore country for the US will be Mexico, and, as mentioned, Ukraine or Poland plays the same role for Germany.

There are some cases when the time difference is quite bigger than in these examples. That said, Malaysia is the best location for Australia or New Zealand. Although it is quite farther than, say, Ukraine from Germany, it’s still much closer than any other country with a big pool of cheaper experienced developers.

 

Nearshore vs Offshore Outsourcing: What To Choose?

Your choice should depend on the project’s complexity and its requirements and deadlines.

If you have an easy, daily use application in development, you can easily go with an offshore team. Offshore are also suitable for tight budgets, but, once more, you should pay extra attention to the quality and constantly check if everything is going right with your project.

Nearshore outsourcing allows you to have a close dedicated team, enabling better control over your project development flow, more engagement with the team, and fewer possible problem points due to faster reaction time.

This makes it better for parts of large projects, or even for expanding your in-house team, both in a temporary or long-term manner.

So, when choosing between offshore vs nearshore outsourcing, clarify your requirements and analyze both the short- and long-term goals of your project.

 

What Are the Nearshoring Outsourcing Benefits?

Note: although nearshore outsourcing advantages and disadvantages are hot topics for discussion, we focus on its strengths in this article.

benefits of nearshoring
Benefits of Nearshoring
    • Geographical proximity

One of the notable benefits of nearshore outsourcing is that you need just a couple of hours on the plane to visit your team. 

If a project requires personal meetings during its lifecycle, travel costs for you or your project manager will be way lower compared to the case of offshore development.

Usually, direct airlines cover the distances between the main development hubs and nearshore markets. In some cases, it also means traveling directly to and from a meeting that won’t require a hotel stay.

    • Fewer (or no) time-zone differences

In the case of nearshore outsourcing, partnering companies are usually located in the same or the nearest timezone. This maximizes the amount of time you can spend on efficient communication throughout the workday.

One of the considerable nearshore outsourcing advantages is that a 1-hour difference gets you a 7-hour window for comfortable communication. This makes it easier to address all the problems at their root without slowing down the processes.

    • Cost savings

What are nearshore outsourcing benefits? Any business owner who opted for nearshoring will probably say its main advantage is cutting down costs.

Almost instant communication saves a big part of the budget compared to offshore. However, in the second case, the developers may lose paid time waiting for your response, task management, research, or working the wrong way and then redoing the work after noticing a problem.

Fast and easy travel to the neighboring countries will also save money on tickets. There are probably lots of competing transport companies with low ticket costs.

    • Cultural and language similarities

Similar language and culture play considerable roles in the nearshore software development process as they simplify and speed up the operations.

Suppose you and your nearshore outsourcing company speak the same language. In that case, your communication process may be faster and more transparent than that in English, even if you both have excellent English proficiency.

Similar culture will probably intend the same bank holidays and absence of situations when your project delays for a partner’s holiday, and one week later — for yours.

    • Compensation of staff shortages

Nearshore software development companies are the best option to augment your team in case of staff shortage. Such software engineers are used to project-based work and are flexible enough to dive into a new project with all due quality standards.

The development process will be naturally faster and easier with nearshore outsourcing due to the same language and cultural similarities described above.

    • Improving company efficiency through load distribution to outsourcing companies

Does your company have a large software product in development? If so, you can get a boost from the advantages of nearshore outsourcing

How? 

You can simply outsource the project’s different integral parts to a nearshore software development studio and rearrange your core team for principal tasks.

These hired teams will work as sub-teams of your large project to some extent and make your development process more flexible.

 

How to Make the Most out of Nearshore Outsourcing?

Having addressed the question “what is nearshoring,” it’s essential to understand how to make the most out of it. Here are three tips from Qubit Labs that will help your company benefit from nearshoring:

1. Evaluate your tasks and divide them into categories depending on their complexity

Key Nearshore Outsourcing Statistics
Nearshore Outsourcing Statistics

Certain project phases or other activities require more time and effort than others. Because of them, companies often experience delays and slowdowns. As per fortune, 52% of small businesses will continue to outsource their non-core functions even in the post-pandemic economy. 

Another fact about small businesses is that around 37% of such companies use nearshore development to handle at least one of their business processes. Most often, companies outsource IT operations (37%), accounting (37%), or digital market responsibilities (34%).

Nearshore outsourcing allows for increased business efficiency by making the company more flexible, giving more free time to the employees, and ensuring expert assistance. 

You can invest saved time and finances into further growth once you transfer the most cumbersome and tedious tasks to remote companies.

2. Ponder the feasibility of nearshoring

Since you’re already aware of the nearshore zone definition, it’s clear there will be no problems regarding timely communication with your partner. Nevertheless, it still implies working with new people and adding another entity to your team. 

Nobody’s canceled onboarding and time required for adaptation, so you’ll need someone to manage these processes. It’s necessary to have a reliable point of contact with your nearshoring vendor. Such an employee will be responsible for tracking the vendor’s performance and checking whether the delivered results meet the requirements. 

When being sure about your decision to outsource, it’s essential to compare nearshore vs offshore to understand which option is more suitable in your case. 

If you’re not sure which alternative is more efficient, you can combine them. Say you have a US-based company that wants to facilitate its performance and accelerate processes. This being so, you can hire offshore developers in Ukraine and nearshore to other countries of the Eastern European region.

Such a solution enables increased productivity because both your teams will work simultaneously when your in-house employees have their time off. 

3. Establish and promote trust 

The nearshoring definition implies transparency in all processes. Your remote team is more likely to deliver high-quality results when aware of your organization’s goals, structure, capacity, target audience, and core tasks.

When it comes to choosing a nearshoring partner, make sure to check other clients’ reviews and ask the vendor about its hiring approaches, the information it provides to the customers, and the way it manages internal processes.

Also, it’s essential to define nearshore company’s transparency and emphasize that you prefer complete visibility. Such an approach allows for choosing the developers yourself, being sure that their skills align with your requirements, and closely monitoring all the processes, being able to introduce changes the moment any issues arise. 

 

Things to Consider When Using Nearshore Services

Like any tool, nearshore outsourcing can be highly beneficial for a company, but only if used wisely. When choosing a location, companies should research the level of employee training in the country of interest, its laws, and the specificities of intellectual property security.

Knowing the country’s general economics and the prospective partner’s experience, human resources, and technological understanding are also advantages. 

Qubit Labs, as a nearshore development company, knows everything about it. We are the go-to team in your search for a reliable outsourcing destination that will guarantee your company’s success.

The high level of IT specialists and openness to cooperation made Eastern Europe, and Ukraine in particular, such an attractive nearshoring destination for Western European businesses.

Thinking about outsourcing to Ukraine? Then, you’re welcome to check out our guide about the major advantages of outsourcing to Ukraine.

 

Nearshore Outsourcing Benefits for Your Company

Benefits like lower operating and traveling costs are pretty obvious, but are they enough to make you choose nearshore services?

Nearshoring also allows your company to take on more work and either delegate projects to workers in countries with substantially lower wages or delegate only the most tedious tasks while assigning the important projects to the in-house specialists.

And while you significantly lower costs, you still retain control, high responsiveness, and, having correctly chosen the location in a neighboring country, a team that will understand your market.

Also, choosing a company closer to home makes business faster because you avoid time-zone differences.

This also translates into better quality and motivation since the workers are more likely to be awake and alert and don’t have to adjust their schedules to another country’s business hours.

How to Choose a Nearshoring Partner
Steps on How to Choose a Nearshoring Partner

If we sparked your interest in the topic, here’s an insightful read — Offshore Team 101 by Iva Kozlovska.

Discover more about software developers in Ukraine and how you can hire a team of local developers by reading our “How to Hire Software Developers in Ukraine” article. 

Review average hourly rates in outsourcing.

FAQ about Nearshore Outsourcing

  1. What is nearshore outsourcing?

A process of delegating software development and certain business tasks (in most cases) to companies located in neighboring countries and similar time zones – this is a nearshore meaning. 

  1. What is the difference between offshore and nearshore?

Nearshore outsourcing means delegating software development to the companies located in the nearby countries (for example, to Mexico if the business is in the US and to Ukraine if it’s a German organization). Meanwhile, offshore outsourcing implies hiring developers from any country and different time zones. 

  1. Why do companies nearshore?

Nearshore outsourcing helps to optimize costs, save time, compensate for staff shortages, and improve the overall company efficiency, to name a few. 

  1. What are nearshore locations?

The most popular nearshore locations are Ukraine, Poland, Czech Republic, Hungary (for Western European countries), Mexico (for the US), Malaysia for Australia or New Zealand). 

  1. What are the advantages of nearshore?

Some of the nearshoring benefits include short flight times, same time zones, cultural and language similarity, easy integration, a wide choice of talent, better communication and coordination, cost reduction, and improved efficiency.

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Svitlana Rumyantseva
Project Manager
Svitlana is a ex Project Manager at Qubit Labs with legal education and PhD degree in political science. She has experience in managing in-house and offshore/nearshore software development teams including freelancers. She is sure that smooth communication and motivation is the basis of efficient teamwork and successful projects. Svitlana is passionate about networking, achieving great results and acquiring new knowledge.