A Complete Guide to Nearshore Software Development
It’s official: in-house teams are becoming less vital for businesses. Modern companies are increasingly open to hiring outsourced development teams. In fact, they often delegate some projects to freelancers or other companies. Outsourcing software development helps them save costs and time while staying productive. According to a report by Deloitte, 70% of companies cite cost reduction as the primary motivation for outsourcing, a significant trend in the current software development trends.
On the other hand, outsourcing may bring some challenges — language barriers, timezone issues, and poor management. In this post, you’ll learn the pros and cons of nearshore software development and ways to deal with possible issues.
What Is Nearshore Software Development?
Nearshore software development means delegating software development services or certain tasks to companies located in geographical proximity to your country. When you hire a nearshore company, the difference between you and the contractor is typically 1 to 3 hours. This allows for minimal time difference and better communication with your contractor, compared to offshore software development. In fact, Accelerance’s Global Outsourcing Survey found that 64% of businesses are increasingly choosing nearshore partners due to the ease of communication and collaboration. This method also aligns with the growing demand for adaptive software development, which emphasizes flexibility and collaboration throughout the software development process.
Personal visits are also less of a hassle. For instance, a flight from Berlin to Tallinn takes two hours. So, if you’re hiring a nearshore outsourcing team from Central Europe, it’s convenient to arrange meetings or in-person discussions without long delays, ensuring a smooth process.
Why Consider Nearshore Software Development Services
Despite obvious advantages, nearshore outsourcing may not suit every company. Underneath, I’ve spelled out the indicators telling that your company should consider nearshore outsourcing.
Budget Limitations
If you’re on a budget, nearshore software development is a great option for cutting expenses, especially if there are no affordable providers in your region. Nearshore outsourcing offers cost-effective software solutions while maintaining a closer geographical relationship. Research by Statista shows that the global IT outsourcing market is expected to reach $587 billion by 2027, a clear indicator of how businesses are leveraging outsourcing to manage software development cost efficiently.
On the contrary, if you have a larger budget for hiring software engineers, you may consider expanding your in-house team. Otherwise, nearshore software development companies are the right choice for balancing costs and efficiency, enabling businesses to speed up software development and scale projects without the need for long-term staffing commitments.
Plans for the Future
Sometimes it’s better to have your own development team. If you plan to build multiple applications, teamwork gained during the first project can play a vital role throughout the software development process. However, a single project doesn’t require maintaining a full-time team. A nearshore software development team can build and maintain your application as needed. This eliminates the need for ongoing office rent and salaries, making it a more flexible outsourcing solution. By clearly defining the terms in your software development contract, you can ensure that all expectations are met without additional overhead costs.
Location
Among all outsourcing approaches, nearshore software development depends most on geographical proximity. While selecting a remote development team, you should consider the availability of qualified specialists in nearby countries.
For example, if you’re an entrepreneur from Norway and looking into outsourcing, you’d benefit more from hiring an Estonian nearshore software development team rather than an Indian or Philippine offshore company. Estonia is only an hour ahead of Norway, while India is 5 hours ahead, and the Philippines 7 hours ahead.
Lack of Developers
When working on a large project that requires scaling quickly, chances are you’ll need more developers. Nearshore software development is a great option in this case. You can delegate part of the project to a nearshore team to alleviate the workload on your main in-house staff. This practice is common among leading companies, especially with the rise of software development trends that emphasize agility and rapid scaling. In fact, up to 37% of small businesses outsourced software development in 2021, according to Clutch.
Advantages of Nearshore Software Development
As you can see, nearshore software development has great potential and offers several benefits for companies. Let’s outline the primary advantages of nearshore outsourcing.
Cost-Effectiveness
It’s no secret that businesses turn to outsourcing software development to reduce expenses. With nearshore software development, you avoid the overhead of hiring full-time developers, paying wages, renting office space, and purchasing hardware or software. According to Deloitte, 59% of companies outsource specifically to reduce software development cost.
Closer Collaboration
Another advantage of nearshore software development is the proximity of the development team. In the event that personal meetings are required, the short distance makes it much easier to arrange. Nearshore outsourcing to Central European teams, for example, ensures that entrepreneurs in Western Europe can fly to their partners in just a few hours. Close collaboration allows the software development process to remain efficient and adaptable, which is crucial for meeting deadlines.
Similar Regulations
While building an application, you will face some regulations you have to comply with. For example, if you are focused on the European market, you’ll have to follow the GDPR (General Data Protection Regulation). There’s another set of rules for residents of California called CCPA (California Consumer Privacy Act). Remember: make inquiries if the company knows how to comply with the required policies!
Before drawing up a contract you have to make sure that company knows how to follow the rules defined by your region. Violating CCPA and GPR can lead to heavy fines, so take this point very seriously.
Minor Timezone Difference
Timezone compatibility is crucial when choosing a remote development team. With nearshore software development, the timezone difference is minimal, which facilitates better communication. For example, Washington, DC, is only two hours ahead of Mexico City. Similarly, most European countries experience a minor time difference with countries like Estonia or Ukraine, making it easier to schedule meetings without the issues that arise with offshore software development.
Experienced Talents in No Time
Actually, this advantage can be applied to any outsourcing type, but still. The point is you don’t have to spend weeks looking for qualified talents among all of the CVs. These actions require you to have an HR department.
The nearshore software development means that the provider already has a team of nearshore software developers who have worked on multiple projects together. It kills two birds with one stone: communication between team members and working experience.
If you need more programmers for the development of additional features, nearshore software companies will allocate more talent as you scale.
Disadvantages of Nearshore Software Services
Despite all the positive sides of nearshore software development, there are some drawbacks as well. But, nothing can be flawless, right?
Offshore Outsourcing Is Cheaper Than Nearshore
While nearshore software development offers many benefits, offshore software development can sometimes be more cost-effective. Offshore companies, particularly in countries like India or the Philippines, often provide lower rates, making them an attractive option for businesses with tight budgets. However, a well-structured software development contract can mitigate some of the risks associated with offshore outsourcing by clearly defining the scope and quality expectations.
Lack of Companies
If nearby countries aren’t IT-oriented, it is recommended that you hire an experienced offshore software development company.
Sure, any country has its software development companies, but the quality that no-name companies deliver will be quite different from well-known outsourcing destinations like Estonia or Vietnam. For that reason, sometimes it’s better to choose an offshore company with a number of reviews than a questionable nearshore provider.
Hard to Verify Skills & Competencies
It’s tricky to find a trustworthy partner to perform your development responsibilities, especially if you’re working with someone in another country. This is the case for both nearshore and offshore outsourcing. Even if you’ve done your homework and identified a team that appears to be capable of handling your project, verifying their level of knowledge or experience might be difficult.
Periodic Monitoring
That’s a common flaw in outsourcing. Since you’ve hired a remote group of developers, you have to get in touch with a contractor from time to time. Luckily, it’s relatively easy to hold meetings with nearby countries. At Savvycom, we always arrange our conferences at a time appropriate for our customers. However, if some issues require your physical presence, flights can still be exhausting and time-consuming.
Top Favorite Examples of Outsourced Software
Outsourcing is a universal practice. Even world-leading companies hire outsourcing companies to save funds and properly distribute the load on in-house developers.
Skype
Back in the days when Skype was taking its shape, founders used a nearshore software development model for the backend and website. Features we love the most, like video conferences, message, and file transferring were actually developed by the Estonian group of developers. This approach made Skype the primary tool for business and personal conferences over the world.
Slack
Another outstanding example of nearshore outsourcing is Slack. This software simplified corporate messaging for a number of companies, but it lacked an attractive design. So, it was decided to hire a Canadian design company for creating a logo, web, and mobile app design. Now Slack is considered to be the app that feels, looks, and sounds different. The combination of delightful design and useful features resulted in a global revenue of $401 million.
Opera
Opera originated as an internal project of the Norwegian telecommunication company — Telenor. Soon after its release in 1994, it became a standalone project with its own company and rights. The most interesting thing is that Telenor didn’t focus the efforts of the main office on this project. Opera was written in C++ by developers from 24 different locations all over the world. Telenor used outsourcing to cut losses in case of failure. But it turned out quite the opposite, Opera became one of the top-rated web browsers in the world.
It’s clear that nearshore software services reached far into the IT industry. The advantages of nearshore development are too significant to ignore. The only thing you have to do is to find a reliable provider that’ll fulfill your expectations.
Savvycom Expertise
Savvycom is an experienced nearshore software development company with headquarters in Central Europe, Estonia. Our competence comprises delivering top-quality software solutions to startups and all-scale businesses using cutting-edge technologies for 10+ years.
We provide IT-related services and digital product creation from scratch. They help our clients optimize workflow productiveness, overcome companies’ internal challenges, and obtain competitive benefits. By choosing us, our partners are ensured with a row of benefits:
- Free initial project estimation with no hidden payments or additional fees from our Sales Managers
- Three flexible cooperation models are suitable for every case: dedicated team, fixed price, time & materials
- Rapid software architecture process’s elaboration
- Product quality assurance and control at every creation phase
How Is Nearshore Different From Offshore?
Hiring developers from a nearshore development center is referred to as nearshoring (situated in the adjacent region as well). Offshoring, in turn, is outsourcing to a country that is geographically distant.
What Are The Benefits Of Nearshoring?
Nearshore software development brings specific advantages to a company:
- Cost reduction for software development projects
- More convenient communication thanks to close distance and little to no time difference
- Similar regulations allow the service provider to better comprehend your country's rules
- Access IT talents in no time since the software developer already has a professional team to take care of your project
How Do I Choose A Nearshore Partner?
While examining prospective partners, evaluate their websites and other online resources, such as Medium blogs and case studies, and seek for:
- Technical and industrial expertise: Verify that their developers have the necessary expertise. Look to see if they've worked in your industry or produced similar items in the past.
- Models of software development that are now available include: Not all outsourcing companies provide nearshore services.
- Customer track record: Case studies, success stories, and customer testimonials are strong markers of client satisfaction.
- Business culture: Check out Glassdoor to see how developers feel about their employers. Nearshore organizations with a strong developer culture have greater retention rates and more engaged employees.
