Top 9 Advantages Of Nearshoring, Why Should You Choose It?

Not all businesses have the resources to accomplish their objectives, so they outsource. Not only does this trend scale up the companies’ team but also cut down the hiring cost and process for them. One of the most popular types of outsourcing is nearshoring with the market revenue in 2021 in Europe only was $103.9 billion (K&C), imagine the number for the entire world. 

Knowing that companies are showing interest in nearshoring, but what is it and is it suitable for your company? In this article, we will discuss the advantages of nearshoring, and why a business should choose it?

Nearshoring, Offshoring And Onshoring

There are three main types of outsourcing, which are Nearshore, Offshore and Onshore. Let’s see what are the different among these types.

1. Nearshore

Nearshoring is a type of outsourcing that occurs in a country close enough to the buyer’s location. In nearshore software development, it describes when a company outsources a project overseas but then relocates their engineering teams closer once their product is up and running so that they can continue to improve it over time and gain operational advantages over their competitors. For example, you’re based in the United States, nearshore locations could include Canada or Mexico; if you’re based in India or China, nearshore locations could include Malaysia or Thailand.

Nearshoring is suitable for companies that want to cut costs by outsourcing to areas with lower labor costs but don’t want the hassle of dealing with cultural or time zone differences. One of the advantages of nearshoring is that it also gives companies more control over the project management process.

2. Offshore

Offshoring is the same as nearshoring, except that the third party is not in close proximity. There may be a time difference involved. However, it eliminates the risks associated with hiring short-term contractors. It also means that businesses can pick and choose their developers without regard to geography. They collaborate on projects with your in-house team and consistently develop software.

Typically, offshore outsourcing involves countries with lower-cost economies. As a result, it may be the cheapest outsourcing solution, but it has some drawbacks such as cultural differences, time zone differences, and communication difficulties.

3. Onshoring

Onshoring is the opposite of Offshoring. It means moving business processes to a cheaper place inside the country’s borders. Onshoring makes a big difference in how much things cost and gives companies a lot of flexibility. Also, production coordination and communication are better and run more smoothly. Although it might be the most expensive type of outsourcing.

Overall, these are the differences among Onshore, Offshore and Nearshore:

Top 9 Advantages Of Nearshoring

Businesses have outsourced for quite some time. Because it takes place much closer to home, nearshoring is a better alternative to outsourcing. Here are a few of the reasons why many businesses are adopting this strategic practice. So, what are the advantages of nearshoring?

1. Labor Cost-Effective 

• One of the most significant advantages of nearshoring is its ability to offer a cost-effective labor force. By outsourcing to nearby regions with lower labor costs, companies can achieve substantial savings without sacrificing quality. For instance, the hourly wage for skilled software developers in Mexico is often significantly lower than that of their counterparts in the U.S. This allows businesses to maximize their budget and allocate savings to other critical areas, such as marketing or research and development.
• Additionally, nearshoring reduces overhead costs associated with hiring full-time employees, such as benefits, training, and workspace. Companies can also avoid lengthy recruitment processes by leveraging existing talent pools within nearshore locations, thus reducing time-to-market for new products and services. This can significantly lower the overall software development cost while ensuring high-quality deliverables.

2. Favorable Time Zone Alignment

• Nearshoring offers time zone efficiencies, which is crucial for effective collaboration. When teams are located in similar time zones, it becomes much easier to engage in real-time communication. This proximity means teams can participate in live meetings, provide immediate feedback, and make quick adjustments as necessary.
• Having overlapping working hours fosters a culture of immediate collaboration, enhancing productivity and ensuring that projects stay on track. For instance, if a company in the U.S. nearshores its software development to a team in Colombia, the two can easily hold brainstorming sessions or tackle bugs swiftly, leading to quicker problem resolution and greater innovation.

3. Culture & Communication

• Nearshoring to countries with similar cultural backgrounds helps create a smoother working relationship. Shared cultural norms and practices can lead to better understanding and fewer miscommunications. This cultural alignment in nearshoring minimizes misunderstandings related to language and workplace expectations.
• Effective communication goes beyond just language proficiency; familiar cultural practices mean that team members are more likely to resonate with each other’s expectations regarding work ethics, deadlines, and quality standards. This alignment fosters a sense of camaraderie and mutual respect, enhancing collaboration and the overall project experience.

4. Better Control Over Projects

• When working with nearshore teams, businesses maintain better control over projects due to proximity and aligned time zones. This aspect allows for more frequent on-site visits or face-to-face interactions, which can be crucial in fostering relationships, addressing concerns in real time, and ensuring deliverables meet all expectations.
• The close relationship affords businesses the ability to oversee ongoing work closely, conduct regular check-ins, and provide real-time feedback. This heightened level of control allows businesses to pivot quickly in response to market dynamics or changing business needs, fostering adaptability and innovation. This is particularly important in the software development project management landscape, where agility is key.

5. Environmental Benefits and Reduced Transportation Costs

• Shipping is responsible for 3% of the world’s CO2 emissions and 10% of those from transportation (Transport & Environment). As companies increasingly prioritize sustainability, nearshoring aligns with eco-friendly practices. Shortening the supply chain by tapping into local resources reduces dependence on long-haul transportation, which not only cuts costs but also minimizes carbon emissions associated with shipping.
• By partnering with nearby suppliers or manufacturers, businesses can decrease their environmental footprint while potentially opening the door to green certifications that can be attractive to environmentally conscious consumers. Moreover, reduced transportation also translates into quicker turnaround times for products, enhancing customer satisfaction.

6. Wider Pool Of Talent

• One of the most compelling benefits of nearshoring is the ability to tap into a diverse talent pool. Many nearshore countries have invested heavily in education and workforce development, particularly in tech fields, resulting in a surplus of skilled professionals.
• By nearshoring, companies gain access to specialized skills that may not be available in their domestic market. This access to a broader talent base can prove invaluable, particularly in industries facing labor shortages. Furthermore, this flexibility allows businesses to quickly scale their teams up or down based on project demands, leading to efficient talent acquisition strategies.

7. Enhanced Focus on Core Competencies

• By delegating non-core tasks to a nearshore team, companies can concentrate their internal resources on strategic initiatives that contribute to their competitive edge. Outsourcing functions such as software development, customer service, or data management allows businesses to focus on innovation, market expansion, and customer engagement.
• This strategic focus can lead to improved product offerings and services, providing significant advantages in competitive industries. Moreover, as teams can rely on nearshore partners for routine tasks, it frees up time for employees to engage in higher-level strategic thinking and problem-solving, driving the business forward. This may include staying abreast of software development trends to remain competitive.

8. Reduced Risk of Disruption

• Nearshoring can provide a buffer against geopolitical instability, natural disasters, and supply chain disruptions that may affect offshore partners. By outsourcing to nearby locations, businesses can react more swiftly to any disruption, helping maintain operational continuity.
• Shorter supply chains and closer partnerships mean that businesses can build resilience against unexpected challenges, ensuring they are better equipped to manage risks. This ability to quickly pivot is particularly valuable in fast-paced industries, where responsiveness can distinguish market leaders from the rest.

9. Continuous Improvement and Innovation

• Nearshoring not only allows for ongoing collaboration but also facilitates a culture of continuous improvement and innovation. Proximity encourages frequent brainstorming sessions and collaborative workshops, fostering an environment where ideas can flourish.
• With teams working closely together, feedback loops become more efficient, and innovative solutions can be developed rapidly. Companies can leverage the nearshore partnership to experiment with new ideas and enhance the software development process, ensuring they remain competitive in their markets.

The Downsides Of Nearshoring

Nearshoring has pros and cons, which depend on your business:

• Moving large-scale production facilities or other complicated components of operations to a new market closer to home will involve significant upheaval in transferring goods and equipment and learning a new market.
• Nearshoring may be cheaper in the long run but requires an initial investment.
• If the corporation cannot set up production in the new market before closing its current operations, it may delay operations.
• Finding the proper people to work in a new market, negotiating a new regulatory system, and avoiding legal issues and financial fines for non-compliance can also be challenging.
• Finding a good partner within the new market can also be a worry. Moving from one region to another usually means breaking up a relationship with a local provider or partner that has probably worked well.

Savvycom – A Trusted Partner For Nearshore Outsourcing

If you are looking for a partner that offer top nearshore outsourcing services, then Savvycom is here to help!

Savvycom, one of Vietnam’s leading software outsourcing companies, provides Digital Transformation consulting and software solutions in banking, healthcare, and retail for domestic and international enterprises. The company, headquartered in Hanoi with three representative offices in Ho Chi Minh City, USA, and Australia, leverages technical capabilities in Vietnam to empower businesses worldwide through technology and become a top IT company in ASEAN and beyond.

The company has 100+ client endorsements, including Fortune 500 companies, more than 20 international honors and awards, and strategic collaborations with Apple, AWS, and Microsoft. Apple Consultants Network Partner in Vietnam.

What Is Nearshore Software Development Outsourcing?

Nearshoring is outsourcing to a nearby country. Nearshoring is when a software company outsources a project overseas but then moves its engineering employees nearby to improve the product and obtain operational benefits over competitors. If you're in the US, nearshore locations could be Canada or Mexico; if you're in India or China, Malaysia or Thailand.

Nearshoring is ideal for organizations who want to outsource to cheaper labor markets but don't want to deal with cultural or time zone issues. Nearshoring gives organizations more project management control.

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 Determines The Cost Of Nearshoring?

Three main things determine the cost of nearshoring:

• Developer experience and skills.
• English fluency.
• Location.

 

How Do I Choose A Nearshore Partner?

Check out potential partners' websites and other online resources, like Medium blogs and case studies, and look for:

• Technical and business knowledge: Make sure that their developers have the right knowledge. Check to see if they've worked in your field or made things like yours before.
• Some models for making software that are available now are: Not all companies that outsource offer nearshore services.
• Track record with customers: Case studies, success stories, and customer testimonials are all good ways to tell if customers are happy.
• Business culture: Go to Glassdoor to find out what developers think of their employers. When a nearshore company has a strong developer culture, employees stay with the company longer and are more engaged.