CEO at Relevant

Nearshore Software Development: An In-depth Guide in 2023

March 6, 2023


Building and maintaining your in-house tech teams with diverse skillsets and competencies is a struggle nowadays. The largest IT talent gap in history, recent geopolitical events, and a looming recession are forcing business leaders to rethink their strategies and look for practical solutions. 

Can nearshore software development services become a remedy for your business? It can help you reduce costs, save time, find skilled and experienced specialists for your project needs, and build a team on your terms. Companies of all sizes, including well-known Slack, GitHub, IBM, and Google, successfully employ this strategy to implement digital solutions and drive innovation. Around 60% of companies outsource some software development.

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However, to make nearshoring work for you as effectively as it works for Slack or Google, you should learn all the ins and outs of this approach to create a strategy. That’s why we suggest you explore nearshore software development outsourcing in detail, review its cons and pros, and find the recipe for a successful nearshoring partnership.

What is Nearshore Software Development?

Let’s get things underway with an understanding of this particular outsourcing approach. In a nutshell, nearshoring entails hiring a development team from a nearby country with a tiny time difference or in the same time zone. 

So, if your company operates in the United States, hiring your neighbors in Canada or Latin America would be nearshoring. And if you are in the United Kingdom or Central or Western Europe, hiring a Relevant team in Eastern Europe is an excellent example of nearshore outsourcing.  

Nearshoring allows you to take advantage of the cost savings associated with outsourcing while having better control over the process due to geographic proximity. Also, when you cooperate with a nearshore IT outsourcing services company, you will enjoy smooth work with a culturally similar team operating in the same time zone. This carries some tangible and intangible benefits crucial for the success of your project. 

Nearshore IT Outsourcing: Pros and Cons

Though you can enjoy notable benefits, risks exist. Keep reading, and you’ll find out the major nearshore outsourcing benefits and shortcomings to get a complete picture of this model and make an informed decision. Also, we believe these 10 tips on how to avoid IT outsourcing failures will help ensure a smooth outsourcing experience. 

Advantages of Nearshore Outsourcing

It has great potential and can be a way for many businesses to eliminate gaps in the development process. We outlined just a few reasons why you should consider the nearshore option.

Source: Deloitte Global Outsourcing Survey 2022

Increased pool of skilled tech talents

Chances are you’re experiencing a local shortage of developers, like 87% of businesses. Searching outside the country gives you access to a broad market of talented developers, expanding your horizon and technical capability. With nearshore software development services, you can forget spending weeks looking for qualified IT candidates and resources for managing them in-house. From this perspective, nearshoring is the fastest and most cost-effective way to hire specialists with expertise and skills close to your field of operation. 

Moreover, providers already have teams of software engineers with experience working together on multiple projects. So, you’ll kill two birds with one stone: a close-knit team with smooth communication between members and working experience. Plus, an expert team will handle each development step without additional guidance, allowing you to focus on your business.

Easier integration and cultural fit

Sharing similar working cultures, values, mindsets, and organizational structure facilitates smooth communication and integration of a dedicated team into your company. Cultural understanding translates into:

  • The external team’s correct interpretations of your requirements 
  • Work with similar managerial approaches
  • Faster sync-up with your in-house team.

This enables more effective interaction with software engineers, thus enhancing their understanding of your business and ultimately increasing productivity. In addition, open and effective communication improves business collaboration and product development.

Time zone proximity

Although nearshore outsourcing doesn’t require face-to-face collaboration, being geographically close means convenient and timely communications. You can stay in touch and organize daily meetings with the team during your business hours without disruption and stress to your usual schedule.

Similar regulations

While building software, you have to comply with particular regulations. For example, in the European market, you should follow the General Data Protection Regulation (GDPR), a violation of which can lead to hefty fines. But since neighboring countries often have better diplomatic relationships and similar legal regulations, there is little to worry about. Additionally, good nearshore development outsourcing companies know the laws in neighboring countries. 

Note: If you’re operating in data-sensitive industries like banking, healthcare, or fintech, ensure the provider you work with follows all the needed regulations.  

Drawbacks of Nearshore Outsourcing

This model offers various benefits, but it’s not without shortcomings. Yet once you know what to watch out for, it will be easier to build a successful partnership with a nearshore software development company.  

Higher cost compared to offshoring 

Let’s be honest – you can find less expensive options to nearshore outsourcing. Leaving aside all the downsides of hiring a far-reaching team offshore, you get a workforce with some of the lowest rates in the world. 

However, proper IT expertise is always costly, even in the least expensive locations. This significantly depends on the seniority and experience of the specialists. So consider this factor in planning your budget properly if you choose nearshore IT outsourcing. One way or another, both offshoring and nearshoring are more cost-effective than onshore or in-house teams.

Fewer niche experts on the market

The talent pool available in nearby locations might be limited compared to offshore regions. Plus, finding the right combination of skills and expertise to meet your particular project needs might be challenging, especially if you have a narrow niche project.

Now let’s see how businesses that chose nearshoring benefited from this strategic approach.  

Companies That Already Use Nearshore Development

At the beginning of the article, we mentioned Slack as a corporation that outsourced a significant portion of its design and software components for its web and mobile apps. It’s a company that owes its success to understanding how to outsource development and various organizational responsibilities effectively. So, let’s view their nearshoring story in detail.

Slack

The most popular communication tool for startups and small businesses, Slack has more than 18 million daily active users today. Slack’s rapid success speaks for itself, but few know that the enterprise has grown due to strong nearshore outsourcing relationships. 

Slack founder Stewart Butterfield had a good idea but couldn’t turn his vision into reality. That’s why Butterfield brought his rough prototype to design specialists MetaLab in Canada. By nearshore outsourcing their design, marketing site, and app development, Slack, together with a nearshore team, created a streamlined and beautiful product from scratch. 

Their outsourcing strategy worked triumphantly and shows how it may benefit you, even for the most critical stages of product development. It also speaks to how nearshore outsourcing can play a role in the most crucial parts of a company: the logo, website, and entire look and feel of the brand. As you can see, hiring outside experts can be a strategy for establishing and refining the essential components of an organization.    

Nearshore Software Development in Eastern Europe

Let’s check what opportunities await you in the most in-demand locations for nearshoring IT services in Eastern Europe.

Nearshore Software Development in Eastern Europe

This region has become an IT outsourcing oasis on a global scale. Providing a reasonable quality-to-price ratio, outsourcing to Eastern Europe has become a perfect option for many brands. 

The Eastern European IT outsourcing market felt the impact of the Russia-Ukraine war, but its size will double this year compared to 2022 and reach $4,17 billion. Moreover, this region’s software industry is flourishing as low taxes and decent tech infrastructure make it an attractive destination.  

IT outsourcing revenue in Eastern Europe

Currently, the number of IT professionals in Central and Eastern Europe is over 2 billion. While that may be less than in Asia, the region delivers better quality. Software engineers from the most prominent tech hubs – Poland, Ukraine, Czechia, Hungary, Bulgaria, and Romania – can deliver exceptional quality IT solutions with fewer cultural differences. Also, Eastern European experts have a strong command of English that guarantees seamless communication. Finally, the diversity and versatility of their technical skills enable them to tackle projects of any complexity.  

Selecting the best region for nearshore software development can be challenging as various factors may influence your choice. For instance, outsourcing to Bulgaria may entice you with the lowest hourly rates. Yet the versatility of tech expertise and a number of skilled IT professionals make Ukraine and Poland the best countries to outsource in Eastern Europe.   

Nearshore Software Development in Latin America

Thanks to business and technology talent, enhanced infrastructure, the benefit of a substantial time zone, and cultural overlap with North America gave rise to Latin America IT outsourcing. 

As a competitive player in nearshoring, the region combines geographic proximity to the US and affordability, making it a preferred choice for American businesses. So what does LATAM offer a tech leader looking for nearshore development outsourcing?

Latin America has experienced unprecedented technological and economic growth in recent years. The region’s software industry is especially booming and will grow by $33.68 billion by 2025. The number of IT professionals in these countries is slightly over 1 million. Nearshore outsourcing to Costa Rica, Mexico, Brazil, Argentina, and Colombia is the top option for US companies.

Source: Technavio

You can be sure of the quality of work when dealing with LATAM developers. The local governments heavily invest in digital infrastructure and technical education to grow skilled talents capable of providing a wide range of services. So, we see that cultural similarities, time zone alignment, and digital-savvy experts are winning the hearts of their American partners.  

Nearshore VS Offshore VS Onshore 

Each of the three models has pros and cons. Instead of a long text, we created a table about the particularities of onshore vs nearshore vs offshore outsourcing.

To choose the suitable outsourcing model for your specific needs, look closely at your business requirements, establish your priorities, and see which serves them best. And our table may help you decide on the best strategy for operations scaling in your company.

Key factorsOnshoreNearshoreOffshore
CostsHighAverageLow
QualityHighHighMedium-Low
TalentLimitedA sufficient number of IT expertsAccess to a global pool of talent
Time zone differenceSameSame or negligibleHigh (4+ time zones away)
Communication efficiencyHighHigh-MediumLow
Cultural alignmentHighHigh-MediumLow
Expertise and skillsHighHighMedium
English proficiencyHighHighMedium
RisksNoMinimal (depending on contractors)High (work at the lowest rates can be of poor quality)

How to Choose a Nearshore Software Development Company

Finding a provider that offers the best combination of experience, value, collaboration, and performance can be difficult. That’s why we recommend you learn a detailed guide on the selection process of software outsourcing vendors. Meanwhile, below, you’ll find the key elements to consider when looking for the right partner.

Tech expertise, reputation, and track record

Make sure your potential vendors specialize in the programming languages and technology that best suit you and have experience building the relevant software. You should also take notice of vendors’ domain knowledge in your specific industry. To explore all these aspects, start by checking provider websites, focusing on experience within your domain, client testimonials, and their case studies. You can also examine client ratings on business review sites like Clutch, Good Firms, and Glassdoor.

Resource pool and staffing speed

How big is your nearshore provider’s talent pool? Is it able to quickly scale your team up if the need arises? Depending on the project’s complexity and scope, you might require a larger or smaller team. So, the amount of available staff and the company’s ability to scale will define the staffing speed and whether they would be able to meet your resource needs. 

Legal base and security

A nearshore development outsourcing company you choose should always emphasize the security of cooperation and go the extra mile to make your collaboration safe and secure. That includes an agreement with clauses that protect your Intellectual Property. Also, it should have specific security protocols and certifications. So, learn about the vendor’s standard procedures and data protection policies, including the GDPR. 

Communication and language proficiency

A nearshore company should provide a team of software engineers who can communicate with you regularly and in your language or English. You should be able to talk directly to the team that completes your project. So, make sure the language skills of your outside team are adequate, and the communication can flow easily.

Source: Deloitte Global Outsourcing Survey 2022

Relevant Software as Your Nearshore Partner 

Many leading companies work with Relevant – and our portfolio proves it – because of our agile approach, transparent processes, and substantial experience working with European customers. 

Want to see how it works? Then, we propose you examine a real-life example of successful nearshore development outsourcing from our practice at Relevant.

Nearshoring example: Svenn

Project type: Platform redesign and app development

Svenn is a Norway-based software company that helps construction firms with time tracking, work planning, and project management. The company wanted to redesign its old platform to make it more customizable, add user roles, and implement a billing system to offer more value to its customers.

Relevant’s nearshore solution for Svenn helped the company to seize a unique market niche and attract over 2,900 customers from 45 countries. The features like invoice management, report generation, time tracking, and project management that we implemented helped Svenn customers minimize inefficient routines and paperwork. Additionally, IOS and Android apps we built helped our client maximize the reach to its potential customers. 

The success of our partnership lies in effective resource planning and recruitment processes. This ensured that our assembled dedicated nearshore team of engineers perfectly fit the core team with their hard and soft skills. Furthermore, our project manager integrated Slack, JIRA, and Bitbucket to communicate smoothly.

Bottom Line

With the emerging need for business applications and tech talent shortage, IT outsourcing is gaining popularity as a strategic sourcing model for forward-looking tech leaders.   

Traditionally, companies go to Asia to find the absolute lowest prices. However, the competition and increased global talent access have caused a reevaluation of alternative locations. As a result, organizations are increasingly looking towards Eastern Europe and Latin America as viable options for their nearshore outsourcing efforts. 

Project development requires real-time interaction between teams, so it’s a better investment to pay slightly more for time zone alignment, smooth collaboration, and, ultimately, far more beneficial outcomes. If this is what your ideal partnership looks like, get in touch to discuss our model. 



Written by
CEO at Relevant
My company has helped hundreds of companies scale engineering teams and build software products from scratch. Let's connect.

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