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Why nearshore software development is the most cost-effective solution for business

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Ignacio Pascual · Nov 25, 2020 5 minutes read

When you’re in need of an outsourced team of software developers, you usually have one of three options – onshore, offshore or nearshore – each offering varying pros and cons generally related to cost and location: 

Onshore software development is usually the most expensive option because it requires you keep your outsourced team of developers in the same country. Though you may be able to easily meet face-to-face if the outsourced team is in the same City, State or Region, the higher costs that come with paying a local company are often untenable for U.S. based businesses, especially startups.

Offshoring – moving a company’s software development overseas – has been the favorite alternative for years because it is a fraction of the cost compared to onshore development. However, offshoring doesn’t come without problems of its own. 

Working in different time zones, long international flights for on-site meetings and little control over the development process are some of the most common headaches companies experience when they contract offshore.  Additionally, if you have a big project with multiple teams, having another team too far away can be counterproductive to the workload.  

There’s a third option that often provides the best of both worlds for your business – Nearshoring. 

The advantages of Nearshore software development

Nearshore software development is the outsourcing of development to a company that’s geographically close to the country where your business is headquartered,  usually taking just a few hours to visit by plane. 

While geographic proximity is the main driver, it isn’t the sole advantage for nearshoring. Let’s take a look at all the major benefits of this type of software development:

  • First, in the case of most nearshore business relationships the difference in time zones becomes minimal or likely non-existent. This makes coordinating efforts between internal and external teams considerably easier.  You’ll have quicker access to nearshore development team members to handle situations that arise since you’re all working on similar schedules likely within the same time zone.  Allowing for greater coordination among spread out teams gives your project manager more control over the entire development process as a whole. 
  • Second, geographic proximity can lend to the reduction of language and cultural barriers that often exist when outsourcing software development overseas.  Since companies who nearshore often do it in the same hemisphere, many traditions, holidays and languages are shared or are at least familiar to both teams. For instance, most Americans will be more familiar with Latin American cultures and customs than those in far-off countries in Asia or Eastern Europe. This cultural connection can help dispersed teams bond which increases productivity.  
  • Third, companies that nearshore can take advantage of trade agreements and close economic relationships between countries in the same region. This helps you avoid accounting and compliance headaches when contracting software development outside of your home country. 
  • Finally, in most cases, nearshoring can be highly competitive in price or more affordable than offshoring, depending on the region where your nearshore team is located. For example, according to software outsourcing insider data, developer rates in Latin America are comparable to those in Eastern Europe and Asia.  

What to consider when finding the right nearshoring option for your company

When mulling over your options for nearshoring software development work, it’s important to take a few things into consideration: 

Firstly, because of the physical distance between you and a nearshore development firm, it’s more difficult to interact and see how they work during the business courting process. To help you get a better understanding of their team’s talent, work ethic and ability to deliver, you should actively seek referrals and case studies from other companies that have used their services. You can start your search on the nearshore company’s website but don’t be shy about asking for a list of previous clients that you can contact independently to get the information straight from the horse’s mouth. 

Another important consideration when coordinating with dispersed, international teams is hiring a nearshore company that enacts strong data protection and cybersecurity methods, especially when it comes to developing products and services in a highly competitive industry. You can start by ensuring your nearshore software developers are compliant with major international data protection laws including the European General Data Protection Regulation (GDPR) or the California Consumer Privacy Act, or CCPA. Knowing that your nearshore team takes steps to protect the data and information of your company and its customers will provide you with priceless peace of mind. 

When taking into account all factors of software development, it becomes clear that nearshoring provides a highly cost-effective solution to onshoring while at the same time offering added benefits to traditional outsourcing.  These benefits include closer geographical proximity, ability to work in similar time zones, cultural and language similarities as well as conquering compliance issues with economic relationships between countries in the same region. 

With all of this in mind, it’s easy to see how nearshore software development is the most effective solution all around. 

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