Nearshore Software Development: A Quick Guide

Quality Talent at an Affordable Price – that is what nearshore software development brings to the table.

There are no two ways about it. It is getting more and more difficult to get skilled workers for your software needs. Reports show that the shortage of available talent is expected to be 1.2 million by 2026 in the United States! It makes sense then to address this situation before it’s too late.

The solution? Nearshore software development involves outsourcing your software to skilled developers in a neighboring country. This is definitely worth considering. Nearshore software development services can offer a seamless blend of cost-effective, reliable, and bespoke application development. Let’s find out how.

What is Nearshore Software Development?

Nearshore software development is outsourcing your IT needs to developers within your time zone or in the same geographical region.
As per Forrester’s research, 39% of business leaders expect to use nearshore services. They will take full advantage of the cost-effective, skill-packed, and geographical perks available.

This is a clear indication that businesses are recognizing the advantages of outsourcing. Nearshore software development is a facet of outsourcing that has recently gained recognition. We will see some reasons why, but let’s first get acquainted with the different options you have when it comes to outsourcing.

What are the Main Types of Software Outsourcing?

Onshore, offshore, and nearshore are the three main types of software outsourcing. All three have their benefits and it’s best to assess which of them would best suit your business. Here is an overview of them:

1. Onshore Outsourcing

Onshore outsourcing is when you hire a partner from the same country as you. These partners provide convenience and seamless communication. There is no language barrier or cultural gap since there is zero to minimal difference in time zones. However, a significant drawback to this method is the limitation of domestic talent. This can lead to high developer rates and a lack of experienced talent.

2. Offshore Outsourcing

In this model, your development team belongs to a country halfway across the world. It is the most cost-effective model and hence the most popular one. Here, you can hire the cheapest developer within your quality range. The biggest challenge in this model is the time zone difference. You can assign work to the team, but you will get your results the next day. There is also the potential for language and culture barriers. This will add a layer of strain on communication. Another risk factor is the legitimacy of the service provider. Legal actions become difficult and costly due to different jurisdictions and laws.

Read more: Offshoring Software Development: Here’s All You Need to Know

3. Nearshore Outsourcing

Nearshore outsourcing recruits the help of partners from neighboring countries. These countries often have a less than 3-hour time zone difference from your home country. You can enjoy cost-efficiency while widening your talent pool. You can evade language barriers by picking countries that speak the same language. Geographical proximity and affordability are the main advantages of nearshore outsourcing.

Nearshore vs. In-House Software Development

These two software development services are as set apart as their names suggest. In-house services mean that software development takes place within the company. Nearshore services denote that the project will be handled by an outsourced partner in a neighboring country. There are five key areas where the difference between the two methods shines.:

1. Expertise and Skill Access

An in-house development team has the benefit of having your team members under one roof. It also brings an irreplaceable, in-depth understanding of your company processes. Yet, it may lack certain specific skills required to keep up with competing software needs in the industry.
Outsourcing providers, on the other hand, will lead you to an unexplored pool of specialized talent. This will bring a brand new and specific skillset to the project. You will also be free to choose a provider with experience in the domain relevant to you and for a specific project.

2. Control and Communication

Working with an in-house team has the opposite effect. You gain more open and clear communication with the development team. You also have infinite control over the team’s workflow and project progress, which allows you to oversee and make any adjustments before execution.
Working with an outsourced team can open up a few communication challenges. Although these teams will be in the same time zone as your company, there might be miscommunications due to cultural differences, language, etc. Another challenge is the lack of control over development processes. With the involvement of an external team, your control over the project will dwindle.

3. Cost and Budgeting

Outsourcing can offer cost savings for short-term projects, while in-house development has its benefits in the long run. With outsourcing, you can pay for the work done and cut ties. It will not include any long-term employment costs. With in-house development, on the other hand, comes the cost of hiring, training, and retaining staff, which can add up to a pretty sum. However, this can help you make cost-effective long-term plans.

4. Flexibility and Scalability

Outsourcing offers businesses the ability to achieve rapid scalability. It brings extra resources that can help upscale your company after project completion. In-house teams may not be as flexible. Of course, they can be scaled by adding new members, but this process will consume time and money.

5. Project Alignment and Company Culture

The last, but not least, a difference arises in project alignment and company culture. Outsourced teams may lack familiarity with your company’s goals and culture. This leads to misalignments between the development work and the company’s vision.
With in-house teams, this challenge does not exist. The teams are well-versed in the company’s culture and plans. This can lead to a cohesive alignment of development work with company objectives.

How does Nearshore Software Outsourcing Work?

Since we now know what nearshore software development is, let us now understand how it works. This development solution allows you to outsource your project to nearby countries. It functions as a channel for you to tap into resources in your geographical proximity. These development partners offer clear communication, effective workflows, and quality results.

Listed below is a brief overview of the steps involved in nearshore software outsourcing:

1. Choosing A Partner

Company owners conduct thorough screening to find the perfect partner. They select firms based on their expertise, budget, and project requirements.

2. Project Planning and Management

The company and nearshore partner will collaborate to draw a clear mark-up of the project. This will include key aspects such as project scope, timelines, and deliverables. Regular team meetings will ensure smooth alignment.

3. Project Development

The nearshore team will start working on the project using their expertise. They must ensure to leave enough room for flexibility and improvement. The convenience of proximal geographic time zones will allow for real-time collaboration.

4. Quality Testing

The nearshore partner will conduct regular quality checks. This will ensure that the software meets the optimal standard. During the team meetings, the nearshore partner can provide updates on quality.

5. Delivery and Support

After completion of the project, the nearshore partner will deliver the final perfected product. In most collaborations, it is agreed that the partner will provide ongoing support for the project.

What are the Benefits of Nearshore Software Development?

The nearshore software development benefits are vast. It includes financial savings, risk mitigation, and time efficiencies. Listed below are 5 significant benefits:

1. Wide Talent Pool

Hiring the best must be a top priority for your company’s needs. With nearshore software development services, you have access to a pool of untapped talent. These developers have the specialized skills your project needs.

2. Easy Communication and Collaboration

Due to their geographical proximity, there are fewer challenges of language and cultural barriers. This opens up the door for easy and effective collaboration. There will also be an overlap of business hours so that collaboration can happen in real time. Developers from nearshore countries can understand your business goals and expectations. This further enables them to communicate better and produce effective results.

3. Cost Efficiency

Hiring developers from countries with lower living costs is a major way of maintaining cost efficiency. If the project indicates a short-term development plan, then you can save extra money. Nearshore software development also helps save overhead costs. By relying on experts rather than in-house developers, you pay for quality. Traveling to nearshore countries is easier in case of any emergency or legal proceedings.

4. Frees Up Your In-house Team

With the project development task off their hands, in-house developers can focus on other core business functions. This will also reduce the workload on your internal team. Tasks like quality checks and bug fixing will become the responsibility of your nearshore team. This will encourage your internal team to focus on new projects with more value to company growth.

5. Scalability

A crucial benefit of nearshore software development is its ability to scale your development team. There are more chances of you finding quality talent in a bigger pool outside your country. There is also no need to set up an office space for your nearshore developers. These developers also work on a contract basis which makes scaling simpler. This implies next to no effort when it comes to recruitment and training.

How do Costs Vary between Onshore, Offshore, and Nearshore Software Development?

Nearshore software development benefits are many, regardless of the models. Your choice should depend on your specific needs, budget, and project requirements. The cost of nearshore, onshore, and offshore models significantly varies.

Onshore development is the most expensive. As it involves hiring developers from within your own country. There are also labor and operational costs in developed countries. This can be a heavy burden to companies, especially startups.

Consider the many costs involved in onshore sourcing:

• Staff earnings are considerably high due to the high cost of living in developed countries.
• According to the Society for Human Resource Management, staff recruitment costs in the United States average nearly $4,700 per employee. In Australia, the average cost to hire is $23,860!
• Maintaining facilities for a large staff is exponentially higher in developed countries.
• Liability cover, professional indemnity insurance, and other legal costs associated with maintaining staff.
• Software licenses, operating systems, hardware, software updates, and other IT costs can add up to a considerable amount.

The cost of nearshore development is moderate. You can choose to hire help from less expensive countries. Add to the benefits of outsourcing, which cancels out staffing, maintenance, and other costs; the cost of living is much lower than in developed countries, which means the software partner will be able to offer much lower rates. Although this might be slightly higher than offshore, the benefits of geographical proximity, time zone, and language make it a better option.

Offshore development is the cheapest option. You can hire developers from countries with a lower cost of living. This option gives you access to a wider resource pool and technology. The only drawback here is the difference in time zone and the miscommunication that could result because of cultural and language barriers.

FAQs on Nearshore Software Development

1. What is the concept of Nearshore?
   It is a type of software development that involves outsourcing tasks to neighboring countries. Developers from these countries work under the supervision of the parent company.
2. How is Nearshore software development better than Offshore development?
   Nearshore software development offers better communication and collaboration. It also mitigates any risks of fraud or misalignment with project development.
3. Which is the cheapest and most reliable software development model?
   The cheapest software development model is offshore outsourcing. However, the most reliable option is the nearshore development model. With closer proximity to your business, you can communicate in real time and take advantage of their knowledge of your culture and business methods.
4. What are the advantages of nearshore software development?
   The key benefits are: Cost efficiency, Better communication, Fewer language or cultural barriers, Easier travel, Scalability

Making a Success of Nearshore Software Development

This article has undoubtedly given you a lot of food for thought. Fingent can help. With operation centers in four countries and an active client base in more than 14 countries, Fingent has nearshore development figured out.

Fingent handpicks and trains over 600 qualified professionals who are experts in software development. We specialize in creating custom software for our clients and can quickly adapt to your business and communication needs. Give us a call, and let’s get the conversation started.