6 Reasons for Nearshoring

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Have you thought about Nearshoring your software development? Let us give you six reasons why this could be a good fit for your business.

Many companies use only their own internal resources for developing software, especially when only for themselves but also when they sell on the finished product.  Their own people do a perfectly good job and there are not enough gains to be had from hiring external agencies to do it for them.  There are also enough CIOs who are not convinced that an external agency can produce the same quality for at most the same price as they do it - i.e. that there is a competitive advance to it.

 

Add to that the bad press that outsourcing received (and still does) about unkept promises, low standard of work, slave labour, lack of project control … the list goes on… and it’s not surprising that some are opposed to outsourcing!

 

If you go far enough back in the histories of most countries, each of them has been opposed to any form of outsourcing at all, talking about industry in general and when their own domestic economics has taken a downturn.  Even now, when most are accustomed to outsourcing, there is often a distaste associated with outsourcing - for the reasons given in the previous paragraph.  Several of the reasons that outsourcing far off, though, it turns out can be greatly reduced if not eliminated by “near-shoring” - outsourcing to somewhere closer by.  Both are outsourcing but distance is key here.

 

Why should distance be a factor, really?  In this day and age, the world keeps appearing to be shrinking constantly.  So, what makes distance still so much of a factor?  It turns out that even simple things like visiting your outsourcing partner are important.  In IT projects (and many others!), it is also important to be able to communicate easily and frequently and this gets increasingly difficult not just with distance but with different languages, cultures, time zones and other things. Modern telephony overcomes much of this but culture remains a key factor for instance.

 

Language/Cultural similarities

With the risk of repeating myself, when you have to work with distant countries, language can be a big issue when they are not your own native speakers. When you nearshore, however, providers are highly proficient in their neighbours’ languages and, generally everywhere now, English. Thus, when you’re talking over the phone or exchanging emails, the quality of that exchange is much higher.

As also elsewhere referred to, holidays tend to be similar, especially when all the countries involved share common religions and, albeit to a somewhat lesser extent, histories. These similarities make common work patterns possible. So, as is becoming clear, nearshoring has become the partial cure for all this, as travel is easier and faster, cultures closer and often even the same language, time zones and much more. 

 

 

 

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The key to nearshoring is how close your outsourced team is to you and how important that is to you and your business.  Is that all, though?  Here, we’ll more closely examine the arguments:

 

  1. NEARSHORING IS CHEAPER

What?  Wasn’t the whole point of outsourcing to be cheaper?  It turns out that though on paper outsourcing afar looks cost-effective, there are hidden costs associated with losing control of project execution, quality, timekeeping, costing and even coordination between teams or departments. Additionally, ‘Third World” wages are rising rapidly - Chinese wages at between 15 and 20 per cent per year, for example - because of the increase in demand and their own insufficient supply of skilled labour, as well as global pressure to improve all of their working conditions. Nearshoring provides an option to still have lower labour costs, for example, but still deliver on time and allow the flexibility of a greater available workforce. There is still a shortage of IT professionals in Western Europe particularly and the ever-rising cost of hiring them, nearshoring gives you access to a cheaper workforce relatively closer to hand and similarly (if not even higher!) skilled. With IT talent supply shrinking and the demand for it ever-growing in the West, its price is constantly rising.  So why not look to the nearest places to restore the balance?  Similarly, low costs per hour but far less travel (and even often served by the budget airlines!), cultures westernising all the time, with an excellent standard of English now, all means that nearshoring not only makes financial sense but can even improve your final product and offer better service.

  1. NEARSHORING MEANS BETTER ACCESS TO MORE EXPERT KNOWLEDGE

More often than not, if you’ve started considering outsourcing, there’s a skill or two your company is lacking. You’ve advertised locally - even nationally - and, still, come up dry. Even if you’ve hired the necessary skills, they don’t stay with you long - you constantly need to either pay them more or provide other perks - or even challenges. Nearshoring solves this by offering you professionals in almost all technologies - and no less up-to-date - right away, sharing both the same hours and work culture as you. You can now actually communicate effectively, free to leave your agreed portions of projects to the experts you know can get them done and concentrate yourselves on those parts you do best.

Up until now, one of the big advantages of offshoring to India, China or the Philippines has been the access to highly qualified staff. However, as the U.S. starts exploiting Latin America and Western Europe uses Eastern European labour, each is discovering a rich pool of highly-educated and skilled workers. The universities in Columbia, Panama and most of the Eastern European countries have high reputations in academia, with ever more students from the United States and Western Europe respectively using them. Also, many academics on both sides of these divides have already studied in these destinations and understand the needs of their richer counterparts.

Technological Infrastructure

Ten years ago now, Latin America and Eastern Europe overtook India’s growth in outsourcing facilities. Latin America still continues this trend.  Eastern Europe also benefits from its socialist past in this respect, as education and technology were both highly valued by their regimes at the time. Thus only now is Western Europe catching up with the internet speeds enjoyed in Eastern Europe for the past twenty years and more whilst they are also investing in improved data and telecommunications centres.  Indeed, Europe’s super high-speed internet network of the future is almost borrowed from the East.

  1. NEARSHORING COMPLEMENTS YOUR OWN CAPACITY

We all know when certain projects are or get bigger than we can deliver. Trying to motivate your employees to deliver in these circumstances gets increasingly difficult - especially if it starts getting repetitive - and detracts from the work you hired them to do originally. Nearshoring IT projects or parts of them alleviates this, allowing you to direct your own staff back towards what you originally hired them for. This should immediately lift their spirits and increase efficiency.

  1. NEARSHORING TO THE RESCUE!

Has every project you’ve ever started come to successful fruition?  What have you done when things have gone wrong, especially on important projects or within key functions? You have to get this solved before your business fails! Hiring more capable staff may be impossible and is certainly expensive - all for a short time.  The use of a nearshore partner means you can bring in their expertise when it’s necessary for a fresh perspective on maybe old problems and for different expertise where yours falls short.  That way, your clients are still ensured your quality, dedication, your promise to deliver and you can go back to normal when your own crisis is over. 

  1. NEARSHORING TO MAKE YOU COMPETITIVE

Your IT nearshoring partner will bring in fresh experience with new technologies, verticals, other partners and hints and tips concerning anything from legalities to logistics to, even, languages (computer, of course!). This brings its own challenges, however.  You need more organisation and better preparation for sprints. Thoroughly think through your project beforehand, plan it and talk it through with your nearshoring partner. This will not just enable you to deliver the best solutions, keep your customers happy and thus slam down the competition but keep this going indefinitely.

  1. WORKING TOGETHER

Modern communications allow disperse teams to work together remotely via telephony, video-conferencing, messaging and a host of other technologies so, again, what’s the big deal still about working together?  The fact is that, though you can leave remote teams to get on with their own work (or you should be able to!), it isn’t that simple.  Conference calls do require people to be working at the same time and that makes outsourcing to the other side of the world impossible and hence rules out most of those “cheap” countries. Leaving messages still takes a day for one round trip. The alternative is to work on partial shifts - half your day in your own time zone and half in your outsourced … and that is hard to keep up! North and South America share the same time zones but Europe would need to use African labour for the same effect, which still isn’t ready.  Nearshoring offsets that with a maximum of maybe three time zones difference.

Security

Part of working together is being able to trust that partners will work as securely as you do. Across Asia, theft of IP’s, ID’s and intellectual property still goes unchecked.  However, with many Eastern European countries seeking to join the E.U. and the remainder seeking at least to be able to trade and similarly Southern American countries wishing to trade peacefully with Northern America, their Free Trade Agreements should go a long way towards securing information security near to home.

Eastern Europe is as good as peaceful and Southern America is catching up.  They are all also looking towards political stability with their larger, more powerful neighbours, which is something that cannot be guaranteed when outsourcing to the other side of the world. It is essential when outsourcing that at least national stability is great enough to ensure that your outsourcing provider can provide your service unhindered. That again is far more certain when nearshoring.

Trade regulations and compliance

The same moves towards EU membership and peaceful American trade mean that nearby countries are looking to marry their economic systems and stability.  Especially with EU membership, candidate members of the Euro have to keep their economies very tightly in line with the rest of Europe.

Staff turnover

One last factor here is staff turnover.  There has been some history of high attrition in Asian economies, which doesn’t help build confidence.  Again, the cultural similarities in American nations and those within Europe help avoid that, as do the family-oriented culture of many of these countries.

ELDERS CONCLUSION:

Nearshoring has clear benefits - more similar cultures and timezones, business cultures coming closer together, similar economic outlooks in many cases, similar levels of security (or, at least, rapidly approaching).  You no longer have to look towards the other side of the world for cost-effective outsourcing; you can find it literally on your doorstep!  The one caveat is that your doorstep will likely soon be incorporated into at least part of your house, the warning being that those differences that currently mark them out may yet disappear - or will they?

 

By Elders Marketing Team
10/13/2021

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