Quality software development is a time-consuming process for any company, big or small. Businesses confront the challenge of finding skilled employees while creating new products, whatever they are: a mobile application, website, or custom software development.
Large corporations all around the globe have realized that outsourcing is a great way to save expenses while assembling a decent team of specialists.
Recent trends show that IT nearshoring is gradually replacing traditional offshore outsourcing. In this article, we’ll go through the nearshoring, its benefits and compare it to the other options for workflow management.
What Is Nearshoring?
Nearshoring is the practice of outsourcing business processes to a company located in a neighboring country.
Such outsourcing is a perfect alternative to offshoring since it reduces time zone differences and cultural barriers between collaborating organizations.
The delegation of IT services from one company in Germany to another in Poland might be an example of IT nearshoring.
Alternative Ways to Managing Your Business
Currently, there are many approaches to setting up business processes in a company. It’s easy to become confused among the various terms used to characterize these methods of business management. We will highlight the several options available.
Outsourcing is a long-term cooperative arrangement between two businesses in which one transfers a part of its work to the other for mutual benefit.
When it comes to moving business processes to another company, the notion of outsourcing is fundamental and comprehensive. We mean that outsourcing is a generalizing concept for all its types.
Outsourcing can take many forms, depending on the needs of the business. We have already mentioned one of its variants – nearshoring. Following that, let’s look at the other types of business process outsourcing (BPO).
Offshoring is a type of outsourcing in which one company delegates its workflows to a geographically distant country.
Although this form of outsourcing is quite risky – due to the time zone variations, language barriers, and cultural differences, companies often choose this option because it is cost-effective.
Onshoring is a type of outsourcing in which one organization transfers part of its work to a BPO company located in the same country.
Often, the delegation of business processes takes place in another city.
The risks with this approach are lower, but the expenses are considerably higher.
Multisourcing is a form of outsourcing in which one company delegates its business processes to several contractors.
Large corporations typically use this type of outsourcing to minimize risks if suddenly something goes wrong in the workflow of the BPO services company.
Co-sourcing is a method of setting up business processes that combine the work of internal staff and an outsourcing company.
Rather than assigning duties to outsource completely, working on shared projects reduces potential pitfalls and enhances the transparency of operational issues.
Outstaffing is the temporary employment of workers of another company on a commercial basis.
In this case, the outstaffing service provider is responsible for the labor search, training, and registration.
Workers are formally classified as employees of a third-party firm while working for you.
The Advantages of Nearshoring
Geographical proximity is an absolute advantage in case you need to have a live meeting.
For example, you can fly directly from the United States to your IBM BPO company in Mexico. In addition, the close location of the countries will allow you to conduct a variety of team-building activities, which will have a positive impact on relationships and the quality of work in your organization.
Same Time Zone
Nearshoring is an excellent way to save time on product development because the time difference is either non-existent or minor with this sort of collaboration.
Due to the identical work schedules, you can resolve any operational matters in real-time via Skype calls.
This point follows from the previous two. Geographical and time proximity is the key to the rapid establishment of communication, and consequently, the immediate solution of potential problems.
Another advantage of nearshoring is the similarity of cultural values. It will eliminate cultural misunderstandings and foster constructive dialogue, making cooperation simple and effective.
Language Closeness or Excellent English
It often happens that neighboring countries know each other’s language, or at least understand each other. Otherwise, excellent command of English is essential for mutual agreement.
Nearshoring provides favorable conditions in financial means. Usually, the money aspect is fundamental in choosing this approach to work.
Being able to reduce expenses by hiring staff in a neighboring country is another advantage of nearshoring.
Neighboring countries’ data security regulations are typically equivalent or at least share certain aspects. It guarantees that information about your customers, bills, and projects will remain in private access.
Wide Choice of Talents
Your country may lack qualified professionals, or the cost of their services may be high. In this case, nearshoring is an excellent alternative. For example, Eastern Europe is famous for its large number of skilled developers.
Nearshoring vs. Outsourcing
Outsourcing is a general term for all available methods of delegating business processes to other companies. Businesses usually use it to reduce expenses on hiring staff.
One type of outsourcing is nearshoring. Let’s check what distinguishes these two concepts.
|Geographical location||Nearshoring involves delegating the work of one organization to a company in a neighboring country.||When outsourcing, the delegation of business processes can take place both within one country and abroad.|
|Time zones||Companies cooperate only in close or identical time zones.||Companies can cooperate in the same time zone or different ones.|
|Financial expenses||Staffing expenses are lower than in your country. Travel costs to a neighboring country are also affordable.||Expenses for staff, travel, etc., vary, depending on the chosen outsourcing model. And the most popular types of outsourcing are offshoring, nearshoring and onshoring.|
|Cultural features||There may be insignificant cultural differences.||The cultural characteristics of cooperating companies may vary depending on the model of collaboration. For example, when onshoring, there are no cultural differences at all.|
|Language||Neighboring countries may know or understand each other’s languages.||Linguistic similarities or differences depend on the type of outsourcing.|
|Talent pool||The search for talented employees extends only to neighboring countries.||The search for talented employees extends to all countries as well as to one’s own.|
|Management options||You have the opportunity to fully control the process of the contractor’s work and monitor each step of the project.||With traditional outsourcing, you have less control over all processes and projects.|
Nearshoring vs. Offshoring
Nearshoring and offshoring are popular methods of organizing business processes in companies. Both types of outsourcing have their advantages and disadvantages.
Check out the comparison table below to figure out which option is best for your business.
|Geographical location||The close geographical location is a guarantee of holding live meetings, if necessary.||The collaborating countries’ distant geographical locations make live meetings either impossible or difficult to organize in general.|
|Time zones||Close or identical time zones promote real-time communication and a full match of work schedules.||Significant time zone differences can complicate online meetings, resulting in poor communication quality.|
|Financial expenses||Staff costs are usually higher than in offshoring. However, travel and other hidden costs are lower.||Staff costs are usually minimal. The reason for this is that companies tend to offshore to countries with significantly lower salaries. However, if you need to visit your offshore company, travel costs are high.|
|Cultural features||Neighboring countries have better mutual understanding due to the similarity of cultures.||There are significant cultural differences in remote countries, which may lead to misunderstandings.|
|Language||Neighboring countries understand each other’s languages better.||Remote countries may face language difficulties. Although if the staff is fluent in English, no problems will arise.|
|Talent pool||The talent pool is limited to neighboring countries.||The talent pool is vast, which enables to locate professionals anywhere on the globe.|
|Data protection||High guarantee of data protection.||Risks of data leakage.|
Here are the pros and cons of nearshore and offshore outsourcing for you to consider:
When analyzing current trends in the organization of business processes, the need for outsourcing is growing. After all, by delegating work to other companies, businesses successfully achieve their goals, such as decreasing expenses, finding notable talents, or the desire to create a product in the short term.
In this context, nearshoring can effortlessly meet the needs of businesses. This type of outsourcing allows you to reduce costs and time for software development while creating a comfortable environment for employees.
We hope we have explained the various available types of outsourcing and the advantages of a nearshoring model.