Nearshore vs. offshore software development: 5 tips to choose your IT vendor wisely

Technology leaders today have a host of options for building their business-critical software products. But with increased competition to recruit and retain top technology talent, choosing how — and where — to build productive software teams is as difficult as ever.

According to Statista, Enterprise IT spending is expected to reach $672 billion globally in 2022, an increase of 11 percent from the previous year. In the U.S. alone, as reported by the Bureau of Labor Statistics, employment needs for software developers are projected to grow by 22 percent from 2020 to 2030, with an average of nearly 190,000 anticipated openings each year. 

A recent McKinsey study points to critical future workforce needs that intensify the demand. Survey results show that almost 90 percent of executive respondents say their organizations face skill gaps, either now or within the next five years. And the areas reported to have the greatest need are data analytics and IT, mobile and/or web design and management.

Over the past decade, software delivery outsourcing has become an essential process adopted by many successful companies seeking to scale their operations by partnering with a product design and development firm. Outsourcing software development or accompanying IT ventures has become one of the essential methods for optimizing an enterprise’s software production and expenditures.

As part of the worldwide trend towards outsourcing, offshore and nearshore software development outsourcing has earned special attention from entrepreneurs and technology leaders. This subcategory of outsourcing gives businesses exceptional benefits and possibilities to grow with minimum expenditures. 

Let’s dive into the details of trends within outsourcing digital product development.

Benefits of outsourcing software or product development

Innovation and advancements in technology, changes in the way companies operate as an outgrowth of the recent pandemic and increased remote work arrangements, and increasing industrial applications for technology all increase the urgent need for software development and delivery. 

Timing and efficiency are critical elements that outsourcing addresses, whether the partner is located offshore or nearshore. Outsourcing also provides additional benefits:

• Cost-effective solutions
  Companies are faced with competing needs in software development: getting the details right and maintaining velocity to stay ahead of the competition. Recruiting, hiring, and equipping an in-house team is a costly and time-consuming proposition, especially as average salaries in the U.S. for software developers well exceed $100K. Outsourcing, whether offshore or nearshore, offers a means to save on your finances while achieving high-quality, timely results. 
• Extensive talent pool
  In the U.S., demand for software development talent outstrips the available candidate pool. On average, 65,000 computer scientists and software engineers graduate in the U.S. annually in recent years, a number that falls far short of the projected 400,000 openings. Outsourcing either offshore or nearshore expands the accessible talent pool exponentially. Handing over the creation and management of products and services to a team of offshore specialists increases the chances of choosing the right talent from this significantly larger group. Experience shows that popular offshore and nearshore destinations boast large numbers of tech experts producing sufficient quality work to meet requirements.
• Flexibility and task-specific specialists
  Offshore and nearshore projects enable technology leaders to hire experts for a specific project for short- and long-term involvement. Outsourcing provides the flexibility to ramp up for a product launch or scale back as needed. Tapping into the abundant global or nearshore talent pool increases the ability to find the right solutions architects or highly trained specialists needed for any IT project. 
• Faster recruitment and results
  Driven by speed to market or the speed to stay in the lead, timing is key in creating the team to get the job done. Adding to or building an in-house team takes time at every stage, from recruiting to hiring and onboarding; and a comparatively limited talent pool makes the task more challenging and time-consuming. Choosing to outsource expedites the process, leveraging the resources of a complete team structure including developers and managers that are immediately available and experienced in delivering results rapidly.

Read also: Managed IT services benefits and advantages

Which is better: nearshore or offshore software development?

Offshore software development is delegating the development of digital products and services to a software development company, often located in Europe or Asia, and usually at a lower cost of delivery, when compared to the U.S. As a rule, an offshore team can manage all the processes, including the development, testing, maintenance, and support. Depending on how much you want to delegate offshore, this range of responsibilities might vary, providing a reliable method of creating the product efficiently.

Nearshore software development, or “nearshoring,” is the delegation of business processes, especially technology companies, to a team of experts from a geographic location that closely aligns with U.S. and Canadian time zones. As a rule, the company outsourcing its services has some linkage to the nearshore outsourcing companies it outsources to, which may include cultural, linguistic, social, and political similarities. For North American companies, Latin America has become an increasingly attractive nearshoring location. 

Nearshore outsourcing helps companies reduce costs on development while also being able to collaborate throughout most, if not all, of their working day. Thanks to a growing number of technology specialists in South America with substantial expertise, the result is a quality software delivery team that’s easier to collaborate with in real-time.

Read also: Metrics that matter: how you should be measuring agile

Comparing nearshore and offshore software development

Nearshoring and offshoring, the two colossal mainstays of the modern culture of outsourcing, Let’s take a peek at how nearshoring and offshoring differ, have their similarities, differences and devoted supporters. Let’s take a look at the significant points where they differ.

• Geographical proximity
  North American companies choosing to employ nearshore outsourcing to Latin America enjoy significant benefits related to geographical proximity, as compared to working with geographically distant offshore sources several time zones away.  
• Compatible time zones
  Time zones that are aligned between North and South America, separated by only a few hours at most, allow partnering companies to have optimal opportunities for smooth collaboration. Getting in touch in real-time is easier than when separated by 10 or more time zones in offshore arrangements. More effective communication and higher productivity result.
• Culture and communications
  Cultural and language considerations affect offshoring and nearshoring operations. Many cultural influences are shared between North and South America, smoothing the path for connection and mutual understanding. English is widely taught in public and private schools, as well as higher education institutions in Latin America, and English proficiency is a prerequisite for most IT professionals.
• Reduced travel time
  Although travel to the delivery center may be rare, working with a nearshore provider rather than an offshore provider substantially reduces travel time and associated expenses should in-person meetings be required. Nearshore business representatives can connect with each other within only a few hours of travel time.
• Cost
  Nearshoring to Latin America offers companies the ability to delegate work to experienced specialists at a lower cost than hiring an in-house team. As compared to offshoring, individual rates vary across different regions.
• Experienced Talent
  The offshore talent pool is vast, with virtually unlimited potential for finding specific talent attributes. Narrowing that scope to nearshoring in Latin America reduces that pool somewhat, but still provides a rich supply of experienced software engineering talent. Both options offer advantages. Many organizations find value in a distributed team to align the advantages of a larger talent pool or closer geographical resources where they are needed the most. Your best solution will depend on the goals of your organization.

Due to the similarities mentioned earlier, it’s easier for businesses to communicate with the nearshore development company that builds software – an overlap between languages, time zones, and other critical factors facilitates the connection between companies. Nearshoring is especially effective for essential IT processes, making nearshore design and development notably valuable and increasingly popular.

What about the good old offshore software development?

Another popular and reliable method of creating the product efficiently and cheaply is offshoring. Offshore software development is the process of delegating the development of products and services at low cost to a company located in a faraway country. As a rule, an offshore team can manage all the processes including the development, testing, maintenance, and support. Depending on how much you want to delegate offshore, this range of responsibilities might vary. 

Offshoring features an abundance of savory benefits that tech-savvy entrepreneurs can’t get enough of using. Let’s take a closer look at each of these advantages: 

• Cost-effectiveness 

Offshoring prevents companies from spending lots of money. Cost reduction includes the expenditures on salaries and the recruitment process. However, while choosing offshore development will help you save on your finances, opting for nearshore software development is resource-intensive in terms of managing and maintaining an IT-enterprise using the in-house format. Saving on these critically important aspects of the company’s performance helps businesses greatly optimize their processes and reach the break-even point. 

• Bigger talent pool 

Handing over the creation and management of products and services to a team of specialists based offshore increases the chances of getting a larger number of talents. It’s not that the experts in your country are less professional – going offshore and nearshore expands the accessible talent pool exponentially. As experience suggests, a popular offshore destination boasts not only sufficient quality of the work done by its tech experts, but also the quantity of these very experts.

• Task-specific professionals

Offshore projects enable entrepreneurs to hire experts for a specific project and short-term involvement. For example, if you encourage IT experts to work in the architecture industry, the chances are that you will most likely fail without the involvement of proper specialists.

Comparing nearshore and offshore software development

Four tips for choosing the right nearshore software development company

Selecting the right vendor to be your outsourcing partner is a significant decision that could shape the further success of your business. 

Based on this, you must know the key recommendations for deciding what vendor you should choose.

1.Identify your primary technical needs

Your company’s technical needs should determine your choice. Decide for yourself the principal technical goals and objectives of your business and use this information as the groundwork for your venture for quality nearshore software development services.

2. Check the vendor’s experience

After you’ve started considering a vendor, identify their strengths and areas of special expertise. Consider their level of experience and what the vendor is capable of offering you in the long run. Are they experienced in handling all aspects of the process, including paperwork and legal points as well as security practices to protect sensitive information?

3. Clarify the intended scope of the engagement

Consider whether the vendor will be working on an enterprise-wide project or a small one. Determine if the outsourced team will be involved in the development and management of your other projects. You may find benefit in choosing different delivery locations for different aspects of the product suite.

4. Culture and work environment

Even if the company’s culture and vision is similar to yours (as you may remember, this is one of the critical benefits of nearshoring), there’s always the inside, specific culture of the company itself that you should consider. Also, the work environment as part of the company’s culture is a particular, distinct facet that requires your attention and careful consideration. Ensure that their flexibility aligns with your needs and expectations and that technical and language proficiency meet your standards.

In conclusion: Nearshore vs. offshore software development

Outsourcing software development, whether nearshore or offshore, has proven to offer cost savings and substantial benefits in increased efficiencies.

Your decision to partner with a team from Latin America, Europe, or another part of the world depends on your priorities, goals, and budget. You may even choose a combination, perhaps working with a Latin American partner to develop the product and a testing team based in Europe, to provide nearly a full delivery cycle within 24 hours.

Forte Group recognized the advantages of a growing tech pool in Latin America and seized the opportunity in 2020 to expand into the region. Because our resources are global, we can offer you both nearshore and offshore resources for your development projects. Ready to explore software development resources in Latin America? Get in touch with one of our product strategists, who can recommend the talent mix best suited to handle your technology initiatives.