The Complete Guide to Nearshoring - Benefits, Challenges and Starter Checklist

Has it ever occurred to us how big companies utilize nearshoring to keep making big? 

Innovative companies in the US are exhaustively employing smarter and more agile ways of optimizing costs, scaling operations and hiring top resources. One strategy that is gaining increased importance over the years is Nearshoring – a practice of outsourcing resources for business operations and services from nearby or neighbouring countries that share similar time zones, communication dialects and cultural interests. This brings several far-seated teams into the proximity of the organization, offering advantages unparalleled to outsourcing.

Nearshore software development eases up the process of finding and using top-notch developers that are aligned with the organization’s requirements. With global disruptions on the rise like supply chain bottleneck, rising outsourcing costs, geopolitical affairs, nearshoring is emerging as one of the more resilient, robust and strategic alternatives.

The following guide dives deep into what nearshoring really is, what benefits it offers, the challenges to steer clear from and a starter checklist for companies exploring nearshoring. 

What is Nearshoring?

Nearshoring is an alternative of the traditional outsourcing model, where companies hire and delegate services to employees from a nearby country or region, primarily with a similar timezone and geography, rather than choosing a less expensive model with compromises. For example, a software development company in the US would nearshore to neighboring countries like Canada and Latin America, benefiting from reduced cost of labor and timezone similarities, rather than hiring more expensive resources from Europe or Southeast Asia.

But what is nearshoring in context to offshoring and onshoring in the US?

Let’s break it down.

Offshoring refers to a model where resources and services are sourced from distant and far away countries like India, Philippines, etc. Here, the cost of labor is very low but the company has to compromise with varied timezones, cultural differences and language barriers.

Onshore model refers to hiring services and resources domestically, from the same country. This means exact or similar time zones, better understandability and business affinity, yet costing way more than offshoring.

Here’s where nearshoring comes in to offer a sweet spot – a mix of onshore and offshore models, nearshore enables companies to maintain close proximity for better control and communication, all while keeping the costs under the budget.

Key Benefits of Nearshore Software Development

With the nearshore strategy gaining rising interest within the custom software development arena, it is clear that the benefits it offers are unparalleled. Below are some of the top benefits of nearshoring for organizations looking forward to scale their business.

Geographic Proximity 

The prime benefit of nearshoring software development is the ease of geographical proximity that enhances collaboration and communication. By being in the similar location, companies and nearshoring service providers can respond promptly to each other, reducing any down time involved. This helps all parties concerned to work closely as a team, be available off-site and on-site, quicker project completion and easier cooperation.

Time Zone Alignment

When working with nearshore partners for software development, time is of the essence. By being in the same or similar timezone where the work hours generally overlap, it is easier to facilitate real-time interactions and actions, meetings and discussions. By employing nearshoring strategies, companies improve on organizing meetings and re-establishing connections with old clients, better engage in communications and problem-solving concepts, bringing every project back on track.

Cultural and Language Affinity

Nearshore software development often allows companies to hire software developers that are aligned with the way these organizations work and understand the communication proactively. Besides the geography, management style and company processes are factors that account in reducing friction. With a suited cultural fit, it is easier to align goals and expectations, avoid miscommunication and approach work as a single unit.

Cost-effective Access to New Talent Pool

With software development nearshore strategies in place, organizations can bypass borders and find/hire technical resources from specific tech stack easily, that are otherwise unavailable in their region. While it might not be as cheap as offshoring from low-cost economy countries, it still offers valuable resources, all while saving considerably on labor, overhead costs and infrastructure.

Faster Time-to-Market

Nearshoring accelerates the entire software development process, allowing organizations to launch products faster in the market without the need of extensive marketing. With a streamlined and straightforward approach to development, nearshoring facilitates rapid release of new solutions, attaining competitive advantage in the growing marketplace. 

Major Challenges of Nearshoring and How to Overcome Them

Although it takes a sweet spot when it comes to outsourcing resources, the nearshore outsourcing poses some challenges for companies which need to be considered and overcome. Below are some of the top challenges companies face while nearshoring software development resources, and relatable solutions for each. 

Language Barriers

Yes, nearshoring brings cultural similarities together. But what if it doesn’t? 

Language barrier accounts for one of the primary concerns while nearshoring. Although nearer to the US than most other options, not all countries come with the same proficiency for English as them. Take Mexico for example, it has hundreds of top-notch resources it can readily offer to software development companies in the US, but the level of fluency in English and understanding the business requirements to the depths would still be questionable. This can cause lack of mutual understanding, ultimately affecting crucial operations and stalling business growth.

When evaluating nearshoring services, be sure to check the required proficiency in language and understanding. Look out for bilingual project managers and tech-ops that adapt well to the organizational structure and contribute optimally.

Team Integration, Cultural Fit and Rivalry

Team differences in nearshoring or offshoring, even if the smallest, can cause catastrophe within a team, impacting the overall product, efficiency and collaboration of the project. If nearshoring teams are not integrated and introduced to the existing team properly, the risk of unhealthy relationships within the team tend to rise, posing threats like uncooperative approach or unproductive culture.

This is why accurate staff augmentation for software development is crucial in nearshoring – it integrates new resources to the bigger picture of the organization and aligns requirements and budget with transparent options. Also, look out for cultural alignment during the interviews and conduct training sessions, workshops or meetings that boost the intercultural architecture of the business.

Legal and Regulatory Policies

Geographical proximity in software development nearshoring does not always equate to the country’s legal alignment and regulatory strongholds. Even nearshoring countries can vary vastly when it comes to frameworks like labor laws, intellectual properties, data protection policies and taxation. These differences, if any, create serious complications around hiring, particularly in sensitive industries such as healthcare, SaaS, fintech and education.

For example, a US software development company may find it easy to nearshore software developers from Mexico, but still may struggle due to the labor laws and data privacy regulations. If not accounted for, these small challenges can create compliance risks, IP disputes, financial penalties and what not.

To overcome these risks and steer a clear way, it is advised to work in tandem with the legal consultants that are involved, focusing on cross-border contracts. Choose nearshoring options with free trade agreements and protections laws such as USCMA for Mexico and Canada or EU member states. Clarify in writing, the ownership of the project, data handling techniques, confidentiality clauses and dispute resolution methods.

Your 6-Step Start Checklist for Nearshoring Software Development

Once you have decided on the model, it is time to get ready for nearshoring. Nearshoring requires strategic planning, careful partner selection, and structured onboarding. Below is a starter checklist.

Final Thoughts – The Incredible Journey to Nearshoring

We all know how nearshoring has emerged as a disruptive, strategic, future-proof solution for companies wanting to scale and expand quickly, reduce operational costs and improve team collaboration without the downsides of traditional offshoring. By leveraging this proximity factor and timings compatibility, businesses can now accelerate their processes with top-notch talent, with better control and faster launches.

While challenges might occur, they can effectively be managed and guided with precision. Unified Infotech has been at the forefront of offshoring and nearshoring strategies for a multitude of industries for over 15 years. With seamless collaboration, deep domain expertise and 24/7 availability, Unified is dedicated to help businesses accelerate their development cycles with transparency, flexibility, control and operational speed at which modern businesses scale.

If you are exploring nearshoring opportunities and want to integrate them with your business, consider implementing staff augmentation to stay ahead of the curve. Partner with us and leverage the best-in-class software developers waiting to help you in your business journey.