What is nearshoring?

To be very direct: Nearshoring is when you outsource business activities, mainly in information technology, to countries closeby.

So, how is it different from offshoring? What are the pros and cons? Which countries can I use? Let's discuss that now!

Nearshoring VS Offshoring

As I said, nearshoring is when you outsource business activities to countries closeby (e.g. Poland, when in Europe). You might have also heard of "nearshore outsourcing", that’s exactly the same. It’s just another expression for nearshoring. 

The country you nearshore the software development to often has similarities to your country. Think of the time zone, shared border, economics, cultural similarities, etc. 

Offshoring, on the other hand, is the outsourcing of business activities to countries much further away (e.g. India). Companies opting for offshore outsourcing usually have a bigger monetary advantage but face complexities due to time zones and language barriers.  

Offshoring often means a significant gap in cultural differences, more travel, language barriers, and legal and tax issues.

DO OK, Software Services

Pros of nearshoring

So, now we know the difference between nearshoring and offshoring. But what are the pros of nearshoring? Well, it has a couple of pros:

  • Cost reduction: Although offshoring might be even cheaper, nearshoring is still very cost-friendly. Not only that, but it will also save you from having to hire someone yourself. Hiring someone comes with recruitment costs and will take a big chunk of your time to get your new developer up to speed.
  • Same time zone: By working with developers in a country closeby, you won't find yourself getting stuck with urgent problems. Sometimes, software breaks. When that happens, it is nice to have someone who can fix it right away. Using nearshoring, there will always be someone at the other end of the line.
  • Small cultural differences: Given the fact that you are closer to each other, you and your nearshoring partner will only face minor challenges due to cultural differences. 
  • You're closer: If a face-to-face meeting is required, it will be much easier to make a round trip when your development partner is only a one or two-hour flight away. Although one might argue that face to face meetings are not that required anymore. Recent developments due to Covid-19 have shown that remote work is very much possible and even helps businesses thrive from home!

Cons of nearshoring

Of course, nothing has only upsides. We have to be honest and look at some of the downsides of nearshoring as well:

  • Offshoring is cheaper: As stated earlier, offshoring is the cheapest outsourcing model in existence. If you're looking for the most inexpensive option, nearshoring is not the one.
  • Small cultural differences: You might notice that this is also a pro. You're correct. Compared to other outsourcing models, nearshoring offers fewer challenges due to cultural differences. But fewer doesn't mean there are none. Some might argue that challenges due to cultural differences, however small, can also be a con of nearshore outsourcing. 
  • Communications: Being in a different country comes with challenges in communications. It's just easier to communicate in-house. But again, the world has displayed remarkable flexibility during the Covid-19 lockdowns. We all now have a much better understanding of what it means to work remotely and how to keep communications going. 

Best countries for nearshoring

This depends on the continent your in. We’re in The Netherlands, so we are in western Europe. For a company situated in western Europe, you want to look for countries in Eastern Europe. Within Eastern Europe countries frequently used for nearshoring are Ukraine, Poland, Bulgaria, and Romania.

There are a couple of factors that you should consider before making your decision (besides pricing): 

Political Stability
Some countries are more politically stable than others. When looking for a nearshoring partner you should evaluate what the situation is in your chosen country. 

Communication
English is the main business language. Still, it is important to take this into account and look for a country with high-level English speakers. You don’t want anything to get lost in translation.

Regulations
GPDR, Security standards, laws, etc. These are all very important for every piece of software that is built here in Europe. Make sure that your chosen country has adopted every standard, law, and regulation that is necessary for your country. 

What should I do? 

Well, you have options. As stated above, there are multiple outsourcing models that you can use for software development.

When you're looking for the most inexpensive model, you might opt for offshoring. But remember, that particular model comes with a couple of challenges that might not be suitable for everyone.

If you're looking for a more flexible, but still cost-friendly model, nearshore outsourcing is the best option for you. 

Still not sure? Let's talk about how to make your ideas tangible with nearshoring. Schedule a short call or leave your questions behind so we can have a chat with you!

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