What is Nearshoring? Benefits and Nearshore vs Offshore Outsourcing

Nearshore outsourcing allows companies that need to outsource their business process to an offshore location to avoid moving their operations overseas. Find out the benefits of nearshoring and the differences between nearshore vs offshore. 

What is nearshoring?

Nearshoring or Nearshore Development is a model of outsourcing which allows companies to delegate business processes including software development to companies in the nearby countries.

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Nearshoring has been an effective model that allows companies the option to adjust their resources to improve productivity and efficiency while giving them the opportunity to focus on their core competencies. It allows businesses to save on direct and indirect recruiting and labor costs.

Benefits of Nearshoring

Nearshore is a trend with a granted type of attention. It works especially well in case of the companies, which need IT products like website or application but have nothing common with the IT sphere. These are the benefits of nearshoring:

Cost Reduction

Nearshoring allows you to considerably reduce costs in commercial real estate, offices and other related expenses, saving money for more business-critical tasks. 

When working with remote resources, your company can cut down on on-premise overhead with support brick-and-mortar costs. This is one of the main benefits of nearshoring.

Based on the country you are contracting your developers from, there can be substantial differences between charges. We are currently seeing approximately 30% to 40% cost savings with teams in Latin America compared to teams in the United States.

Nearshoring can be the best option if you want to find the perfect balance between the price and the quality. It might be a bit costlier than offshoring but owing to increased control, you can get a better outcome at the end.

Better Quality Control

When you offshore your development, the subcontracted team is located far away and you have limited access to them. Contrarily, when you nearshore, you are geographically closer to the team, perhaps just a short flight away. This makes it a lot easier for you to keep things under control. If you are planning to outsource your software development, it is better to closely monitor the process.

Extended Talent Pool

When nearshoring your development, you broaden your pool of talent by finding a more capable workforce for your projects. Latin America has succeeded to make its mark in the IT field. It has become a popular destination when it comes to nearshore software development. 

Better Communication (vs offshore)

Cultural and language dissimilarities can create substantial obstacles that are hard to overcome. It can result in problems with communication, delays, legal dilemmas, and so on. That’s why an increasing number of businesses are exploring nearshoring in Latin America as an easier way to outsource.

As the nearshore destination is close to your geographical region, there are often very few cultural differences. Moreover, nearshoring provides the benefit of the same language and time zones to your teams. As a result, it is easier for you to collaborate with outsourced specialists.

Easier and Faster Integration

When nearshoring your operations to a country where people have similar culture or language, you don’t have to wait for weeks before your subcontracted team integrates with your business processes. They can deliver you the best of their performance quickly.

However, it is significant that your nearshore partner has the same kind of technical know-how as your internal team. This will make the alliance more useful.

Similar Legal Background (vs offshore)

When it comes to software development, intellectual property (IP) laws are critical. As your outsourcing team is located nearby, they are more likely to know about your country’s laws. As a result, you will not land into any legal predicaments that could delay your project’s launch.

Nearshore vs Offshore Outsourcing

Offshoring is outsourcing that takes place across national borders, usually in a company that is farther away and production is much less expensive.

Nearshoring happens when an organization decides to transfer work to companies that are less expensive and geographically closer. Using this model allows businesses to move their operations to a closer, more cost-effective location.

This close proximity allows for fewer time zone differences, cultural discrepancies, and a greater level of control in decision-making processes. Many U.S. companies choose nearshoring to Mexico, and other Latin American countries.

The Challenges of Nearshore Outsourcing

However, to counter the benefits of nearshoring, this type outsourcing has its own set of challenges.

  • One challenge is that nearshore outsourcing requires companies to work closely with local partners who must understand the nuances of the company’s culture and business practices.
  • Another challenge is that nearshore providers often lack the same level of expertise as offshore providers.

This means that companies need to make sure that they choose an experienced provider that understands their needs.

Between nearshore vs offshore, which outsourcing option to choose largely depends upon your budget and the nature of your project. While making the decision between nearshore vs offshore, it is important to crystallize your expectations in terms of budget, complexity, and real-time collaboration requirements.

Nearshoring wih Agave Lab

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