Top Reasons Companies Choose to Outsource Nearshore

Why Companies Choose to Nearshore Outsource

Looking to outsource software development talent to keep up with growing consumer expectations and business costs? You aren’t alone – over the last decade more businesses have been outsourcing software development to reduce overhead, increase velocity and drive a faster Return on Investment.

In fact, more than 60% of the total Outsourcing industry consists of IT workers. If you’re looking to hire outside Development talent, it’s important to understand the basics of Outsourcing and what makes Nearshoring and Offshoring so different.



What Is Offshoring?

When a business offshores development work it partners with a development group overseas. Usually, these offshore suppliers are in Asia, (India, Afghanistan, Malaysia, China, Vietnam and the Philippines), Eastern Europe (Russia, Romania, Bulgaria, Armenia), or Africa (Morocco, Kenya and South Africa).

What Is Nearshoring?

When a business opts to use a nearshore development firm instead, they work with developers in nearby countries located closer, including Mexico, Brazil, Costa Rica, or Argentina. The advantages of nearshore includes shared time zones, more similar cultures, and usually, fewer language gaps for a faster Return on Investment.

U.S. and Canadian businesses looking to reduce costs and increase velocity are more frequently looking Nearshore. Here are five major reasons why:

Video: 3 Reasons to Choose Nearshore Software Development Outsourcing

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Five Reasons Companies Choose to Nearshore Outsource

1. Proximity is important.

Since 2005, offshoring numbers have been on a swift decline while Nearshore outsourcing numbers continue to trend upwards. Why?

More experts are citing geographical proximity. Offshoring software development work usually means lag time (in up to or in excess of 12 hours) and less control over quality, projects, and deadlines.

Issues with nearshore outsource distance and timing can increase communications difficulties. And when longer time frames aren’t apparent, poor working conditions usually are. The conditions that offshore development teams endure usually mean a lower quality of life, increased turnover, and an impact to software quality and outcomes.

Undeveloped legal and regulatory systems also come with heightened business risks.

2. Cultural affinity can impact your bottom line.

Cultural alignment goes beyond a shared common language and lifestyle. Offshoring to developing nations creates business risks inherent to less concrete civil infrastructure, under developed legal and regulatory systems, and problems related to political instability and sensitive, intellectual property.

Cultural affinity is key to any outsourcing partnership. More businesses trying to reduce overhead and increase agility by offshoring have run into cultural barriers and communication obstacles.

Latin America and North America have a shared history and border spanning more than three centuries. This commonality is crucial in fostering effective communications and communication. Cultural alignment supports a more efficient and collaborative working environment across teams and generally means fewer complications along the way.

Cultural Affinity Quote

3. More reliable talent is growing faster and closer to home.

To really understand the key differences between offshoring and nearshoring, it is key to understand the variations in available development talent. Traditionally, U.S. based businesses offshored lower salary and responsibility roles and to cost-effective locations around the globe, but lately the trend is changing.

The Deloitte Global Financial Services Group shared that just 10-15% of Indian college graduates are “considered suitable for direct employment in the offshoring industry.”

User demands and new technologies are changing the way businesses are using outsourcing to keep momentum. Initially, American businesses relied on offshoring for lower-level positions in the nineteen nineties and early two thousands. More than ever, these businesses are now relying on outsourcing software development to support more robust and strategic roles as well.

Businesses taking the nearshore approach are instantly connected with developers in nearby countries like Mexico, Brazil, Costa Rica, or Argentina. Nearshore’s popularity in the U.S. is surging because more companies need to reduce their spending on overhead and labor.

Partnering with nearshore companies means working with developers in more convenient, similar time zones than the offshore alternatives. Often times, nearshoring also means a better bottom line. Nearshoring also reduces problems with language and cultural barriers that can reduce agility and make it tougher to meet goals and deadlines.

4. Return on Investment is the reason.

Why are businesses looking to outsource work in the first place? Exactly, Return on Investment.

Because growing companies are looking to outsource for a better Return on Investment more of these companies are looking nearshore first.

Why? Because offshoring software development can add to cost and project timeframes, with management issues like language gaps and less communication between teams on opposite ends of the world. Time zone proximity drastically reduces the number of hours and resources necessary to meet deadlines, lowering the overall cost of each project.

5. Nearshore’s popularity is reshaping an industry.

Since 2010 when Gartner ranked Mexico in the top eight for outsourcing software development locations with a leading score of “very good”, outsourcing trends have been moving nearshore. Mexico has ranked ahead of Brazil and Chile for both the talent pool and value.

In fact, in a recent survey we conducted, 17.9% of US IT Decision Makers indicated that they were currently nearshoring in Mexico.

Increasing Prevelance of Nearshore Outsourcing Chart

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