Companies are not what they use to be. And they don’t run like they used to. With ever-increasing levels of globalization closing the gap between sovereign states and continents, companies have to be nimble on their feet to react to fast-moving events and wave changes in consumer habits – which is particularly true for ecommerce brands and retailers.
As a result, companies are obliged to seek out fresh strategies, diversify their width of services, and improve the quality of their service. And for multinationals, one of the best ways to get things done is to work with a nearshore tech consultancy.
In fact, 57% of multinationals (with more than 2,500 employees) outsource projects nearshore to software development businesses. This has contributed to a ballooning of the outsourcing sector in the US, which is set to be valued at $135.5 billion in 2021.
And it seems as though nearshoring is reaching a peak in popularity across the world, not only among the multis but also the startups. For companies located in Northern and Western Europe, popular nearshore destinations include Poland, Ukraine, Belarus, and Romania. For companies located in the US and Canada, the region of choice is Latin America – popular destinations include Argentina, Colombia, and Mexico.
But what exactly is nearshoring and what is so beneficial about nearshoring software development projects?
The act of nearshoring is when a company outsources a project to a country or region that is relatively close to the organization – closer than offshore. For example a company located on the East Coast outsourcing a project to a consultancy in Mexico rather than India. Or a Spanish organization considering outsourcing a project to North Africa… ok you get it, right?
Much like the grains of sand paradox (which provokes the question: how many grains of sand does it take to make a heap? Or, how many grains of sand would you need to remove from a heap so that you no longer have a heap?) there is no specific definition of a nearshore destination. Yet of course it includes places within a few hours’ flight and share similar time zones, so that much of the working day can overlap with the organization.
Let’s look at some of the most pertinent advantages to nearshoring, when compared to onshoring and offshoring.
1. Workable time zone
The clear advantage when it comes to time zones is onshoring, when you outsource a project to a partner within the same country, which are a lot more likely to share the same time – or in terms of the US within 2 hours.
But nearshoring provides time compatibility that offshoring simply can’t compete with. Think about it: 9am EST is 7:30pm in Indian Standard Time. The working day in both countries simply do not overlap at all. Yet 9am EST is 11am in Argentina, a much friendlier and compatible time difference.
The benefits to this are clear: for specialists who are outsourced, regular and consistent communication with the mothership; real-time contact through messaging and video conferencing, etc.
2. Cutting cost while keeping quality
The single-most advantageous thing about offshore outsourcing is the much lower cost of work. Yet like almost everything in life, the very cheap is also the worst quality. Striking the balance between cost and quality is an ever-present issue to consider.
In the US, nearshoring a project attempts to strike that balance between lower costs and better quality, given that salary levels and general production costs are lower in Latin America than in Canada or the US.
But you don’t lose out on a quality gap. The region is growing its role within global software development thanks to waves of new IT talent and rising levels of expertise that in many cases rival first-world countries. The two outsourcing giants being Brazil and Argentina – also the two South American giants in terms of geographic size.
3. They are specialists
When you outsource a project, you are essentially handing over part of your business to a company that specializes in that one area. If you’re a clothing retailer, ecommerce is an important part of business, but there are many other areas which require a lot of attention and are equally as important.
Having a team fully focused on your ecommerce, who are also highly experienced and have many world-famous brands under their belt – like United Virtualities (shameless plug) will provide better quality and better outcomes.
And because we’re they’re highly specialized in say ecommerce, outsourcers have a depth and varied pool of expertise within ecommerce, something of which is highly unlikely in-house.
4. Work to scale
When a project is undertaken in-house there are fixed overhead costs and are met monthly _ hopefully! If demand fluctuates within a project, or changes within the year, employees are paid regardless of the workload involved in that project.
Working with an outsourced service, the cost can fluctuate depending on the level of workload – depending on the agreed upon contract. When a project deviates or strays towards another pathway, which almost all projects do, resources can be funneled into or withdrawn depending on demand.
5. A shared language
Because direct and regular communication is key to any successful project, the language in which you’re communicating through is a prerequisite. And nearshore destinations tend to share – to a relative degree – languages. For example, Spanish is the second-most popular language in the US; 15% of Germans also speak French, etc.
When we look at the North American case, and the most ideal region for nearshoring, Latin America, the number one country for English proficiency is Argentina, followed by Costa Rica then Chile – something to keep in mind the next time your on the hunt for a world-class consultancy, or more specifically a leading Salesforce dev team.