Nearshore: A Way to Reduce Costs for Software Development in 2024

Software development is a costly process, so much so that it forces companies to implement innovative strategies. One of those is the hiring of a nearshore software development company, that is, what is known today as nearshoring. But…  Is this strategy reliable? Is it compatible with software development? Find the answer on this post.

What is nearshore outsourcing?

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The term Nearshore or also known as nearshoring, is used to refer to an outsourcing of various activities or services of a company, to other countries, which have a lower salary in order to reduce expenses.

The idea is that these countries are geographically close and culturally similar. It is even sought that they have the same language or a very similar one. Along with this, it is necessary that the countries involved in nearshoring have political, economic connection and a great legal similarity.

In the case of Europe, the main Nearshore destinations are: Bulgaria, Romania, Poland, Slovakia, Czech Republic, Hungary, Hungary and Spain.

Nearshore can be used for software development

Although this strategy can be used for various services, it is currently being used to outsource software development services.

Some specialists, such as, recommend using this strategy. Hiring a nearshore software development company is justified for several reasons, including:

It is necessary to hire several professionals with different skills and knowledge so that software can be developed.

Hired specialists must stay up-to-date on new technology trends. This responsibility usually falls on the company that hired them, which entails an expense related to events, training and study, which allows them to remain competitive.

These 2 reasons are enough to use nearshore outsourcing. In other words, this strategy is a wise and very practical decision.

According to data provided by the State of Software Development, in 2018 52.5% of the companies that participated in its survey claim to have contracted external services for software development.

What does nearshoring entail?

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Before implementing this strategy and any other, it is important to know the requirements involved in this decision. In the case of Nearshore, it would imply the following requirements:

  • A contractor (company that needs some service) and the contractor (company specialized in providing this type of service).
  • Same time zone or a very similar one.
  • Low salaries. In other words, the country where the service comes from has low wages.
  • Quality professionals.
  • Share the same language.
  • Possibility of holding physical meetings due to the proximity.
  • Similar cultural codes between both companies.
  • Similar political and economic laws between the countries involved.

As you can see, nearshore requires several requirements or demands for the strategy to work. But even so, delegating this responsibility to a nearshore software development company, such as,  is still a totally profitable idea, despite the necessary requirements.

For this reason, nearshoring is obtaining its greatest boom in the last 2 decades and if we combine this with the current situation of the pandemic, the implementation of this type of strategies will become more common, because they are the ones indicated to face adversity. that were lived last year and those that we will possibly continue to live.

Nearshore has multiple advantages

Up to this point it is easy to understand the reasons for using a strategy like this, but to further reinforce the idea, it is necessary to know the advantages of nearshoring:

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Cost reduction

Some studies, such as the one carried out by the University of Navarra, determined that 80% of companies that use offshoring strategies, such as nearshoring, do so to reduce spending and save more capital, which can be used in other equally important aspects .

It allows to have more competitiveness

Outsourcing a service not only provides a reduction in expenses, it also allows a company to use time, money, and knowledge to speed up the response to the needs of the changing market. This will allow a company to be more competitive and if this is added to the great money savings thanks to nearshoring, then the company can lower prices and obtain a greater share in the market.

Geographic proximity between companies

A nearshore software development company close to the people who hired them brings many benefits. The main thing is the saving of capital in the shipment of goods, reduction of time for transport, facilitation of communication and control over time.

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Businesses can grow faster

As mentioned above, the money saved can be invested in other needs of the company, which cannot be delegated to a third party, but which are equally necessary. In other words, the money saved from outsourcing can be used to implement an outsourcing strategy. This in order to obtain greater scalability.

Ease of carrying out projects

The cultural similarities of the companies involved in nearshoring prevent delay and misunderstandings, streamlining the development process with ease. Added to this, the economic connections and similar bureaucratic laws between both countries, further streamlines the development process, because there is no danger of sanctions, allowing the typical obstacles that delay any project to be overcome.

What other services can be contracted through nearshoring?

Although the main objective of this strategy is to reduce expenses, it will only work if it is implemented with the necessary services. Which are:

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  1. Delegate secondary services: this is valid for services that are not part of the central core of the company.
  2. Outsource services that cannot be assumed for financial reasons: as with software development. You can get results with the same quality, but at a lower price.
  3. Outsource services that are only used in a timely manner: this is useful to avoid hiring personnel for this type of service.

Nearshoring is the strategy that is dominating the market

Although this strategy has been gaining strength for 20 years, it was only recently and especially, due to the pandemic, that nearshoring became so popular for software development. For this reason, experts recommend hiring the services of a nearshore software development company.

Do not worry! There is a large market in Europe and Latin America for these services. In other words, there is no excuse for implementing nearshoring.