What Is Nearshore Software Development: Strengths and Weaknesses

It's official: in-house teams are becoming less vital for businesses. Modern companies are open to hiring outsourced development teams. They often delegate some projects to freelancers, not only other companies. Outsourcing helps them save costs and time and stay productive.

On the other hand, outsourcing may bring some troubles — language barriers, timezone issues, and poor management. In this post, you’ll learn the pros and cons of nearshore software development and ways to deal with possible problems.

So, what is nearshore software development? This outsourced model implies that you delegate custom software development or certain tasks to companies located in geographical proximity to your country. This is the outsourcing model which allows you to have minimal time difference and no communication barriers with a contractor. That's why, when you hire a nearshore company, the difference between you and the contractor should be from 1 to 3 hours.

Besides, personal visits are no longer an issue. For example, a flight from Berlin to Tallinn takes two hours. So, if you’re hiring a software development team from Central Europe, it’ll take you a day or two to take a plane to Estonia, discuss a project with the development team, and return home.

Let’s briefly overview what you may encounter ensuring nearshore collaboration:

• Business needs assessment. Primarily, you identify your software development needs and expectations from the nearshore collaboration, including requirements, budget, and timeline.
• Partner selection. Then, you choose a nearshore software development partner based on the location, reputation, cost-effectiveness, and cultural compatibility considerations.
• Definition of cooperation conditions. Along with your vendor, you’ll define the whole project work scope, development team composition, communication approach, deliverables, and timelines.
• Software development. Your nearshore software development team start building your digital solution based on the agreed-upon requirements using relevant project management methodologies (e.g. Agile, Scrum, Waterfall, etc.). The team works closely with you, providing regular reports and updates.
• Quality assurance. The QA team tests freshly developed software functionality, usability, performance, and responsiveness to address possible issues promptly.
• Delivery and software support. Finally, the team presents the software to you. Besides, they provide post-deployment support, troubleshooting, to ensure the software functions well even overtime.

As you can see, nearshore software outsourcing has great potential and can be a way out for a number of companies. So it’s high time to outline the advantages of nearshore software outsourcing.

It’s not a secret that businesses apply to outsource methods to cut expenses. Moreover, you don't have to hire developers, rent an office, and provide employees with hardware and software. Since common outsourcing countries are developing ones, the pricing can be lower than in developed countries.

Your team's productivity will increase thanks to nearshore software collaboration. To free up your time to focus only on more important duties, you may, for example, employ a team of professionals on the outside to oversee your back-end development.

Furthermore, if your staff routinely work midnight shifts, they may easily burn out. With nearshoring, you might avoid night shifts, improving both the standard of labor and staff engagement.

While building an app, you will face some regulations you have to comply with. For example, if you are focused on the European market, you’ll have to follow the GDPR (General Data Protection Regulation). There’s another set of rules for residents of California called CCPA (California Consumer Privacy Act). Make inquiries if the company knows how to comply with the required policies!

Before drawing up a contract and hiring a nearshore software developer (or a team of them) you have to make sure that company knows how to follow the rules defined by your region. Violating CCPA and GDPR can lead to heavy fines, so take this point very seriously.

Alongside geographical location comes a difference in the timezone. If you have heard about offshore development, you should know that the time gap may become a problem. For example, clients from the USA often can't get in touch with Project Managers from India or the Philippines.

When the clock shows 9:00 AM for US citizens, Indians are already leaving their working places because it's 6:30 PM. Thus, communication issues may happen.

Things are entirely different with nearshore software development services. For example, Washington, DC, is only two hours ahead of Mexico City. The difference is even less for Central and Western European countries with the time in cities like Tallin of only one hour. Thus, you can hold online conferences at a suitable time for both sides, and you won't experience jet lag after long flights.

This advantage can be applied to any outsourcing type, but still. You don't have to spend weeks looking for qualified talents among all CVs. These actions require you to have an HR department.

Nearshoring software development means that the provider already has a team of nearshore software developers who have worked on multiple projects together. It kills two birds with one stone: communication between team members and working experience.

If you need more programmers to develop additional features, nearshore software companies will allocate more talents as you scale.

Choosing the nearshore software development outsourcing region that is the most tailored to your demands may be hard due to globalization and, consequently, a wide diversity of options. Below, you can find a selection of the 5 best nearshore software development destinations:

Estonia is famous for its highly skilled workforce, particularly in software development, IT, and engineering fields. Estonia is renowned for its advanced digital infrastructure and e-government services, making it an attractive destination for nearshore collaboration.The country offers an appealing price-quality ratio, clearly distinguishing it from the competitors. Cultural similarities with Western Europe and North America, as well as high English proficiency, minimize possible misunderstandings during collaboration, making it transparent and reliable.

Poland has a vast pool of skilled IT professionals, including software developers, engineers, and designers. Poland's central location in Europe, coupled with its cultural affinity and language proficiency, caused the increasing popularity of Poland for nearshore outsourcing due to its proximity to Central and Western Europe.

Norway indeed has a robust IT sector and is a good choice if you are looking for a highly tailored and specific skill set. For companies from Western Europe or other neighboring Nordic countries, it may be an attractive option due to cultural compatibility and similar business practices. However, here, highly proficient IT experts come with a high price tag compared to other nearshore outsourcing options, making it a less common choice for nearshore software engineering.

Hungarian software development specialists are now swiftly gaining popularity as a nearshore software outsourcing option. Here, you can find outstanding expertise and a niche-oriented approach for a reasonable price. However, compared to more established nearshore hubs like Estonia or Poland, Hungary's IT outsourcing market might be slightly less mature. Besides, the language barrier may still appear to be an issue here.

Germany is widely known for its engineering and technical expertise, particularly in automotive, manufacturing, and machinery. The country's strong industrial base makes it an attractive destination for nearshore outsourcing. Anyway, it’s usually not the most popular nearshore destination due to higher pricing options. However, certain cities in Eastern Germany might offer more nearshore advantages due to lower labor costs than Western Germany while still serving a skilled workforce.

Below you can examine the comparison of average nearshore development rates of outsourcing regions we've just discussed:

While deciding what approach to choose to successfully create and deliver your software, you may discover that there are also other options like onshore and offshore. To help you better understand the concept of each cooperation model, let’s briefly overview 3 main models at once: software development nearshore, onshore, and offshore.

• Onshore software development. The onshore model involves outsourcing certain development tasks or the whole project to a vendor located within your country or region. This is a great option if your project requires close collaboration and frequent in-person interaction, if your company has sensitive data or intellectual property concerns, or for expertise in regulations within your region
• Nearshore software development. As you already know, nearshore IT development implies outsourcing software experts from regions geographically close to your country. For you as a business, it’s advisable to utilize this model if you seek close cultural background time zone compatibility but also need a more cost-efficient solution than an onshore software development
• Offshore software development. The offshore software development model means collaborating with a third-party vendor from a remote region, typically with a 3+ hour time difference. Offshore software development may become your choice If you prioritize cost-efficient or narrow expertise that doesn't compromise in quality.

So what about the pricing? Let’s assume that you have a business in the UK and need software development assistance. Below, you can see the rates of basic software development team members by the chosen cooperation model:

Outsourcing is a universal practice. Even the world-leading companies hire outsourcing companies to save funds and properly distribute the load on in-house developers.

We'll give examples of famous companies' collaboration with nearshore software programming vendors and how such collaboration resulted.

Back in the days when Skype was taking shape, founders used a nearshore software development model for the backend and website. As a result, the Estonian developers created features we love the most, like video conferences, messages, and file transferring. This approach made Skype the primary tool for business and personal electronic meetings worldwide.

Another outstanding example of software development outsourcing (nearshore in particular) is Slack. This software simplified corporate messaging for a number of companies, but it lacked an attractive design. So, it was decided to hire a Canadian design company to create a logo, web, and mobile app design. Slack is an app that feels, looks, and sounds different as a result. The delightful design and valuable features resulted in a global revenue of $401 million.

Nearshore software services reached far into the IT industry. The advantages of nearshore are too significant to ignore. The only thing you have to do is to find a reliable provider that fulfill your expectations.

TransferWise is a money transfer service company that provides online money transfer services, allowing its users and businesses to send money internationally at lower costs and with transparent exchange rates. The has employed nearshore software development teams in countries like Estonia and Lithuania for software engineering and future support and maintenance

Basecamp is a project management and collaboration tool that helps teams track progress and properly organize processes. Basecamp LLC has utilized nearshore development teams in Central and Eastern Europe (CEE region) in countries such as Ukraine and Poland for certain aspects of the development process.

Before handing your software project to the nearshore software outsourcing team, you should strictly outline your requirements to collaboration. Besides, it's vital to establish your personal vision of cooperation with your IT vendor. To simplify this task for you, here are 5 aspects to primarily pay attention to before diving into work with a nearshore software development partner.

Evaluate the team's previous software delivery experience and general capabilities to ensure they perfectly match your unique project requirements. First of all, look for specific skills relevant to your project (e.g., programming languages, frameworks, AI engagement, etc.).

Thoroughly consider the team structure. Your IT vendor will help you choose the right mix of developers, QA engineers, project managers, and other specialists needed for your project.

Besides, you can utilize staff augmentation, in case you don’t need the whole team of IT professionals. This model allows you to quickly onboard the specified specialists, making it easier for them to get acquainted with your business goals and brand identity.

Even though you can still meet with the software experts comparatively quickly, nearshore software product development is mainly remote cooperation. So, it’s vital to establish mutually convenient communication channels with your team. These can include popular messengers like WhatsUp, Telegram, or the corporate messaging platform Slack, as well as emails. Besides, it’s convenient to set up virtual meetings via Skype, Zoom, or Google Meets to exchange project-related information instantly without the need for physical interactions or a strong attachment to a time zone.

Ensure that the nearshore development team's work ethic and values align with your company culture, which can influence project management styles and overall collaboration. Also, look for a team demonstrating a solid understanding of your industry or business domain. Remember to check the chosen team's willingness to adapt to your company's internal processes and working style to foster a smoother collaboration experience and minimize occasional misunderstandings.

There are multiple ways to check if your potential nearshoring development is trustworthy. Check if the company has certifications and industry-specific awards (e.g., ISO/IEC 27001:2013 (data security), ISO 9001:2015 (quality management), etc.) and general market recognition. Besides, check the company’s past clients' reviews and testimonials on platforms like Clutch or Goodfirms.

To find the most profitable software nearshore development offer, compare rates from different nearshore software development companies, but at the same time, don't strongly focus on the lowest cost possible. Thoroughly evaluate the overall value proposition, considering expertise, communication approach, and delivered software quality. Lastly, check if the provider has a clear and transparent pricing structure with no hidden fees.

Cleveroad is an experienced nearshore software development company headquartered in Central Europe, Estonia. Our competence comprises delivering top-quality software solutions to startups and all-scale businesses from different domains like Healthcare, EdTech, Logistics, E-commerce, FinTech and more using cutting-edge technologies for 12+ years.

We provide IT-related services and digital product creation from scratch to help our clients optimize workflow productivity, overcome companies' internal challenges, and obtain competitive benefits.

By choosing us, you are ensured with a row of benefits:

• Proven experience in software development across numerous industries, such as Healthcare, Logistics, FinTech, Retail, EdTech, Social media, E-commerce, etc.
• Software experts operating Innovative technology stack for your project in web (React, AWS, Angular, Azure, .Net, JavaScript, etc.) and mobile (Flutter, Kotlin, Swift, ARKit, ARCore, etc.)
• Mature quality management proved by an ISO 9001 certificate to meet the quality needs of your software policies and processes to data security based on ISO 27001-certified security management
• Project Management Office that enables us to oversee your project to deliver desired results on time, in line with your business requirements, and staying within your budget
• High-quality expertise in working with modern technologies, including blockchain, cloud computing, Artificial Intelligence, Augmented Reality, machine learning, IoT technologies, etc.
• Cooperation with software development experts with high knowledge of domain laws and regulations like HIPAA, GDPR, HITECH, HL7, CCHIT, etc.

Besides, we offer diverse cooperation models, and you can choose the one that best suits your project's complexity and scale. This includes:

• Dedicated team model. In the dedicated team model, you hire a full development team that exclusively works on your project, with no distraction on side tasks. Here, you pay for the time spent on the project based on the specialist's hourly rate
• Staff augmentation model. Here, you supplement your existing team with external experts with specific expertise that are solely dedicated to your project. Unlike classic outsourcing, here, you retain control over project management and direction. You also pay for the time spent on the project multiplied by the hourly rate
• Time and material model. In the time and material model, you pay for actual time and resources spent during your project development
• Fixed price model. In this model, we agree on the price of the entire project scope and deliverables upfront. You pay predetermined amounts at each project development iteration

Our team has delivered a lot of nearshore outsourcing projects, and you can get acquainted with the most recent and vibrant examples below:

• Telemedicine management system
• Location-based marketplace for pubs
• Investment management platform
• Software platform for e-banking services
• Web-based marketplace platform for B2C

We are ready to optimize your business by software development nearshore outsourcing services. Let's start our cooperation and aim to succeed together!