A Complete Guide to Nearshore Software Development: Strengths and Weaknesses

Updated 13 Sep 2022

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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.

What Is Nearshore Software Development?

Nearshore outsourcing means that you delegate 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 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.

What is Nearshore Software Development

Nearshore software outsourcing examples for different regions

The above nearshore software development outsourcing is one of the IT outsourcing models. However, you won't have a broad picture of outsourcing if you miss information about its other alternatives: onshore and offshore.

Onshore outsourcing is the practice of hiring a firm situated in your own nation to offer services or carry out specific activities on your behalf. A bright example of the onshore destination is whether your company is based in Atlanta and your service provider would be from Chicago.

The closer the hired team is to your business, the simpler it will be for you to monitor the project's development and all connected operations. But remember that a strategy like this is only appropriate if a budget issue is not a concern. Onshore IT outsourcing generally comes at a high cost.

Offshore outsourcing entails hiring an experienced software building provider with a location outside of your own. For instance, you locate in the US when your IT vendor is from Estonia.

The most companies consider this outsourcing model as the most beneficial one according to the row of advantages (e.g., cost-cutting opportunities, access to the tech talents worldwide, etc.).

But let's return to onshore outsourcing to talk about the reasons when applying to this outsourcing model and cooperating with nearshore developers would be the best business decision.

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Why Consider Nearshore Software Services

Outsourcing in general is quite a beneficial thing for businesses, and statistics totally prove it. This way, according to Clutch investigations, about 80% of worldwide companies considered their projects' outsourcing in 2021, and 27% of them were thinking about IT services outsourcing having in mind to benefit from its advantages and obtain more profit collaborating with onshore, offshore or nearshore software development company. Regarding the advantages of outsourcing, Statista also forecasts huge popularity of this cooperation type between businesses and its income growing to more than $92 billion in the near future.

However, despite obvious advantages, nearshoring software development may not suit every company. So, underneath, we've spelled out the indicators telling that your company should consider nearshore outsourcing.

Reasons for Choosing Nearshore Software Outsourcing

Points to consider before choosing a nearshore Agile development

Comfortable geographic position

Among all the outsourcing approaches, near shore development depends most on your position. Therefore, while choosing an outsourcing company, you should consider the number of qualified specialists in the country.

For example, if you're an entrepreneur from Norway looking into outsourcing, you'd better hire an Estonian nearshore team rather than some Indian or Philippine offshore company. The reason is that Estonia is only an hour ahead of Norway, India is 5 hours, and the Philippines 7 hours.

Project budget flexibility

If you're on a budget, nearshore software outsourcing is an excellent option for cutting some expenses, as there may be no affordable providers in your region.

On the contrary, if you’re not limited in budget for hiring software engineers, you may want to consider expanding an in-house team with more talents. In any other case, nearshore software development companies will be the right choice.

Easier team scaling

Sometimes it’s better to have your own team of developers. If you’re planning to build several applications, teamwork gained during the first project can play a vital role throughout the development process. However, a single project doesn’t require you to keep an entire team under the roof of your office. A nearshore development firm can build an application and maintain it as long as you need. So, there’s no need to spend costs on office rent and salaries.

Read our post to decide what’s better for you: in-house or outsourced development team

Wide pool of developers

You'll need more developers when working on a vast and fast-growing project. Nearshore IT development is a good option in this case. You can delegate a part of the project to an outsource company to take the load off your leading team. Outsourcing has led to the success of some well-known companies, and we'll cover some prominent examples later.

Advantages of Nearshore Software Outsourcing

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.

Benefits of Nearshore Software Outsourcing

Main advantages of nearshore software development

Cost-Effectiveness

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

Closer Collaboration

Another advantage of cooperation with a nearshore software company is the short distance between you and the vendor. With the development of technologies, the world's becoming smaller, and you can solve most problems via phone. But sometimes, your physical presence may be required, so there's no other choice but to book a flight with your partner. However, Western European entrepreneurs can take a flight to Central European associates in 2-3 hours.

In addition, nearshore companies are an excellent option for those who want to hold meetings or arrange online conferences.

Similar Regulations

While building an application, 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). Remember: 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.

Find out more about CCPA rules and how to avoid violations with this article

Minor Timezone Difference

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 Сentral 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.

Comparison of Western European to Ukraine Timezones

Time difference between Estonia and European countries

Experienced Talents in No Time

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.

The nearshore 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.

Disadvantages of Nearshore Software Services

Despite all the positive sides of near shore software development, there are also some drawbacks. But nothing can be flawless, right?

Cons of Nearshore Software Outsourcing

Top 3 disadvantages of nearshore software development

Offshore Outsourcing Can Be Cheaper Than Nearshore

Leaving aside all the negative points of offshoring, it still provides the lowest rates. Depending on your location, you can still find affordable options that match the average price, but this will instead be an exception rather than a rule. So, if there are no cheap providers in your region, you should consider hiring a software building company.

Lack of Companies

If adjacent countries aren’t IT-oriented, you'll be able to hire an experienced offshore software development company.

Of sure, any country has software development companies, but the quality that no-name companies deliver will be pretty different from well-known outsourcing destinations like Estonia or India. That's why it's better to choose an offshore company with many reviews than a questionable nearshore programming firm.

Need in Periodic Monitoring

That's a common flaw in outsourcing. Since you've hired a nearshore software programmer or small group of such specialists, you have to contact a contractor from time to time. Luckily, it's relatively easy to hold meetings with nearby countries. At Cleveroad, we always arrange our conferences at the time appropriate for our customers. However, if some nearshore programming outsourcing issues require your physical presence, flights can still be exhausting and time-consuming.

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Our experts will calculate costs and find the best balance of results and expenses for your project

Examples of Outsourced Nearshore Software

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.

Skype

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.

Slack

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 development are too significant to ignore. The only thing you have to do is to find a reliable provider that'll fulfill your expectations.

We've prepared TOP-15 of the best IT outsourcing companies to facilitate your vendor choice! Read the article and learn more!

How To Make Nearshore Outsourcing More Effective and Trustworthy?

We prepared a short list of checkpoints for you that will help you empower software development nearshoring income and benefit as much as possible.

1. Determine the difficulty of your tasks and classify them accordingly

In order to boost corporate productivity, nearshore outsourcing makes the organization more adaptable, gives employees more free time, and ensures professional help.

Once you outsource the most time-consuming and tiresome activities to other organizations, you can use the time and money you save for future growth.

2. Consider the viability of nearshore development outsourcing relationships

There won't be any issues with timely communication with your partner because you are already familiar with the concept of the nearshore zone. However, it still involves forming new relationships and expanding your team by including a new member. So, having a trustworthy point of contact with your nearshoring vendor is essential. Such a worker will monitor the vendor's performance and verify that the outcomes produced adhere to the specifications.

3. Create and advance trust

Check evaluations from previous customers before picking a nearshoring partner. It will help you know more about your potential choice, as the clients who previously worked with the provider can characterize them the best. Moreover, you should speak with the vendor about employment practices, customer information delivery, and internal process management methods.

A nearshore software development firm's transparency must be defined, and you must highlight that you seek total visibility. Such a strategy enables you to select the developers personally, ensure that their qualifications match your needs, closely monitor all the processes, and be ready to make modifications as soon as problems appear.

4. Verify your selection and make adjustments

When deciding whether to outsource, it's crucial to examine nearshore and offshore options to determine which is most appropriate for your situation.

You can combine them if you're not sure which is more effective. Consider a US-based business that wishes to improve performance and speed up operations. Due to this, you may recruit nearshore software development team in Estonia and other Central and Northern European nations.

Increased productivity is made possible by such a solution since your teams may operate together even when your internal staff members are on vacation.

Due to the said, you may establish more productive working relationships with your software creation vendor, and receive higher incomes.

Your Reliable Vendor for Nearshore Software Development Services

Cleveroad is an experienced outsourcing software development company headquartered in Central Europe, Estonia. Our competence comprises delivering top-quality software solutions to startups and all-scale businesses using cutting-edge technologies for 10+ years.

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

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

  • A quality software that will perfectly fit your business
  • In-depth consultations with one of our experts (Project Manager, Business Analyst or Solution Architect) as to your project
  • A team of agile-minded and highly qualified experts to develop your project
  • Rapid software architecture process’s elaboration
  • Product quality assurance and control at every creation phase
  • Support, maintenance and advertisement services after your solution's release, etc.

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

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Frequently Asked Questions

Nearshore outsourcing means that you delegate software development or certain tasks to companies located in geographical proximity to your country. When you hire a nearshore company, the difference between you and the contractor should be from 1 to 3 hours.

No, it isn't. There are some more types to use:

  • Onshore outsourcing - you apply to the IT vendor in your country
  • Offshore outsourcing - you look for outsourcing services abroad

Nearshore means hiring developers from a nearshore development center (situated in the adjacent region as well). Offshore, in turn, is outsourcing to a geographically distant country.

There are a bunch of reasons for that. We've outlined the most widespread ones.

  • Comfortable geographic position
  • Project budget flexibility
  • Wide pool of developers
  • Easier team scaling
  • Determine the difficulty of your tasks and classify them accordingly
  • Consider the viability of nearshore development outsourcing relationships
  • Create and advance trust
  • Verify your selection and make adjustments
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