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Outsourcing software development helps enterprises gain operational performance and innovation speed. Scaling operations with speed while driving costs down is imperative to stay on the cutting edge.
Outsourcing software development can give your business agility, speed, and perfect execution. Companies evaluate nearshore vs offshore locations to find a software outsourcing partner to build digital products and find new teams to diversify the sources of its advantages.
- Increase your company’s competitive defenses by expanding your capabilities and adaptability with a software outsourcing partner and exploring other software delivery models.
- Build strength and improve performance by scaling up your software operations by adding new tactics, teams, and know-how.
Companies competing in today’s digital economy looking to outsource software development must weigh the advantages and disadvantages of nearshore vs offshore.
Nearshore vs Offshore Evaluation Criteria
The nearshore or offshore model is determined by your goals, technical fit, risks, level of service, and how your in-house teams integrate with the new teams.
In economic terms, you have probably heard it said: “You get what you pay for,” which can certainly be applied when outsourcing software development. However, rates are not everything: you must also consider productivity, code quality, testing services, production time, and after-sales services.
Nearshore Supplier Sourcing
Setting up an office in a foreign country near or far away is only feasible for some corporations. Others outsource software development by hiring a team directly or selecting a third-party development company. But there are many types of contractors for outsourcing software.
A low-priced contractor may not have the teams ready and may run to recruit developers once they get your contract. But these developers probably have never worked together and/or don’t have enough experience. So this route could be less expensive but could also result in lower quality, higher attrition rates, and/or a weak infrastructure.
Other suppliers may have teams organized in a software development center, but they may not have the appropriate skills, may not be sufficiently committed, and/or may have other weaknesses. For example, developers in India are known to be highly skilled and to prefer to work for large companies, but their rates are not low, and they are not readily available.
It is advisable to get references from other clients to verify any supplier’s integrity as well as visit them in person to discuss your plans before embarking on a relationship. (Thus, travel costs must be considered).
Trustworthiness of Nearshore vs Offshore Contractors
The best option for US corporations is to outsource software development by contracting with a company with headquarters or operations in the US and development centers in the nearshore or offshore country. Negotiations and contracts signed in the US may prove more trustworthy.
An offshore or nearshoring partner with development operations should provide ready-made teams or quickly build new teams to start a project. A partner with a local office and management can retain talent and provide stability and sustainability to the relationship.
When you source for suppliers in faraway locations such as India or China, the culture is very different from Western culture. As a result, your negotiation approach might not lead to the best results. When evaluating nearshore vs offshore opportunities, this is the first thing to consider—how easy or difficult is it to do business in that country? Due to cultural differences, the software buyer may have varying interpretations of the meaning of quality, level of responsibility, ethics, or other business customs.
Mexico vs India
The nearshore vs offshore comparisons should also be made more specific for countries or locations. So, for example, if you are in the US, nearshoring would naturally be to Mexico or Canada. But if you are in Western Europe, then nearshoring would be Portugal, Ukraine, or Poland. So, for this discussion, when we talk about nearshore vs offshore, we will be referring to Mexico vs India or China.
Time Zone and Proximity
One major aspect of nearshore vs offshore decision-making involves time zone and proximity considerations. This aspect is critical when working with India, because early-morning or late-afternoon meetings are not popular with dev teams. In addition, the time zone difference is an obstacle when the project requires a lot of information exchange, making communication in real-time very difficult. On the other hand, teams in Mexico are in the same time zone and can work throughout the day with your in-house teams. Also, traveling from the US to Mexico can be accomplished quickly and inexpensively as compared to travel to/from India.
Nearshoring Agile Development
Nearshoring to Mexico is more suitable for the agile development process as well as projects that require high interaction, as higher collaboration and communication is gained due to proximity.
Your business can benefit from lower costs by establishing a dedicated development team in Mexico with a US-based partner. Your nearshore partner can provide managed services to create a specific application by handling recruitment, team management, project management, and administration.
Your project can also be scaled quickly by evaluating your team and adding developers with the required technical skills as extensions of in-house teams (staff augmentation).
Nearshoring software development services offer engagement options such as dedicated teams, staff augmentation, and scope-based (fixed costs, time and materials).
You can have immediate access to talented individuals with specific skills for projects managed by the nearshore partner or by your team at their facilities. This is a solution for situations when recruitment takes a long time or when it’s difficult to find the skillset required.
Other companies provide hiring or staff augmentation services that match candidates in exchange for fees. On the other hand, a nearshore partner’s goal is to deliver the final product, so it can appoint developers with a proven track record to work on your projects. Teams working with a nearshore partner’s development center ensure security and data privacy.
Nearshore vs Offshore Costs
Consider your labor costs and the costs of managing remote teams, infrastructure, and services. Nearshoring to Mexico has advantages, as the government promotes IT industry services and has modern data privacy and protection laws.
When comparing nearshore vs offshore for managing teams and projects, there are hidden costs associated with offshoring. For example, your in-house team might get tired of traveling or working in the evenings or early mornings, all of which takes time away from their families.
Explore the costs and benefits of nearshore vs. offshore models with our business specialist.
Where do you go next?
- How will these software delivery models impact your strength?
- Do you need to adapt your core business to a nearshoring development model?
- How can choosing to nearshore your business help defend your market position over time?