Your Essential Guide to Nearshore Software Development
Demand for software development services continues to grow, regardless of region. With increasing demand and the drive for digitization across industries, companies increasingly use outsourcing as a cost-effective and efficient solution to meet their software development business goals. Experts estimate the global outsourcing market will grow by $40.16 billion by 2025. Nearshore is also very popular. What is nearshore software development? What advantages does it offer? Read our comprehensive guide on nearshore software companies to gain in-depth insight into this outsourcing model.
- What is nearshore software development?
- The importance of cultural differences and time zone in nearshore outsourcing
- Why nearshore outsourcing?
- Types of nearshore software development services
- Pros and cons of nearshore software development team
- Nearshore vs. onshore vs. offshore development
- Where to find nearshore software development services?
- Cost of nearshore software outsourcing
- Best nearshore software development companies in Europe
What is nearshore software development?
Nearshore software development is an outsourcing model in which the outsourcing company delegates software development work to a neighboring or geographically close country, usually for the benefit of having little differences in time, cost, and culture. For example, English IT companies may look for nearshore software entrepreneurs in countries such as Poland, Germany, France, Spain, Norway, or Ukraine.
Is nearshore outsourcing of interest to the business world? Definitely yes! Data published by Procurement Tactics shows that software outsourcing spending will reach $519 billion in 2023. This represents a 22% increase over 2019. Importantly, nearshore and offshore growth is also expected to continue due to wage inflation and rising costs. Market analysts also predict that in 2023, most nearshore markets will remain unsaturated and capable of delivering high productivity and scale.
The importance of cultural differences and time zone in nearshore outsourcing
In nearshore outsourcing business and technology services to companies located in nearby countries, distance and cultural differences, and time zone matter greatly.
Cultural differences can affect how people communicate, interpret content and make decisions. Therefore, business partners need to be aware of these differences and be able to adapt to them. For example, in countries with a more hierarchical social structure, questioning a supervisor’s decisions may be considered inappropriate, while in other cultures, employees are expected to express their opinions actively. In addition, cultural issues also affect the consistency of days off, clarity of communication, and team chemistry. Because of this, project work proceeds more efficiently, and the various business objectives and goals set are achieved faster.
Time zone can also affect the effectiveness of cooperation. If there is a significant time difference, business partners may find it challenging to communicate and solve problems quickly – and as we know, “time is money.” Therefore, choosing a country in a similar time zone can be an excellent solution. This avoids communication delays, and teams working on a given project can exchange insights and complete subsequent tasks without delays. In today’s Agile world, this is extremely important.
Why nearshore outsourcing?
If you are still wondering why nearshore outsourcing is worth considering, below are its business benefits.
1. Geographical proximity
Geographical proximity is one of the main advantages of nearshore outsourcing that we have already mentioned. In practice, it means that the cooperating companies are in the same or virtually the same time zone, which ensures smooth communication and faster response to customer needs.
Besides, services are outsourced to companies in neighboring or geographically close countries, reducing business travel time and costs compared to offshore outsourcing.
In addition, geographic proximity allows for greater control over the quality of services, as it is easier to conduct inspection visits and monitor the work done by the outsourcing company.
Geographic proximity in nearshore outsourcing also has a positive impact on work schedules. It is much easier to set convenient working hours to minimize the time difference between the client and the outsourcing company. In addition, with both parties working in similar time zones, communication is more efficient, and employees do not have to work non-standard hours, positively impacting their job satisfaction.
2. Cultural compatibility
Cultural compatibility is one of the key success factors in nearshore outsourcing. When a company outsources tasks to another company in a nearby country or region, the benefits of cultural similarities can be significant.
Language is, of course, the most apparent aspect of cultural compatibility. However, similarities in mindset, work style, and approach to business are equally important. This makes it easier for outsourced employees to understand the client’s requirements and better align with their expectations.
Cultural compatibility also helps build better relationships between companies. Similar values and modes of communication make it easier to establish contact and build trust. This, in turn, translates into effective communication, better results, and more efficient IT project management.
It is also worth noting that cultural compatibility affects employee satisfaction. People employed by an outsourcing company may feel more comfortable and confident working with clients with similar values and work styles.
3. Cost savings
Cost savings is another of the critical advantages of nearshore outsourcing. Companies can save money by moving some or all business activities in running IT or other projects to a country with lower labor costs.
In addition, these benefits can be enhanced by choosing a country with adequately developed infrastructure, a well-educated workforce, and stable political and economic conditions. In this way, the savings that can be achieved by nearshore outsourcing can contribute to a company’s competitiveness and success.
4. Large selection of specialists
With nearshore outsourcing, companies from countries such as Poland or Ukraine can compete with more developed markets, such as the United States or Germany. This means that companies from these countries can access a more comprehensive selection of IT companies offering specialized software development services at competitive prices.
In addition, nearshore outsourcing offers the possibility of sourcing IT professionals more quickly and easily and access to know-how even in specialized fields. In a country with a shortage of specialists, companies can thus promptly find specialists in neighboring countries without any downtime in projects.
Nearshore outsourcing can be more flexible because of the time required to travel to distant countries, and the time differences are much less when a contractor from a nearby country is selected. This allows for quicker response to client needs and reduces the risk of project delays, as a nearshore outsourcing company can adapt more quickly to the client’s needs and change project strategy if necessary.
It’s also worth mentioning that flexibility is significant for projects that require a quick response to changing market conditions or for projects that depend on seasonality. With flexibility, nearshore outsourcing can help companies succeed in a challenging global market.
6. Better process control
In nearshore software outsourcing, the company outsourcing the software development project usually works with a nearby outsourcing company, facilitating communication and monitoring the progress of the work. In addition, because of reduced business travel costs, people can meet and discuss project challenges when necessary. This allows you to accurately analyze project progress and verify the effectiveness of the software development company.
The likelihood of successful project management is increased by being able to choose an outsourcing company based on credentials and industry experience.
However, remember that to reduce the likelihood of misunderstandings and challenges during the project, the contract and the unique requirements and goals must be adequately prepared.
7. Lower costs of the software development process
When you outsource software development, the differences in income between developed and developing countries are significant. Therefore, opting for a nearshore software development team saves much money on salaries and employee benefits.
As a result, hiring of nearshore teams of software developers for advanced IT services and operations in developing countries generates more significant economies of scale and lowers the cost of software development and operations outsourcing than with the help of in house team.
[Follow up reading: CHECKLIST – How to choose a software development company]
8. Shorter time to market
Today, companies worldwide recognize the importance of speed in operations or getting finished products to market and how it can be used as leverage against the competition. With nearshore outsourcing, there is no need to rely solely on in-house software engineers to bring a product to market. Instead, nearshore software development teams can tailor the team’s expansion to the product roadmap and thus act faster.
Types of nearshore software development services
Nearshore software partner can offer you support on many levels. Nearshore software development company and services cover many different types of software development activities, including:
- Development of software – designing and implementing new applications or developing existing ones according to customer requirements.
- Software testing – conducting quality, functional, and performance tests of the software to ensure its proper operation.
- Software implementation – integrating and configuring the software in the client’s environment, performing data migration, and user training.
- Software maintenance – ensuring continuous software operation and updating, fixing bugs, and adapting to the client’s changing needs.
- Technical consulting – assisting project managers in selecting the best technological solutions, designing system architecture, and analyzing and optimizing IT processes.
- Mobile application development – designing and developing mobile applications for various platforms, such as Android and iOS.
- Data analysis – collecting, processing, and analyzing business data to gain better market insights and optimize business processes.
The final scope of services outsourced under the nearshore software development model depends only on your corporate, project, or HR talent needs.
[Read also: How to choose a tech stack for your IT project]
Pros and cons of nearshore software development team
Like any cooperation in the outsourcing model, the nearshore development center for software development has strengths and weaknesses. Among them, the key ones are:
Advantages of nearshore outsourcing:
- Geographical proximity – one of the main advantages of the nearshore developers is that the developer team is in a similar time zone, and it is easier to contact them when needed and coordinate work.
- Cost – usually, a nearshore team is cheaper than an onshore team so that companies can save on developer hiring costs.
- Cultural proximity – nearshore countries often share similar values, which can contribute to better communication between the developer team and the client.
- Availability of resources – nearshore countries often have developed technology and education infrastructure, making finding and hiring highly skilled developers easier.
- Similar quality of work – developers from nearshore companies and countries often have a similar style, work metrics, and ethical standards, which can be challenging to achieve with offshore teams.
- Flexibility – a nearshore team can provide work flexibility and adapt to client needs.
Disadventages of nearshore:
- Language barrier – sometimes, communication between the nearshore team and the client can be difficult due to language barriers and differences.
- Challenging selection process – when selecting a nearshore team, it is essential to carefully vet their experience and competencies to ensure that the delegated professionals can support the project’s development.
- Security risks – outsourcing to nearshore countries may involve data security risks, which should be thoroughly investigated and appropriate safeguards provided.
- Process control – in the case of nearshore software development, verifying subsequent stages of ongoing projects can be tricky unless you develop standards beforehand.
Considering all these factors, assessing the legitimacy of using nearshore software development is easier. However, at the same time, one should remember to analyze all advantages and disadvantages of nearshore outsourcing concerning the needs of one’s own company, not comparing it to competitors or similar use cases.
Nearshore vs. onshore vs. offshore development
We already know a lot about nearshore software development projects. However, one more issue remains: understanding the differences between nearshore, onshore, and offshore outsourcing models. In general, these are three popular outsourcing models that companies use to acquire IT resources. Each model has unique characteristics and offers different benefits depending on business needs.
Nearshore development is an outsourcing model in which a company uses an external company located nearby, usually in the same country or region. Often these are countries with similar working times and cultures, which facilitates cooperation. Since the partners are in the same cultural zone, the advantages of nearshore development companies are more accessible and cheaper communication, less time difference, and easier quality control.
Onshore development is an outsourcing model in which an external IT company is located in the same country as the enterprise. The advantage of onshore development is complete control over the project and ease of communication, thanks to the lack of a language or cultural barrier. At the same time, the project cost can be higher, as typically, these countries have higher living and labor costs.
Offshore development is an outsourcing model in which a company uses an outside company located in another country, usually in a region with significantly lower labor costs. The advantage of this model is generally that a project can be completed for less money. On the other hand, the disadvantage is a more significant time difference and more complex communication, which can cause delays in the project and negatively affect the quality of services offered.
When choosing between these models, a company should consider its business needs, goals, and issues related to the project’s cost, quality, and timing.
Where to find nearshore software development services?
If you are looking for nearshore services, i.e., outsourcing software projects to companies in neighboring countries, looking for them on the Internet is best. You can use search engines by typing in relevant keywords, such as “nearshore software development” or “IT outsourcing.”
You can also look for information on industry websites such as Clutch and recruitment portals or ask friends or other companies for recommendations.
Once you have found potential nearshore software development firms, it is worthwhile to analyze their offerings carefully. Check that they meet the technological and industry requirements, and verify they have the right experience and competence in their services. It is also essential to learn about their processes and work methodologies and pay attention to their organizational culture and communication style.
Once you’ve selected a nearshore software development partner, it’s worth having in-depth discussions to review the project details and determine goals and requirements. Setting the work schedule, communication style, and project costs is also a good idea. Finally, before signing a contract, it’s worth consulting a lawyer or outsourcing specialist to ensure the agreement benefits the company and protects its interests.
[Read also: Introduction to IT staff augmentation]
Cost of nearshore software outsourcing
The cost of nearshore software outsourcing depends on several factors, such as the location of the business partner, its level of experience and competence, the size and complexity of the project, and technology and industry requirements. Costs can vary depending on the country where the partner is located and the type and scope of services it performs.
Typically, prices for nearshore software development outsourcing services are lower than for outsourcing in Western countries but higher than for offshoring in Asian countries. However, in Eastern Europe, such as Poland, Romania, and Ukraine, service prices tend to be lower than in Western countries, while at the same time, business partners from these countries offer high-quality and good IT experiences.
To illustrate, costs vary depending on the location of the outsourcing partner. For example, according to the “State of European Tech” report, the hourly cost of a developer in Eastern Europe (Poland, Czech Republic, Slovakia, Hungary) averages 42 euros per hour. In contrast, the hourly cost of a developer in Western Europe (France, Germany, Italy, Spain, UK) averages 71 euros per hour.
However, it is worth remembering that cost is not the only factor in choosing a business partner. Also necessary are qualifications, experience, approach to the project, flexibility, and quality of communication. Therefore, before deciding to outsource, it is worthwhile to carefully analyze all factors and choose a business partner that best suits the needs and requirements of the company.
Best nearshore software development companies in Europe
The software development market in Europe has enormous growth potential. According to the Statista portal, its revenues could reach as much as $199B by the end of 2027. Eastern, Central, and Southern Europe are the top three locations regarding the number of professional developers, creating plenty of market competition. So which European companies providing outsourced software services are worth noting?
A team of IT professionals working in a boutique software house in Poland, specializing in building custom solutions and integration systems for clients from various industries and countries.
It’s worth working with us in a nearshore outsourcing model. First, being based in Poland means we are close to clients in Western, Eastern, and Central Europe, enabling easy contact and quick responses to needs.
Second, Stratoflow employs experienced professionals with the knowledge and skills to develop high-quality software in Java. The team consists of developers, designers, analysts, and testers who work together on a project to ensure its success.
Third, working with Stratoflow saves the cost of creating and maintaining an in-house developer team while maintaining high-quality services.
At Stratoflow, we always focus on individual approaches to the customer and customization of our services to meet business and project needs. As a result, we guarantee flexible cooperation, allowing the client to control the project and respond quickly to changing business needs. We have received 4.7 ratings on Clutch for this approach.
[Read also: Interview with our senior software developer Michał Boroński]
Binariks is an IT services company, including software development, testing, systems integration, and technology consulting. The company is based in Ukraine but offers services in a nearshore outsourcing model to clients from various countries.
It is worth considering cooperation with Binariks because of several factors. First, the company has experience working with clients in various industries, which means it can tailor its services to specific business needs. Second, Binariks employs highly skilled professionals with the knowledge and skills to implement IT projects. Third, the company offers competitive prices for its services, which can help reduce costs associated with software development or systems integration.
The Clutch service has recognized Binariks as a top B2B company, as evidenced by a score of 4.9 out of 52 reviews.
Another of European company worth mentioning in our list is Scalefocus. It is an IT company specializing in providing advanced IT solutions for clients in various industries, providing software development and digital transformation services that enable organizations to operate, innovate and scale their business. The company is based in Bulgaria but also offers services in a nearshore outsourcing model to clients in other countries.
It is worth considering cooperation with Scalefocus for several reasons. First, the company has extensive experience designing and implementing IT solutions for companies of different scales and industries. Its 500 completed projects in 26 countries for more than 300 clients, including Fortune 500 companies, innovative start-ups, and established leaders in various industries, speaks for itself.
In addition, Scalefocus consists of a team of highly skilled professionals who have the knowledge and skills necessary to design, implement and support advanced IT projects in many programming languages. With more than 800 engineers and seven centers in Bulgaria, North Macedonia, and Turkey, it is possible to offer comprehensive IT consulting and software development services covering all software development life cycle stages.
In addition, Scalefocus offers competitive prices for its services, which can help reduce costs associated with software development or systems integration. It is rated 4.9 on the Clutch website.
Magnise’s IT specialists can find creative solutions by developing the most effective and tailored software solutions – from prototyping to production support, respecting partners’ business needs. The Netherlands-based company is rated 4.9 on Clutch for the quality of its services, including its nearshore outsourcing model.
Magnise is known in the IT industry as a provider of quality services in terms of cost and time. They are distinguished by working in a 2-4-8 kickstart model, which means 2 days to start, 4 days to gather requirements, and 8 days to complete the first prototype.
Their software engineers have over 15 years of experience, so assembling a dedicated team for nearshore outsourcing is not a problem. In addition, Magnise collaborates in real-time and can work remotely or at customers’ offices.
BairesDev is an IT company that designs, develops, and maintains software for multiple clients. The company is based in various corners of the world but also offers services in the nearshore outsourcing model in Europe – in Spain.
BairesDev offers its clients access to teams of highly qualified developers, designers, and IT specialists who can complete various IT projects. Their clients include brands like Pinterest, SalesForce, Google, and Rolls-Royce.
The company has extensive experience working for clients in various industries, including large enterprises, start-ups, and public sector companies. BairesDev offers its clients access to specialists with a wide range of competencies and knowledge of the latest technologies, so it can tailor its services to individual client needs.
In addition, BairesDev ensures the quality of its services through modern working methodologies, such as Agile and DevOps, and regular training of its employees. The company also focuses on transparency and regular progress reporting, allowing clients to track project progress.
It is worth noting that BairesDev has received much positive feedback from its clients and many awards and accolades, including being named one of the fastest-growing companies in Latin America by the Financial Times. On Clutch, they boast a rating of 4.9.
Nearshore outsourcing – how to choose the best company?
Choosing a company for nearshore can be challenging, but it is crucial to the next project manager’s success. There are many factors to consider, such as experience, technical skills, cost, location, and work culture. Therefore, it is worth conducting a thorough analysis of the market and the companies you plan to work with to make the best choice.
It is also worth paying attention to references and reviews of other customers who have used the services of a particular company. Finally, it is also essential to familiarize yourself with the approach to project management and communication between the client and the development team.
Also, verify the language and work culture a particular company uses. The work culture and approach to the project must coincide with our expectations and values.
If you have any questions or concerns – write to us! Stratoflow specialists will happily provide you with expert support in outsourcing IT services.
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We are Stratoflow, a custom software development company. We firmly believe that software craftsmanship, collaboration and effective communication is key in delivering complex software projects. This allows us to build advanced high-performance Java applications capable of processing vast amounts of data in a short time. We also provide our clients with an option to outsource and hire Java developers to extend their teams with experienced professionals. As a result, our Java software development services contribute to our clients’ business growth. We specialize in travel software, ecommerce software, and fintech software development. In addition, we are taking low-code to a new level with our Open-Source Low-Code Platform.