Nearshore Software Development: What Is It? Benefits, Process, and Best Practices

In the past few years, nearshore software development has emerged as a go-to alternative to in-house tech hiring. And why not? It is actually the best way for businesses to explore beyond their geographical borders and hire skilled IT talents to build their software. However, the only condition remains that there shouldn’t be much timezone difference. This type of software outsourcing has turned out to be a boon for countries facing talent shortages. 

A recent Deloitte survey revealed that 90% of companies face hiring challenges despite mass layoffs in 2023. However, nearshore software development outsourcing, or software nearshoring, has helped global companies hire tech talents at comparatively lower costs than in-house teams without compromising quality. 

Although nearshore development remains the top option to help companies hire the best talent, choosing the ideal partner is equally important. Otherwise, there might be unexpected outcomes due to miscommunication, delays, and cultural differences. 

If you’re here reading this article, the chances are you might be considering nearshore development. If that’s so, here’s everything you should know about this software outsourcing model. We have created this guide to nearshore development so you can understand the nitty and gritty of what it takes to get started!

What is a Nearshore Software Development?

Nearshore development, or nearshore outsourcing, is a type of software development outsourcing model in which projects are usually outsourced to developers in neighboring countries or regions with less timezone difference. 

For example, a UK-based company can outsource its mobile app development project to Spain because of the one-hour time difference. Clients and software developers can communicate in real-time, and they can even visit each other to discuss the project in person without spending hours on flights or traveling. 

In addition, this outsourcing model helps businesses save on the time and cost required to set up an in-house development team. While many compare nearshore development to onshore development, there’s a huge difference between the two outsourcing models. To help you differentiate between nearshore software development and other models, here’s a brief comparison analysis:

Nearshore vs Offshore Software Development

Offshore software development is quite similar to nearshore in that developers are also hired from different countries in this model. However, the key difference remains the geographical proximity between the client and the outsourced destination. In this software outsourcing model, the minimum timezone difference between the client and the developer’s country should be 4 hours. 

For instance, a US-based company can hire software developers from India, which is over 10 hours ahead. The Indian developers are comparatively cheaper and skilled enough to work on any project. 

Nearshore vs Onshore Development

Onshore development refers to hiring independent developers or development companies within the same country. For instance, a startup based in California can hire a freelance developer from Florida or Alaska. 

By hiring from their own country, businesses can easily overcome challenges such as time zones and cultural and communicational differences. However, due to the high cost of living in developed countries like the US, Canada, and the UK, onshore outsourcing can be quite expensive. 

Market Analysis: Key Statistics on Nearshore Software Development 

• The market for IT outsourcing is predicted to grow from $469 billion in 2023 to $758 billion by the end of 2030. (Source: Nearshorefriends)
• The cost of nearshore software development is comparatively 46% lower than onshore outsourcing. (Source: HatchWorks) 
• 80% of US companies consider nearshore development. (Source: Hirewithnear)
• Nearshore outsourcing is expected to add $78 billion to Latin America’s export sector after 2023. (Source: HatchWorks) 
• 21% of small businesses intend to hire nearshore software development companies, up from 15% the previous year. (Source: Clutch)

How Does Nearshore Development Outsourcing Work?

When you work with a nearshore software development company, they will explain their working methods and operational practices at the outset. Usually, they follow one of two main outsourcing models. The benefits and availability of these models depend on the outsourcing service provider you choose to partner with.

Integrated Teams 

In this model, the nearshore app development partner provides staff members who work as part of your in-house team but remotely. This approach is great for filling gaps and supporting your in-house development team. You are responsible for directing their work and making sure they collaborate well with your existing developers.

The integrated team's support can be charged as a fixed monthly cost or on a time-and-materials basis. This setup ensures that you have the flexibility and additional resources needed to complete your projects effectively.

Dedicated Teams 

This model is more of a complete solution where you hire entire nearshore development teams. The key advantage is that the team will handle all the project's requirements or workloads. They typically work as an independent unit, separate from your in-house team.

A dedicated team can be brought in for a specific project or period, speeding up time to market. The main benefit is that your internal team remains focused on their tasks without any disruptions. This approach ensures efficient project completion with minimal impact on your internal resources.

Benefits of Nearshore Software Development

Adopting nearshore software development can bring significant benefits to your project. 

Here are some key points to consider:

1. Cost-effective Development

Nearshore development can help you save substantially on software development costs. Depending on your preferred location, you can search for development partners with nearby countries that offer competitive rates. For instance, companies in continental Europe or the British Isles can choose nearshore partners in Eastern Europe, like Ukraine or Romania. These countries are known for delivering high-quality work at competitive prices.

2. Similar Time Zones

Working with development partners in similar time zones is very beneficial. It extends the overlap of working hours, which makes collaboration easier through video calls and messaging tools. This means if a change or problem arises, you can address it in real-time without having to wait for several hours as you would with an offshore partner.

3. Geographical Proximity

Choosing nearshore software development companies in neighboring countries also offers several advantages. It’s faster, easier, and cost-effective to visit them for in-person meetings, or for them to visit you if needed. Moreover, their culture and work approach is likely to be similar to yours, making it easier to integrate their development teams with your in-house team.

4. Access to a Larger Talent Pool

Using nearshore software development services, you can overcome geographical limitations and access a wider range of skills and expertise. This means you can find development teams that have the specific knowledge you need, whether it's experience in your industry or proficiency in certain coding languages.

5. Increased In-House Productivity

Outsourcing software development can reduce the workload on your in-house team. Without the stress of new projects on top of their regular tasks, your team can avoid burnout and maximize their productivity and creativity. You can also have a nearshore partner handle your back-end development, allowing your in-house team to focus on more critical and value-adding work.

Challenges and Risks of Nearshore Development

While nearshore development has many benefits, there are some potential challenges. The good news is that with careful planning, these can be managed effectively:

1. Legal Matters

Since your nearshore partners operate in a different jurisdiction, legal issues can become complicated. If everything runs smoothly, this isn't a problem. However, if issues arise, dealing with legal disputes across multiple territories can turn out to be a headache for you. 

2. Project Timelines

Whether you know it or not, communication is probably the most crucial aspect of any software development project. Without regular updates and progress meetings, nearshore development teams might lose track of the project's main objectives. Ensuring clear and constant communication helps keep everyone aligned.

3. Ongoing Monitoring

Nearshoring can sometimes make collaboration challenging. If your partner isn't well-located geographically, traveling for in-person meetings can be time-consuming and expensive. Choosing a well-positioned nearshore partner can mitigate this issue, ensuring smoother and more efficient collaboration.

Best Practices for Hiring a Nearshore Development Team

Outsourcing to a nearshore app development team doesn't guarantee success. It's essential to focus on preparation, coordination, and communication to achieve the best results. 

Here are some steps to help you collaborate effectively with your nearshore developer:

#Tip 1: Choose a Suitable Outsourcing Model

Nearshore development teams usually offer different outsourcing models like time and material, fixed price, and dedicated team. Each model has its own advantages and disadvantages. For startups with limited budgets, the fixed-price model can help control costs. Larger companies might prefer engaging a dedicated team that works alongside their in-house IT experts for better control and integration.

#Tip 2: Choose the Ideal Nearshoring Region

Some neighboring countries are better suited for nearshoring than others. For instance, Eastern European countries like Ukraine have a large pool of skilled IT professionals with diverse industry experience. They also offer competitive rates compared to developers in more developed countries. When choosing a nearshoring destination, consider cultural, language and time differences to find a region you're comfortable working with.

#Tip 3: Onboard and Streamline Expectations

Whether adding to your internal team or outsourcing a whole project, a clear onboarding process is essential. This helps developers understand your work culture, processes, and business workflows for better collaboration. By establishing a common understanding, both internal and remote team members become aware of their responsibilities, ensuring smoother and more effective teamwork.

#Tip 4: Apply Suitable Collaboration Framework

It's best if the nearshore development team you hire already has a good workflow in place. This ensures they can quickly make changes without losing quality. If not, you can introduce software development methods like Agile. This helps your nearshore team keep up with feedback and changes smoothly.

#Tip 5: Monitor Progress

As the client, it's essential to regularly check in with the developers. Keep an eye on their progress, challenges, and anything that needs your attention. A good nearshore partner will keep you updated through channels you're comfortable with and quickly respond to your suggestions and feedback.

How to Choose the Best Nearshore Software Development Company?

When selecting a nearshore development company, it’s crucial to consider various factors to ensure a good fit for your project needs. Here are some key points to help you find the right partner:

Step 1: Assess Your Project Needs

Understand what your business requires. Are you building an app from scratch, or do you need support for an existing one? Identify the necessary tech stacks, like JavaScript, HTML, and CSS for front-end development. Decide if you need one developer or a full team. Asking these questions in your Request for Proposal (RFP) helps vendors provide clear proposals.

Even if you have an in-house team, outsourcing can help you get direct access to specialized skills that might be scarce locally. For example, some companies need expertise in generative AI, which may be hard to find in certain regions.

Step 2: Researching Nearshore Developer Candidates

Finding the right nearshore developer requires careful research to ensure timely deliverables and communication. Clearly define the skills, experience, and working style you need. This will ensure a good fit for your team.

You can look for a nearshore development partner through the following ways: 

• Google: Search for 'software developers' plus the country you're interested in. Visit their websites to see if they offer the services you need.
• Directories: Use platforms like Clutch and Goodfirms to find developers by location, rate, services, and reviews. These sites provide overviews of vendors’ services and portfolios.
• LinkedIn: Search for development services and filter by location and industry.
• Industry Peers: Ask colleagues for recommendations based on their experiences.
• IT Events: Attend international or regional IT events to connect with nearshore developers.

Step 3: Verify the Developer’s Credentials

Before hiring a nearshore developer, it's crucial to verify their credentials to make sure they align well with your project needs. Here are some steps to help you perform due diligence:

Reputable developers should have a portfolio showcasing their past work. This will help you determine if they have the expertise, experience, and industry knowledge required for your project. If a developer doesn’t display their portfolio openly, it might be best to consider other options.

At the same time, check independent directories like Clutch for reviews from previous clients. Look out for any red flags, such as slow progress, misaligned products, or cost overruns. Positive reviews indicate a reliable vendor. Many companies find new clients through positive word-of-mouth from their satisfied customers.

Step 4: Evaluate Collaboration Methods

Even with similar working cultures and time zones, managing collaboration with a nearshore IT partner is crucial. Here's how to approach it:

• Ask About Tools and Methods: Find out what tools and communication methods potential nearshore vendors use to manage projects. Tools like Trello, Slack, and Jira can help update you on progress, discuss changes, and receive feedback.
• Established Workflow: Ensure the vendor has a solid collaboration workflow. Talk to them about how they measure progress and work towards achieving a product-market fit for your app. For example, at Mtoag Technologies, developers use the Agile methodology to implement changes based on client feedback quickly.

Step 5: Consider Cultural Fit and Communication Practices

Nearshoring often takes advantage of cultural and language similarities, but this isn't always the case. Some neighboring countries can have very different working cultures and languages.

For instance, Australia is just 3 hours ahead of China, making it a potential nearshoring option. However, many Chinese developers may not speak fluent English or have a different working style.

Step 6: Interview the Candidate

Communication issues can still happen even if you share the same language, time zone, and culture with a nearshore developer. That's why it's important to have a face-to-face interview before signing a contract. This help businesses to identify any potential roadblocks or issues early on based on how the project manager or business lead responds.

Use the interview to learn more about the nearshore developer and make an informed decision. Hiring a developer is a long-term commitment, and you want to minimize risks from the start. You can ask questions related to their: 

• Preferred development methodologies
• Communication strategies
• Tech stacks, frameworks, and other technical aspects
• Testing and issue-fixing approach
• Development team’s qualification and specialization. 

Conclusion

Given recent trends, we can confidently say that the majority of companies will start outsourcing their software development project to nearshore companies in the next few years. Building software entirely in-house is becoming less financially attractive.

However, the questions remain—which skill sets are most needed, and how can companies benefit from nearshore development teams? With generative AI transforming industries, businesses will seek developers skilled in integrating deep learning models into their applications.

As a CEO, you can position your business for growth and stay competitive by considering nearshore software outsourcing. The benefits of nearshoring often outweigh the drawbacks, provided you manage the risks effectively.

So, don't let a lack of talent stall your next project. Outsource with Mtoag Technologies for timely and cost-effective software development.

FAQs

What is the Meaning of Nearshore Development? 

Nearshore development involves outsourcing software development tasks to neighboring or nearby countries. The goal is to take advantage of geographical proximity, similar time zones, and cultural affinities to improve collaboration and reduce costs. This approach provides better alignment and communication than offshore outsourcing, which often involves more distant countries.

What is an Example of Nearshore? 

An example of nearshore development is a company in the United States partnering with a software development team in Mexico. Due to the close proximity, similar time zones, and cultural similarities, this partnership can enhance collaboration and communication, which makes it easier to manage projects and respond to changes in real-time.

How Much Does It Cost to Outsource Software Development? 

The cost of outsourcing software development can vary widely depending on the project's scope, the location of the development team, and the required expertise. Outsourcing to nearshore or offshore partners is more cost-effective than in-house development. The cost can be anywhere between $25 and $150 per hour, with nearshore options often balancing affordability and quality.

Why is Nearshore Better than Offshore? 

Nearshore development is often preferred over offshore development due to its close proximity. Similar time zones make real-time communication easier, and cultural similarities enhance collaboration and understanding. These factors can lead to more efficient project management and fewer delays compared to offshore outsourcing.

What are the Benefits of Nearshore Outsourcing? 

Nearshore outsourcing offers several benefits, including cost savings, improved communication, and better cultural alignment. Being in similar time zones allows for real-time collaboration, reducing delays. The geographical proximity makes it easier to arrange face-to-face meetings when necessary.