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Pros and Cons of nearshoring software development: everything you need to know before deciding for or against staff augmentation

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Scaling your IT team without losing efficiency and productivity during the process is a hard challenge to equalize. Considering the high salary of a good developer in the USA, and the time it takes to find this guy, it’s almost impossible to hire great talents with affordable prices. But there is a practical solution called nearshoring software development.

Just to have an idea, software engineers can cost on average USD 150k in New York, plus a fringe of about 20%. This US-based engineer will come out at USD 180k (minimally) if hired locally. At the same time, traditional recruiting processes may take months.

A solution for this dilemma it’s expanding your talent pool beyond US borders. Unfortunately, when you depend on a third to do things for you, chances are you’re going to have limited control about processes and get in trouble with time zone differences, linguistic and cultural barriers can make matters worse.

It can increase several kinds of risks such as: losing the quality of services, legal protection regarding Intellectual Property, Compliance, and other risks that you can check in detail in this article.

Would this be a dead end? Not at all.

Nearshoring software development is a good option to consider because can access world-class software experts located in very similar time zones, making all the processes faster, less costly, and yield great results. 

How does it work? What are the Pros and Cons? Keep reading to find more!

The undeniable benefits of Nearshoring software development

IT outsourcing as an industry is experiencing healthy growth and is predicted to grow by 4.42% between 2018 and 2022. At the same time, Nearshoring software development means counting on the cost-benefit of having a distributed team abroad, at the same time being able to manage it as if he were in his own country.

The great secret is that nearshoring software development teams can be smartly managed thanks to the geographical proximity and cultural fit. So you can ensure quality and efficiency in managing your team.

That’s why many American companies are adopting this model –  nearshore business process outsourcing already reached a revenue of 23.6$ billion, according to Statista.

Since your expectation with outsourcing hires is to save time and increase productivity, dealing with poor communication or lower the quality when developing your products must be out of the question!

Thinking about this, many companies have adopted Nearshore Software Teams, because it allows leaders to tap into a global talent pool without the high expenses associated with hiring within the US. US organizations already registered an average of 38% to 48% savings in labor costs by outsourcing IT functions to Central and South America.

Here is a shortlist of benefits for choosing a nearshore team:

  • Get face to face with your team, supported by shorter flight times when compared to offshore
  • Maintain your sanity (and sleeping nights) not working an odd schedule because of bizarre time zones
  • Keep intellectual property laws are similar to the US
  • Not losing Higher-level of engagement (thanks to similar culture)
  • Improve quality software development and collaboration
  • Reduce costs with the US dev team and increase ROI

Reasons why Short Flight Times are important

The home office is a divine gift for IT teams (thesis more than confirmed after the covid-19 pandemic). But let’s be honest: sometimes nothing can replace being face to face with your team, right?

When we talk about a nearshore team you’ll be able to:

  • Schedule in-person meetings (once your team is close to your office, it’s easier and cheaper)
  • Improve your productivity and focus  because less time in the air also means more time on the ground working
  • Facilitate the connection and meetings between Nearshore Dev Team and your clients
  • Strengthen communication and relationship with the team to foster motivation and alignment

Reasons why compatible Time Zones can make your software development strategy easier

Nearshoring software development allows you to meet with your team in a time zone similar to yours. As a positive result of this proximity of locations you can:

  • Minimize most of the cultural and language barriers that can cause significant issues in offshoring solutions
  • Organize communication tools, meetings, or deadlines to not confuse schedules
  • Foster open collaboration between your internal development and they outsource counterparts
  • Improve your communication by engaging the team during business hours
  • Establish people’s trust in leadership and each other
  • Nurture the company’s culture and promote high engagement in the long term

As you might expect, it would be a lot easier if we didn’t have to deal with time offsets at all.  It’s impossible to avoid them entirely, but many issues can be solved by Nearshore Teams.

How easier is integration with In-House Development Crew

As a nearshoring software development programming team that has equivalent schedules and speaks the same language as you, the efficiency of the integration with the In-House Development Crew is too much easier.

If integrated correctly, internal and outsourced teams can complement each other very nicely, filling gaps created by their counterparts while highlighting the advantages of each model.

You more than anyone know that a fully and well-done integration is only accomplished after a series of conversations, technical meetings, and frequent get-togethers. So, if you have a nearshore team it’ll be easier to establish strong relationships and routines than an offshore, for example.

How you can gain a Higher-Level of Engagement By bringing together Related Cultures

Finding devs with related cultures ensures that you can communicate properly with them. It can be easier to talk to someone familiar with American culture.

In a study with open-source software communities, researchers found that developers tended to connect with people with similar levels of performance and experience.

So, establishing this similarity will be crucial to integrate internally and nearshoring devs. Nearshore software development is composed of engineers and devs who will be able to add value where in-house teams struggle.

Most of the South American countries show high proficiency in the English language, beating out China and India who have remained at low proficiency. Brazilian devs, for instance, are excellent programmers to assist tech companies overseas in building and maintaining their products.

Also, in 2012, Brazil’s software market grew by 26.7%, surpassing China, and ranking the country seventh globally in the industry. With more than 250,000 IT professionals, and approximately 23,000 new IT graduates entering the industry each year, Brazil is a great place to find software developers.

World map highlights Brazil as a good time zone overlap with the Americas as a whole

Analysis of Brazil as an Offshore Services Location – TimeZone is a bonus

Original reference: Analysis of Brazil as an Offshore Services Location, Gartner, 2019

How you can Enhance Communication Between Outer and Internal Resources

Software Development Teams should feel that they can easily communicate with their team members as well as upper management, otherwise, nothing will work as it should.

With nearshoring software development, the communication style and quality expectations are comparable to onshoring but at rates similar to offshoring.

To enhance communication between outer and internal resources, you should:

  • Keep near-shore dev team up-to-date on company changes, progress, and plans
  • Provide an online platform for knowledge sharing
  • Include Online Project Management Tools in Team’s work routine
  • Remove the physical barriers as much as you can
  • Work towards proper information flow
  • Perform Recurring Meetings with internal check-ins (like daily or weekly scrums)

Value-for-money: when cheaper Price than US Developers is an alternative

One of the best benefits of Nearshore Teams is hiring excellent software engineers and devs cheaper than US developers  – 40-50% less on cost-per-hire. There’s an entire hidden pool of highly qualified and innovative Engineers overseas still waiting to be explored.

Brazil, for example, is the largest Startup Ecosystem in Latin America. It has the biggest city in the continent (São Paulo) attracting hundreds of new and well-established companies – such as Google and Facebook – as well as other cities like Rio, Belo Horizonte, and Florianópolis that are leading Brazil’s tech scenario and luring the most talented Engineers in the country to work for their tech companies. Engineers with a great education, multiple languages skills, and striving to elevate their career.

See more about the Brazilian IT Market:

  • 6.18 million fluent English speakers;
  • 6th largest IT market;
  • 1st in IT investments in Latin America;
  • 46k IT graduates per year;
  • 2.4k higher education institutions;
  • The largest population of Java developers in the world;
  • 2nd for legacy systems and enterprise development (after the US) in mainframe developers;
  • 4th position in top front-end developers;
  • One of the lowest attrition rates in the world.

Find more about What does Brazil’s great tech talent pool.

Still, confused? Learn what is The Difference between inshore vs nearshore vs offshore

Nearshore, offshore, onshore… At last, what’s the difference between them?

Let’s begin with the traditional: onshore. This model refers to giving work to an organization in the same country you reside in.  One of the best benefits of working with an onshore team is to collaborate with your team daily and of course the Real-time communication. But, costs usually are higher. 

In the meantime, offshore outsourcing relocates work to different countries – mostly like India, China, and Eastern Europe. That’s why chances are that your offshore company follows business and management processes very different from your own. Time zone differences, linguistic (documentation standards, nomenclature, level of detail, etc), and culture usually are the biggest barriers.

Graphs show the drawbacks of offshore outsourcing include poor communications, quality control, and cultural differences

Drawbacks of offshoring include poor communications, quality control, and cultural differences

Original source: Reach Home Loans

Finally, nearshore outsourcing means contracting teams in a nation that is geographically (and relatively) near to the hiring company’s home country. Besides that, working with nearshore devs means gaining a diversity of skill sets, practices, protocols, and methodology, having a fresh point of view on the problem, and establishing more autonomy to create innovative products.

Graphs show the nearshoring software development evolution's over time

Nearshore benefits grow over time

Original source: Softtek

Understanding these three models will be crucial to establish your strategy of building and scaling high-performance teams.

The difference between Onshore, Nearshore, and Offshore (Table Comparison)

Onshore Nearshore Offshore
0 hours of difference 1 to 3 hours difference 6 to 12 hours of difference
The software development team is in the same country as your company The software development team is in a nearby country The software development team is usually on a different continent
It’s expensive and time-consuming It´s cost-effective when compared with your local market Often cheaper than the nearshore option
Not applied Direct flights available (with a flight duration of 2 to 3 hours) Long flights (with a flight duration of 13-20 hours)
Not applied $ 2,000 minimum (airfare) $ 450 average (airfare)
Can have the same difficulty of nearshoring management Easier to manage due to the short time zone difference More difficult to manage due to the time zone difference

X factor: What is The Difference between own team vs outsourced

How to avoid rifts between your American-based team and whoever is abroad

If you want to avoid that your saving money hiring strategy turns into a nightmare, your outsourcing must be well thought out. Consider that outsourced engineers aren’t in full synergy with your product team, so to accomplish your goal of building a high-performed software development team you should create successful communication, effective validation mechanisms, and processes to avoid re-work to fix or adapt non-conforming code. From the first interview until the integration and day by day work, it’s very important to align all the expectations, methodologies, and deadlines.

The Dilemma that every CTO needs to face: own team vs outsourced

Outsource or not? That’s the question. It’s good to say: outsource doesn’t do miracles at the same time as owning your own team doesn’t necessarily mean that you have everything perfectly controlled. This is a common pitfall that many IT Leaders fall into.

Before deciding for or against staff augmentation, consider the company goal. If your company needs to acquire talents for the long term, but also reduce costs, outsourcing will be the best choice. If time and money are not a problem for hiring devs, then building your in-house team is possible.

Here are some questions that can help you:

  • What kind of developer or software engineer are you looking for? (A senior full-stack, a leader, or a frontend?
  • How long do you expect to wait for searching and hiring these talents?
  • What kind of tests will be effective to evaluate soft and hard skills?
  • What will be the salary?

Anyway, every IT leader’s purpose must be to find the best cost-benefit and this objective leads most managers to choose to outsource, as shown by this survey by Deloitte.

Top reasons organizations opt for IT outsourcing:

  • The catalyst for innovation (64%)
  • Improvement of speed and time to market (63%)
  • Improvement of performance (54%)
  • Enhancement of scalability and rapid elasticity (54%)
  • Access to new tech (51%)

Top 5 reasons for opting for an In-house development team:

  • Keep the organizational culture with a team that deeply understand the nuances of how your organization runs
  • Keep real-time communication easier and more effective
  • Gain speed to deliver new products and during the entire process (resolving bug reports or changing the direction of your application)

When should you go for fully in-house engineers?

A fully in-house engineer is certainly the dream of all Software Development Teams. If you need to gather a high-performance team based on our own culture and methodology and, of course, money and time are not a problem for you, so you can go ahead.

  • You need to manage your team in-person
  • Money and time spent are not a real problem
  • You secure a long-term team
  • Your team becomes uniquely specialized with your requirements and knows your business and culture
  • You need a team that is solely devoted to your project and the efforts to achieve it.
  • Technical information remains within the company
  • Management can control and oversee the timeframe, activity, and progress of work

When should you go for fully outsourced engineers?

Unlike the in house model, outsourced your Software Development Process is a solution to be applied if:

  • You want to better control costs and only pay for the work you want to be done
  • You expect to scale and staff augmentation to deliver results faster
  • You can train the nearshore development team to know your business and culture and even work with you over many years
  • You have fewer resources (company time, money, space)
  • You’re thinking in expand technical expertise and experience to bring better results to your project and even help your team develop new skills
  • Having support with troubleshooting even after the project is finished.

To quickly solve this question, compare below:

Topic Nearshore Team US Developer (onshore)
When costs are equal Winner
Long Term Commitment Equal Equal
No Office Distractions Winner
Quality of code Most of the times, the winner

When should you mix in-house engineers, staff augmentation, and project outsourcing?

Sometimes mix in-house engineers, staff augmentation and project outsourcing will be the best choice for you. The truth is that there is no 100% answer for it. Anyway, cost-benefit and quality will always be the deciding factor to the forefront.

If you have a great in-house development team, but you need a specific person with specific skills of course you should consider integrating an overseas talent with the rest of your engineers. Or, if you need to expand the operation in terms of intelligence (but hasn’t increased your budget), nearshore combined with in-house also will be perfect for you.

Half in-house and half outsourced is not usual but can be tested. make sure that you treat them the same when work is in question, Encourage Communication and Track the Result. I’m sure that will be an interesting experience.

We help you custom curate your product engineering team with nearshore talent best suited to you.

When deciding where to find your IT outsourcing provider, it’s important to know the exact requirements of your project, the allocated budget, and the time frame allotted for completion.

If you’re considering work with high-performance nearshore development teams, talk to Ubiminds to find more about our strategy to bring the best result to your company!

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