Software Development Outsourcing: Offshore or Nearshore?!
If you navigate the complex waters of software development, it is highly likely that you came across terms like outsourcing destinations, offshore and nearshore outsourcing. While images of shores and beaches came to mind, it all sounds confusing when the conversation topic is software… Don’t worry. Help is on the way!
Let’s start from the basics.
In a nutshell, software development outsourcing is when a business hires a third-party company or developer(s) to handle information technology tasks, like building a solution from scratch or providing an extra pair of hands to their internal development team.
What software development outsourcing means today
Even though software development outsourcing has been here for decades, nowadays it is a crucial tactic for any organization who wants to keep up or keep ahead in technology.
Not long ago, organizations used outsourcing to improve back-office operations through cost reduction and performance improvement. Today, outsourcing solutions are enabling competitive advantage by accelerating changes within those organizations that have the audacity and skill to leap over the technology chasm. The focus has shifted from traditional work transfer to upfront transformation and automation! And that is super exciting!
Therefore, businesses are challenging traditional methods of building software and driving a huge competitive advantage!
But what is the best outsourcing option for your business? Let’s dissect each one of them!
Location: what distinguishes offshore from nearshore
Typically, software development outsourcing can be described as nearshore or offshore. But what’s the real difference? In practice, it’s the distance between the contractor and the provider:
- Nearshore Software Developement: outsourcing in countries in the same or similar time zone, located in bordering countries or a short distance away;
- Offshore Software Developement: outsourcing: to regions that are overseas or more than four time zones away.
For example, if you are in the United Kingdom, it would be considered “nearshore outsourcing” any provider located in South, Central and Eastern Europe, such as Portugal, Spain, Bulgaria, the Czech Republic, Romania, and Poland. Although all these countries are relatively close to you, only Portugal is in the same time zone (which has a major impact on a daily basis).
India, on the other hand, is considered an offshore outsourcing destination. With a time difference of almost 6 hours, it is located at more than 4,000 miles away and a flight distance of more than 8 hours.
Why proximity matters in software development outsourcing
Destinations like India, China and Vietnam were the standard outsourcing countries for more than a decade. However, in the last years, businesses have started to see the benefits of building outsourcing partnerships with nearby countries.
Although these low-cost countries have extremely low wages, there is a big misconception that offshore outsourcing is cheap. If you look deeper, you’ll find a pool of hidden cost – management attention, communication, and co-ordination expenses. Not to mention taxes or duties that sometimes might be due. These ventures turn out to be quite expensive.
That’s why businesses are changing their game plan. Nowadays, geographical and cultural proximity play a crucial role in the outsourcing industry.
Same or similar time zone, shared language, and proximity mean you can fully be in control and involved in your project.
Of course, cost efficiency is one of the major factors as well. But the real price is factored in and seldom does the evaluation include solely the daily rate of the development team.
Modesty aside, a great example of a premium value-to-cost ratio is Portugal. In Portugal you’ll find a pool of talent, prime location, social and political stability, excellent accessibility and great technological infrastructures. Portugal is seriously considered one of the most competitive outsourcing destinations.
Can you Outsource and still be Agile? It’s all about communication
Definitely. And, from our experience, it can make or break an entire development project.
It is common to say that Agile is only suitable for small and co-located teams. However, stats are showing that’s not only the case. The 10th Annual State of Agile Report shows that 71% of agile teams are geographically distributed in some manner. Moreover, according to 12th Annual State of Agile Report, 45% of respondents are using agile practices to manage outsourced development projects and 40% of respondents indicated they plan to increase the use of agile in outsourced development projects in the next 24 months.
These numbers show that Agile can and should be used in software development outsourcing. The emphasis in mutual trust, communication, collaboration, and flexibility, results in a 98% of success of Agile Projects.
We believe that, if you want to find success in your Outsourcing projects, communication is of paramount importance. And that’s why we are bringing out Agile in a post about Outsourcing. The adoption of Agile methodologies makes it easier to avoid misconceptions, misunderstandings and, in general, miscommunication.
If you want to succeed in Outsourcing, it’s easier if you adopt Agile methodologies. Make sure you’ll find a partner who shares the same vision.
Nearshore as a value-added solution
Software development Outsourcing is now the new normal. But the latest research shows a shift in industry thinking. Outsourcing is not just about saving money anymore. It’s seen as a critical tool in innovation and automation.
However, the biggest challenge for a successful project is managing the communication. Proximity – geographical and cultural -, language, common technologies and shared methodologies, all play an important part when it comes to choosing your outsourcing partner.
Whether you choose a nearshore or offshore outsourcing, the most significant thing is to choose a partner who understands you and with whom you can keep a relationship of trust and team work.
What about you? Are you looking to extend your development team? Let us help! Share your needs with us.
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