What is nearshore development? The complete guide

What Is Nearshore Outsourcing

Nearshoring is a closer-to-home type of outsourcing. Nearshoring is outsourcing in a similar time zone and with a geographic and cultural proximity between nations doing business. For example, when a US-based company partners with a software development company in Costa Rica this is considered nearshoring due to the relatively short distance and the similar cultures.

For a detailed breakdown of the differences between offshoring and nearshoring, see our in-depth blog ‘What Is Nearshore Development, and What to Look For in a Partnership’ on the subject.

Offshoring was perhaps once considered the gold standard for saving money and receiving high-quality workmanship, but this is no longer the case. Closer to home alternatives are quickly emerging as a better option for several reasons.

Advantages of Nearshore Outsourcing

The main reasons for companies to outsource business processes are to reduce business costs and increase efficiency. Adding external specialists allows companies to better focus on their main objectives and the strategy behind running the business without worrying about the development or completion of mundane tasks.

The reasons North American companies often choose to do business with companies in nearby nations because of advantages such as fewer cultural differences than with an outsourcing partner, greater speed to market, and control of intellectual property. But the benefits to nearshore outsource software development don’t stop there.

1. Improved Control of Intellectual Property:
   Companies that are located in nearby countries might have the same data protection laws and regulations to protect the business. They may also have similar financial and legal obligations as the country of the home business. This is worth considering when bringing an innovative product to market, as protecting intellectual property as well as financial investment is obviously important.
2. Fluent English:
   Although Spanish is the dominant language in most Latin American countries, English is gaining importance and rising in popularity, especially among professional services firms that work with international clients. Most schools and universities offer courses in English. Having less cultural discrepancies and language barriers improves communication and collaboration.
3. Similar Time Zones:
   Being in the same or similar time zone as an external team makes working more efficient. Emails don’t linger unanswered until overnight and there isn’t the expectation of working during traditional non-working hours.
4. Greater Speed to Market Working:
   with an external team that is located in a similar time zone and who speaks your native language makes the entire collaboration faster than outsourcing elsewhere. Nearshore collaboration allows the development and launch of products or services much more rapidly. This means less time spent in the development phase and more time with the completed product.
5. Reduces Digital Disruption:
   Customer demands and entire industries are changing at a fast pace. Digital transformation is no longer a competitive edge, it's critical to the survival of most businesses. Instead of waiting for a digital disruption to upset their existing business models, traditional businesses have started to embrace digital transformation.

IT Nearshore Outsourcing

Outsourcing is particularly popular in the information technology sector. Product development and other IT work is becoming commonly sent to Latin America. Latin America offers several skill sets that make IT nearshoring a desirable option for business.

1. University Education
   While education has traditionally been a struggle for Latin America, there are positive changes and subsequently better job opportunities. Costa Rica, for example, has a highly rated educational system that has been repeatedly recognized as one of the best in the region. The literacy rate in Costa Rica is 97.9%, one of the highest in Latin America. And the national universities, Universidad de Costa Rica (UCR) and Instituto Tecnológico de Costa Rica (TEC), rank among the best in Latin America. Chile and Brazil also have high-ranking universities that offer good job prospects to alumni.
2. IT Specialization
   Many universities and technical schools in Latin America offer programs in software development and IT solutions. Through government initiatives, private investments and individual demand, Latin American countries have become dependable players in technology, producing IT talent that rivals the level of those in first-world countries. According to Forbes, in 2015, Mexico had over 113,000 engineering graduates. At the time, this was the 8th highest worldwide. Meanwhile, in Colombia, the Ministry of Technology (MINTIC) launched its IT training program, Plan Vive Digital that has trained over 6,000 students. To make it accessible for all students, the country is paying up to 80% of the training costs. And not only is Latin America tackling technology with gusto, it is also creating more opportunities for women within the traditionally male-dominated field. Take for example, Laboratoria, a company that has been training young women coding and software development skills in Latin America since 2014. This emphasis on education with a specialization in software development and engineering has led to a highly educated workforce in Latin America, making it an enticing destination for nearshoring.
3. Language/Multilingual
   English is fluently spoken and a prerequisite for individuals involved in the nearshoring industry. In the same aforementioned article Forbes found, “Latin Americans often learn English in school, and now Peru, Chile, Ecuador, Mexico and Brazil have all surpassed China in English proficiency.” Fluent English eliminates costly misunderstandings and provides ease and quick communication
4. Similar Cultures
   When working with countries within Latin America, deadlines, commitments, and responsibilities are recognized, valued and met. This is another feature that makes doing business in Latin America a more attractive option than outsourcing to a far-flung geographic location with a drastically different culture. Costa Rica, for example, has attracted several industry leaders including HP, IBM, and Intel.
5. Telecommunication Infrastructure
   Most of Latin America has a relatively modern telecommunication infrastructure, including fiber optic. Fiber-based networks are considered the most advanced subterranean transport infrastructure for data services. Latin America is well aware of the advantages of fiber optic connectivity and is committed to investing in it. Costa Rica has the second-highest Internet coverage in Latin America. According to a Superintendence of Telecommunications (SUTEL) report, fiber-optic internet lines in Costa Rica grew 146% between June 2019 and June 2020.

Nearshore Outsourcing Services

There are several types of services commonly offered within the IT industry. Let’s look at a few here.

Nearshore Software Development

Software development is an area that is frequently sent to a nearshore firm for undertaking and completion. This is due to the aforementioned high levels of education and able workforce, plus the savings to business in working with a country where labor costs are significantly lower.

Software development employs highly skilled teams of engineers and developers to develop and create products as well as assist in the evaluation of current systems. Most nearshore software development teams use agile methodologies to work with the US or Canadian based home office. Agile methodologies enable quicker time to market with fewer bugs and errors.

Nearshore Agile Development

Agile development is a method used by nearshoring businesses such as Pixel506 in Costa Rica. Agile methodologies mean working on projects through phases that are referred to as sprints. Within each sprint there’s time built in for testing, evaluation and contact with the client. This way, any issues are spotted immediately and fixed before continuing on to the next sprint or phase. The high level of communication between the nearshore team and the US or Canadian office ensures that a product is delivered as expected and that deadlines are met.

Nearshore Software Testing

Software testing is another area where nearshore firms are excelling. By offering strong software testing capabilities, Latin American businesses are attracting US firms looking to ameliorate or check over existing software.

Software testing is the process of verifications within a system to ensure that everything is functioning properly. The goal is to identify faults, errors or missing pieces of software before moving onto the next phase of testing. This is a preventative measure to avoid costly software product defects. Testing is an important step in any software development process as it protects financial interests of the business, the security of user data, customer satisfaction and the business’ reputation. Due to the fact that it is a competitive marketplace, if a software product is unsecure, error-ridden or slow users will quickly seek out a competitor to fulfill their needs. This makes testing all the more important. Nearshore testing is especially appealing because internal and external teams can work collaboratively throughout the day

Nearshore Staffing Services

Another key feature that nearshoring offers is staffing solutions. Nearshore firms can provide staffing solutions to help a business augment an existing in-house team or they can provide a full dedicated team of engineers and developers to fulfill a clients software needs. Teams can be scaled according to need and work to blend seamlessly with the existing work culture. Whatever the size or duration of a project, nearshore staffing is a viable alternative to in-house hiring. It saves both time and money for the business.

Pixel506’s CEO, Antonio Ramirez sums up the value of nearshore staffing services,

"At Pixel, we understand that all businesses have different needs so we customize solutions for each one of our clients. Some companies approach us for a very specific product or service. We provide them with a delivery team with the right combination of skills and experience to match the clients’ needs to deliver a high-quality and customized solution. Other companies are looking for long-term relationships based on loyalty, mutual trust, and integrity. We provide these clients with a dedicated team that becomes an integral part of their in-house team. Either way, all clients get our personal attention, complete confidentiality, and full dedication, regardless of the type of project or the size of their budget."

There are other nearshore outsourcing services, too, which include but are not limited to user experience research, SEO, blog content creation, and data analytics. If your needs are not listed here, don’t hesitate to contact us to see if we can be of help to you.

Nearshoring and a Cultural Fit

Nearshoring is growing in popularity and with good financial reason, but it is also a popular choice due to the cultural similarities between the US and Latin America. The cultural connection is an important piece of communication and that ultimately can affect the bottom line of a business. Pixel506’s Antonio Ramirez in Costa Rica expounds upon the importance of a cultural fit, “I’m a firm believer that finding the right cultural fit between your in-house team and the nearshore team is just as important as technical skills. As long as you work with people who communicate well and who cherish similar values, it doesn’t matter if they are based in different countries.”

Is Nearshoring Right for Your Business?

It’s not always easy to know if nearshoring is the right move for a business, however in this article we’ve expounded upon many of the benefits and reasons why businesses should consider outsourcing as an option for the overall wellbeing of their operations. While whenever work is being done outside of the company, there is risk involved, nearshoring mitigates much of the traditional risk of outsourcing. With improved control over intellectual property, fewer cultural discrepancies, similar time zones and faster time to market for products, it’s easier and easier for businesses to say yes to nearshoring opportunities.

If it’s an idea that you’re interested in exploring, please get in touch. As an agile nearshoring company, Pixel506 can easily adapt to your specific requirements, dedicate the number of people necessary to carry out your tasks, and communicate with you and your team in a timely and efficient manner. We’d be happy to chat with you more about what your needs are and in what ways we might be able to help. Read on to learn more about us.

About Pixel506

If you're looking for a nearshore software development service or a technical staff augmentation service, Pixel506 can help. We are located in Costa Rica but also have Pixelians (team members) based in Peru, Nicaragua, and Colombia. With such a large talent pool to choose from, we can establish an effective nearshore product development team that fits your needs exactly. We help businesses gain a competitive advantage and exceed business goals through user experience strategies, data, and innovative solutions. Founded in 2009, we have over a decade of experience helping big, medium, and small companies succeed in the digital world. Contact us today to see how we can help―we look forward to getting to know you and your business over a digital cup of coffee.

Key Takeaways

• Nearshoring is outsourcing in a similar time zone and with a geographic and cultural proximity between nations doing business.
• Advantages of nearshoring include, improved control over intellectual property, fewer cultural discrepancies, similar time zone and greater speed to market and fewer digital disruptions.
• Nearshore IT outsourcing is flourishing because it offers a talented pool of workers who have a high level of education, specialization in IT services, speak fluent english, hold similar cultural values and have top-quality connectivity.
• There are several types of nearshoring services within the IT sector including: software development, agile development, software testing and staffing services.
• An invaluable part of the nearshore experience is the cultural fit between the home country and the working country. Latin America offers a parallel work culture and value system.
• If you’re curious about what nearshoring might offer your business, get in touch with Pixel506 today and we’d be happy to begin a conversation.

Related Resources:

• why the tech industry is addicted to nearshoring
• nearshore software development
• nearshore, vs offshore vs onshore
• Find a Nearshore Partner with the Right Cultural Fit” Interview
• How to Hire a Great Nearshore Development Team
• Top 4 Benefits of Nearshore Outsourcing for SaaS Companies
• 8 Reasons to Consider Nearshore Software Outsourcing
• 4 Successful Nearshoring Partnerships
• Top 5 Reasons to Choose Costa Rica for Nearshore Development
• “Why the tech industry is addicted to Nearshoring?
• “What Is Nearshore Development, and What to Look For in a Partnership