In the IT industry, offshoring can be based on one of several models. Choosing the appropriate paradigm is crucial, as it will let you maximize the profits, minimize the expenses and reduce the time required to complete a project. The most common forms of cooperation with a software house include onshore, nearshore and offshore.
Onshore, nearshore and offshore – what is this all about?
Although the names of individual cooperation models sound similar, the actual differences between them are considerable and significant, from business and logistical perspectives.
Offshoring consists in transferring selected business processes abroad – to a country located on another continent. In this case, one of the most popular destinations is India. This solution allows you to delegate those parts of a project which your company cannot complete using its own resources.
Unfortunately, cooperation based on the offshoring model requires constant supervision over the work of a team located halfway around the world. One possible solution is to delegate a representative of your company who will oversee the developers’ work on-site, in the subcontractor’s offices. On one hand, this provides a better view of whether your requirements are met accordingly and if the quality remains high. However, there are downsides. By delegating an individual likely to hold a high, independent position in your company, you enfeeble your company’s performance right here, locally.
Moreover, constant business trips rapidly increase the overall project costs. If you operate in the SME sector or run a start-up based on modern IT solutions, this could turn out to be too demanding. Even in the case of establishing a company branch abroad (e.g. in Delhi), the parent company has to appoint an employee, and sometimes even an entire team, to ensure that the subsidiary operates in accordance with the values of the founding company – without any guarantee of satisfaction.
Onshoring means the commissioning of works to a company from the same country. There is full, cultural compatibility between the companies (the employees communicate in the same language and understand the business, social and cultural nuances), and are often located relatively close to each other, increasing the potential for personal meetings. The downside of onshoring is a comparatively high price of the services and, in some countries, also poor availability of specialists.
In the case of Germany, this could be the greatest obstacle. Since finding and retaining employees for one’s own company is already problematic, software development companies are facing the same issue. This is confirmed by numerous market reports or studies by the German Economic Institute. According to a survey conducted by the Bitkom association, the market is currently about 137 thousand IT specialists short, and this number is higher than before the pandemic, which also affects the rate of technological development of the entire country, as well as the progress of digital transformation*.
Nearshoring means cooperation with a company located on the same continent, but in another country, like in the case of German companies who find their technological partners in companies located in Poland. In this case, cooperation takes place in the same time zone, which eliminates the need for online meetings outside standard business hours. Moreover, it is possible to quickly arrange a visit at the customer’s office, whenever the situation so requires. Another advantage is the possibility of easier communication – usually, companies following the nearshore model communicate in English. However, certain companies can complete projects in the customer’s native language.
Cooperation based on the nearshore model can be conducted in several ways. The most popular ones include Team Outsourcing, where your partner company provides you with specific technological talents, e.g. Senior Java Developers or an entire testing team. This way, they can help your team solve a specific problem or provide competencies you are missing.
Another option is Project Outsourcing – this gives you an opportunity to entrust end-to-end projects to excellent specialists. In this variant, the subcontractor can not only propose the appropriate technology but also implement the entire project, prepare the necessary documentation and perform the whole implementation or maintenance. All that in constant contact with you and your team.
What to bear in mind when choosing your business partner?
Quality of the work
If IT works are delegated to another country, the final results should be of at least the same quality as locally. By “quality of the work”, we mean programming skills, daily project flow, similar work ethics as well as a common language.
If a company decides on nearshoring, it should, first of all, verify the experience of the potential business partner. Has the company ever completed similar projects in the nearshore model? Does it know the given industry and its nuances? Have the customers to date been satisfied with cooperation?
Cultural differences can be minor for nearshore partnerships, but they exist. Of course, one cannot expect a nearshoring partner to have a perfect understanding of a given culture. But what you can expect is to work at a similar pace and in a similar style, use the same tools and speak the same language.
Make sure to check if the company has any experience in working with customers from your region. If so, verify the level of satisfaction with cooperation. You can do so via the website or the Clutch, service, where companies voluntarily post ratings of cooperation.
The geography of nearshore partnerships enables the parties to regularly visit each other, but practice does not always follow theory. If you value a high level of understanding between you and the company you choose as your business partner in a new project, it is always worth finding out if they are ready for regular face-to-face meetings, e.g. in your office. Besides, it is worth checking whether their team would be ready to dedicate the amount of time necessary for proper onboarding.
If having read this article, you see that the way of nearshoring meets the needs of your company, contact us! We will be glad to talk about how we can support you in the pursuit of your business plans.