The Benefits of Nearshore Software Development

The value of outsourcing as an effective strategy for software development is generally well understood. As far back as 2013, it was reported the 2 out of 5 CIOs surveyed planned some sort of outsourced software development for the coming year. In this article, Accelerance would like to help you understand better the benefits of NEARSHORE programming.

Want to know more about the benefits of outsourcing in general? Read More

What is NEARSHORE software development?  How is it different than outsourcing (or is it)?

• Outsourcing is the use of a 3rd party (person or company) to perform work, software development for example, you might have previously accomplished by the use of your company employees.   
• INSHORE means you are outsourcing to a 3rd party in the same country as you.
• OFFSHORE, therefore, simply means outsourcing to a 3rd party in some other country. The top 3 outsourcing countries are India, China, and Malaysia. In fact, 5 of the top 10 outsourcing countries for IT are in Asia.
• DUALSHORE outsourcing is simply a hybrid. Usually a liaison or account manager, will be in the US and the software development team will be located in another country.
• NEARSHORE outsourcing is an under-utilized outsourcing option, where the 3rd party is in a neighboring country. For US companies - a NEARSHORE outsourcing provider would be located in North or South America.

NEARSHORE programming offers unique benefits over offshore programming and  is an attractive option for North American companies looking to outsource software development.  Latin America is an especially attractive NEARSHORE option to consider.

From a macroeconomic perspective, The investment community has a positive outlook on Latin America business. A recent study compiled by Ernst and Young in Private Equity Roundup Latin America, confirms that private equity and venture-capital investments remain committed to Latin America. Indeed, many of the businesses being invested in are small and medium enterprises (SMEs), and perhaps 90 percent of these companies are in Mexico and Colombia. Therefore, many managers are becoming more comfortable betting on Latin America as an outsourcing destination. In fact, Software outsourcing to countries in Latin America has grown tremendously. Mexico and countries in Central and South America have jumped on the software outsourcing bandwagon.

Benefit #1: Lower Rates

The attraction of lower programming rates, compared to the US continues to be a key reason that companies explore offshore outsourcing for software development. Certainly, NEARSHORE outsourcing provides this savings opportunity as well. NEARSHORE outsourcing providers  in the Americas (e.g. Latin America and South America)  have highly skilled programmers at hourly rates that are much lower than comparable programmers in the US. Why are the rates better?

• In most cases the US dollar is stronger than the local currency.
• Many NEARSHORE programming companies  are in countries where the wage scale is lower than the US. In other words, the NEARSHORE programmers are paid well - but the cost of living is lower in their native country compared to the US.

Benefit #2: Shared Time Zones

In traditional offshore outsourcing, many US companies have faced challenges in working effectively with an Asian software development company because of the time zone differences. In a recent survey one third of US companies that outsourced to India considered the 10-hour (or more) time difference to be a big challenge. Very often the “core team” in an outsourcing software provider will be working hours that are completely opposite of normal US business hours. Unless carefully managed by you and your outsourcing provider, these work hour differences can become a significant drag on effectiveness and make timely collaboration problematic.

In contrast, NEARSHORE outsourcing programmers are working in time zones that are the same as your company!  The workday overlap between North permits a high-collaboration, which is so important in software-development methodologies like Agile and Scrum.

Face-to-face meetings are far easier to accomplish. Even US managers who might be squeamish about a 20+ hour trip to Asia would likely not hesitate to make a trip to Latin America or South America - where the travel time might require less travel time than an east-to-west-coast trip inside the US.

Benefit #3: Few Language & Cultural  Barriers

Universities in Latin America have robust IT programs. They produce software engineers in numbers that can easily support software outsourcing commitments. English as a second language is prevalent, and continues to be the “default language of commerce” for companies that intend on conducting business outside the borders of their native country. 

Perhaps just as importantly, these countries share a common “Western Culture” with the US. There is a strong connection and affinity to the US in commerce and popular culture. US company brands are well known. US political and other national news is viewed more regularly than in Asia, or even Europe. Even US music and TV shows have been re-broadcast to Latin America consumers for years.

Benefit #4: Software Outsourcing Advisory

For more than a decade, Accelerance has recognized the benefits of NEARSHORE outsourcing to US companies. We know that  companies who already understand the benefits of outsourced software development see new levels of value using outsourcing, NEARSHORE outsourcing provides new levels of value. For other US companies who had a bad first experience with outsourcing, NEARSHORE outsourcing provides an approach that removes barriers such as language, culture, and work day / time zone differences.

In Summary

NEARSHORE software development outsourcing is an option that many companies overlook. The typical mindset is “Outsourcing = Asia”. Companies based in the US and Canada have wonderful NEARSHORE options. Like other outsourcing options, NEARSHORE outsourcing to a a Latin America or South American team provides savings in hourly rates compared to US programming rates. Skilled programming teams exist in NEARSHORE “centers of excellence”, just as they do in elsewhere in the world. Moreover, you will gain additional benefits and efficiencies because of shared language, culture, and time zones.

Accelerance has already investigated and established relationships with certified, vetted software development companies throughout Latin and South America countries including:

• Argentina
• Brazil
• Bolivia
• Colombia
• Costa Rica
• Mexico
• Peru
• Puerto Rico
• Uruguay
• Venezuela