One of the biggest challenges facing companies is cost reduction, which is why entrepreneurs are constantly looking for new strategies that will allow them to be more competitive in an increasingly saturated and globalized environment. The nearshore software development company is an exciting alternative that has gained momentum in the European market in the last two decades.
What is nearshore?
Nearshore is a type of outsourcing or externalization of specific activities by a company to countries to reduce costs, generally due to lower salaries.
Unlike offshore, a company choosing nearshore will choose neighboring countries that benefit from geographic proximity, economic and political ties, and cultural and legal similarities. In the Americas, the top nearshore destinations are Mexico and Colombia.
The five advantages of nearshore
Cost reduction
According to a study conducted at the University of Navarra, companies in the 1980s were offshoring in search of ways to reduce costs. The main advantage of the nearshore software development company method is the reduction of fixed costs, especially regarding salaries and social costs. With this outsourcing strategy, you can have a smaller workforce and spend less time and resources on people management, saving you twice as much.
Drive business growth
The financial savings from the nearshore software development company can be reinvested in other areas of the business to grow it. Outsourcing some services will also allow you to increase your scalability, so you can devise a solid internationalization strategy to increase your SME’s revenue.
Increased competitiveness
The ability to outsource specific processes also endows your company with a more flexible structure, allowing you to react more quickly to market changes. All this will enable you to be more competitive compared to large companies with more rigid structures. In addition, reducing nearshore costs allows you to lower prices and gain a larger market share.
Geographical distance
The nearshore software development company represents a double advantage. On the one hand, geographic proximity reduces freight costs while avoiding the customs duties and taxes that characterize trade with countries outside the European Union.
It also means reduced shipping times and more efficient customer service. On the other hand, the fact that there is no more than a three- to four-hour time difference facilitates communication and timekeeping and is a necessity for companies that need a deadline-like call data center.
Cultural similarities and economic ties
A similar culture facilitates the outsourcing process, helping avoid delays and misunderstandings. The existence of economic relations between countries also speeds up the bureaucratic process.
What services can I outsource to nearshore?
IT, call center, and accounting is the most outsourced activities, although you can still outsource your SME’s other activities abroad. You can outsource nearshore software development company services to:
- Outsource secondary benefits that are not a core part of your business.
- Outsource services you occasionally use, so it doesn’t make sense to hire people to take care of them.
- Outsource services that you cannot afford for economic reasons, as it will be much more expensive to train and retain staff to achieve the same quality that a nearshore company can provide at the same rate.
The globalized world has made finding talent much more accessible. This is partly due to technological advances that have increased accessibility and made telecommuting and remote work more effortless. In this regard, there are different forms of outsourcing depending on the service provider’s location.
While it is true that no one option is more or less suitable, it is essential to weigh the advantages and disadvantages of each. We define them below to help you make the decision that best suits the needs of your project.
