Outsourcing, Offshoring or Nearshoring? Choosing the right practice to cover your software development needs

More and more companies around the world are facing a lot of challenges during their growth and development. Especially now, when the planet seems to be going under a massive regeneration process and everyone needs to find ways to stay afloat or even better, surf this new “wave of change”. In these difficult moments, companies are bound to make some big decisions, and one of the most important ones is strongly related to how much financial investments they are willing to put into developing certain projects. A company’s financial priorities can determine whether those projects can be done by hiring an in-house team or not. Most of them will find this rather difficult and time-consuming. Leaving costs aside, the whole process of finding, hiring and training the right people can take months not to mention, there’s always a risk of a bad match that resets the whole process.Luckily there are alternatives and most CEOs are very keen on exploring them. For others, things such as cultural match and geographic proximity while getting their best money's worth is what matters. For some, the most important objective is keeping costs as low as possible. An activity that is widely known as outsourcing. We will take a closer look at what outsourcing means, what are its benefits and risks and of course the difference between it and its brothers nearshoring and offshoring. We’re also going to look into the best way of choosing the right practice for your needs and why are they gaining so much popularity, especially in the software development industry.

Outsourcing

There isn’t an agreed-upon definition for this term, but it is the action, or better yet the decision that a company takes to employ another firm to help complete certain projects or business tasks. For example, a healthcare provider needs help in developing an app or a tool that can keep a very detailed track of all its patients and their medical history. Because the healthcare provider doesn’t need an entire development team just for this project, it searches for another firm, that can create and provide the platform or the app for a fair price. In this way, they don’t have to commit to a team long-term and they can still get the desired product at a very good price and quality. Let’s see what are the main benefits of outsourcing:

  • No long-time commitment. You can sign a contract with the outsourced firm only for a specific project or task, and when that is completed, your commitment ends with it too. Of course, if you require long term assistance, that can be arranged as well.
  • Cost-effectiveness. Compared to hiring a full in-house team to care for those specific needs, outsourcing can be the answer to a more profitable outcome of that said project. Not to mention, you can take advantage of a much cheaper labour market, and still get the same quality you desire.
  • Flexibility. You can test the market freely to see what works best for you and only then make a firm decision. Changing providers comes way easier and cheaper than changing your own people or even entire teams.
  • More time for your business goals. Working with an outsourced firm can save you some time that can be spent improving some core functions in your own business. You can focus on running things more smoothly and efficiently now that someone else handles the heavy lifting.

Now some risks:

  • Communication issues. Poor communication, especially between partners can make the collaboration come to a sudden end. There are a lot of tools and practices that can help with managing these types of collaboration. The best advice you can get regarding this potential issue is to establish some ground rules regarding communication, reporting and deadlines right from the beginning.
  • Culture. If the outsourced firm is located in another country that is governed by different cultures and traditions can actually be a deal-breaker for some. But if you’re both flexible and honest, cultural diversity can become an advantage.
  • Language barriers. This is a risk worth considering and it is not to be ignored. You do need to speak the same language in order to facilitate an easy communication flow. So make sure both you and your partner are speaking a common language.

Another great advantage of this outsourcing practice is that you don’t have to be next-door neighbours with the employed firm. They can be located anywhere in the world and still do the job as planned. And that takes us to the next topic. If outsourcing is the main term used for externalising projects and tasks, over time, we came to learn that outsourcing has two little brothers that help with understanding this rather complex practice. They’re called offshoring and nearshoring.

Offshoring

Considered the younger brother of outsourcing, offshoring is the specific term for when a business decides to choose a partner for a specific project or task in another country, usually somewhere overseas. Taking the above-mentioned example, the healthcare provider will decide to search for a software development provider in a far distanced region like Asia and employ them to develop the much-needed platform or application that they require.There are a fair amount of reasons why a company decided to offshore projects and even parts of their business to such distant places like China or India, which are amongst the most popular ones. Let’s look at some advantages:

  • Cheaper labour market. It is widely known that these above-mentioned countries have very attractive costs. So, this might be their biggest advantage yet.
  • Diverse talent pool. Taking advantage of skilled professionals that can perform at a decent quality, but at a much lower price, is really something that deserves a few points on the plus side.

There are risks with offshoring too, some bigger than others, and definitely worth taking into consideration.

  • Travel distances. If you want to be actively involved in your offshored projects, the distance can be a bit overwhelming. Not to mention, the travel costs involved and the time spent on the entire journey there can cost you more than you bargained for.
  • Cultural and work-related differences. There’s no secret that eastern countries have their own rituals and traditions that need to be accounted for. And also there is a chance that their work style might not match your expectations.
  • Language barriers. Not yet very westernised, people in these countries can learn common languages like English a bit harder, thus making the overall communication more difficult.

There is, however, a much better solution that eliminates most of these high-level risks that offshoring can bring. It is known as nearshoring, and it is something that most Western European companies are benefiting from as we speak.

Nearshoring

With an increased need in reducing offshoring risks and getting high-quality work done at some very decent costs, the world adapted and gave life to nearshoring. Now, the main difference between nearshoring and offshoring is the location of the partner company. While with offshoring we have some faraway lands like China and India, when it comes to nearshoring we think more locally. Let’s take a look at our example. If that healthcare provider is located in the UK, or in The Netherlands and decides that they want to find a partner much closer to home, they will choose a firm in a European country, usually one located in Eastern Europe. In choosing so, they are eliminating the tedious travel costs and time spent on said travels, are still getting cheaper fares than in their own country, but are benefiting from a much more skilled talent pool that is accustomed to the European culture and work style.Here are the main advantages of nearshoring:

  • Geographical proximity. Less expensive travel costs and no dramatic time zone differences. This advantage speaks for itself. No more overtime meetings or long haul flights to catch.
  • Close cultural affinities. Because we’re speaking of countries from a common region, like Europe, chances are that the cultural affinities are very similar, or non-existent. Everybody has the same work style, traditions and celebrations, so things can progress easier.
  • No hidden costs. Being under EU jurisdiction, chances are there are a few tax exemptions and thus, you could be saving some money in the process.
  • Much skilled talent pool. Most European universities have similar teaching styles and access to education might be easier here than in other areas. This only means that there is a wider and more skilled talent pool to choose from.
  • Still lower costs. Not so cheap as Asia, but still cheaper than western European countries, nearshoring to Eastern Europe, for example, can still make more sense, financial wise.

Nothing in this life is perfect, and nearshoring is no exception, so here are a few risks worth considering.

  • Higher costs than offshoring. Difficult to ignore, nearshoring does require higher costs than offshoring simply because of the highly trained professionals that provide the much-needed services. It can be a con on your list, but if the quality of the project is scoring higher, then it shouldn’t be such a big issue.
  • Not so many providers. China and India are well known for their colossal labour force that shouldn’t be overlooked.

With advantages and disadvantages to all above-mentioned practices, it is of great importance to form your own decisions.

Making the right decision

Whether you know that you need external help to better manage your projects or your operations, or you still need more information to reach a conclusion, know that there isn’t a one size fits all solution. There are a few things that can help you decide and choose the best possible course of action.Let’s take one step at a time. Usually, the main reason a company decides to seek external help, especially for software development projects is that they do not afford to hire an entire team to take care of those needs in-house. So if your budget is a little tight but you still need to get that project out, then an offshoring team might be the best solution. Asian professionals might not deliver the best quality and the communication will be difficult but you’ll get the product in the end. If the budget is a bit more flexible and you are determined to get your money’s worth at the highest possible quality, then you might want to look closer to home. Nearshoring is gaining more and more popularity and choosing Europe as a desired destination for your projects, will get you more than just a collaboration. This collaboration should be considered more like a partnership and the most important aspect on your list should be open and honest communication. How does such a collaboration look like, you ask? Here are a few must-haves an ideal partner should possess:

  • A proven track record of projects or services similar to the ones you require
  • Trustworthy references that benefited directly from their work and were satisfied with it.
  • A dedicated team of skilled professionals that can handle any project.
  • A similar cultural background and should speak at least English (if not other languages like German) fluently to make the collaboration much easier.
  • A good understanding of your business goals and the drive to help you achieve them.

Taking a step further

Eastern Europe has been the destination of choice for any company in the West needing nearshoring services. But how do you find the right country and team that can fulfil your business goals?While there are many great software development companies in the CEE region, one destination has jumped ahead and gained popularity in the last couple of years. Romania has been one of the top choices when it comes to delivering high-quality IT solutions. With a total workforce of about 8.4 mil., about 100 000 of them work in the IT industry. Due to the academic environment, strongly inclined towards a technical approach, many of Romania’s students choose to opt for a career in software development. With its vibrant western-influenced culture, the extremely favourable proximity to Western Europe, highly skilled specialists, and the extremely good prices, Romania became the destination of choice for nearshoring practices. And let’s not forget, you can get all of this under the comfort, safety and benefits of the European Union’s laws and regulations.Qubiz is a company that is 100% focused on people – both employees and clients. We’ve been in business for enough time to understand that putting people first is the thing that matters most in order to succeed in any undertaking. Our values are at the core of this culture: Client Centricity, Excellence, Teamwork, Trust and Respect, Fun and Entrepreneurship.We consistently measure ourselves by these values. By breaking them down into concrete behaviours, we are able to create a roadmap for each employee and, using 360° feedback, they know what are their strengths and where to focus on growth in the future. We believe that having a good cultural match with our clients is the single most important thing that can ensure a high-value collaboration towards reaching business objectives.We’ve been the technological partner of choice for many Western European companies in countries such as The Netherlands, The UK and the DACH region. We’ve worked with both big and small companies from different industries and managed to successfully deliver cutting edge IT solutions for businesses that are on an ascending path towards innovation.We can act as a one-stop-shop, by providing services that cover the whole application lifecycle, including functional design and consulting, software architecture design, UX/UI design, software development, QA, and finally maintenance.Need more information? We’ve got you covered! Just take a look at this guide we’ve put together to help you choose the right course of action for your nearshoring needs.

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