To expand, today’s businesses need to take into consideration the importance of decisions regarding their operational and strategic agility. The latest technologies play a big part in ensuring they can act competitively. One of these decisions may including choosing whether to start software development in-house or look for an outsourcing partner.
Outsourcing has proven to be a great business model that while helping to reduce operating costs also significantly boosts profit margins. They also follow a very high quality of customer service. The model is tremendously scalable and enables companies in any market to adjust resource allocation as business conditions change. Following these positive trends, several companies opt for out-of-country outsourcing divided into two categories – nearshoring and offshoring.
When assessing where to locate production facilities, international companies are considering the effects of new technologies in making their decision making. This was the primary finding of “Nearshoring and Onshoring as a Competitive Advantage”, a study recently released by supply chain consultancy Miebach.
The study revealed that 51 percent of companies already use nearshoring as a location strategy for their production processes. This high share is expected to increase further as 26 percent of study participants believe to a high or even a very high degree that nearshoring is a future trend. Europe, in particular, will see a significant increase in nearshoring, while an increase in onshoring can be expected for North America.
What is Nearshoring?
Nearshoring means that an organisation has outsourced work to another organization that is within its geographically surrounding region. For companies in the UK, the European region is a nearshoring region and companies usually prefer to outsource within its boundaries mainly because of factors like data protection laws. When implementing this model, businesses opt to move their operations or functions to a geographically close but more cost-effective location, with minor time zone differences and fewer cultural discrepancies. Proximity allows for less expensive travel, a greater degree of control and timely decision-making in critical situations. Nearshoring countries are often bound by similar financial and legal constraints that provide social and economic stability within a region.
The recent boom of nearshoring partnerships in Europe has proven how well such cooperations between organisations can work. The outsourcing relationships are usually between clients that are located in larger European countries and various providers based out of smaller European nations. These destinations are attractive because they provide cost saving opportunities, have very highly skilled people with dedicated teams, and a less stringent regulatory environment, but more importantly, they allow for more day-to-day physical oversight. Most companies from the USA nearshore to Canada, Mexico, Argentina, Brazil or the Caribbean.
How Nearshoring can be a Competetive Advantage to You
Nearshoring has become a marketing differentiator for those businesses who wish to set themselves apart from sourcing centers in Asia. Software development outsourcing is a serious matter so you should not take it lightly. Look at these advantages of nearshoring:
- Control and Influence – Similar time zone, shared language, or good knowledge of a common one and proximity mean businesses can have fine control and are more involved in the project.
- Common Culture and Values – Cultures in Europe have converged since the political change in 1989. Values, views, hierarchies, reliability, and manners differ only minimally. The coordination and communication of productions are more effective and efficient due to similar working hours and cultures.
- The Cost – Quality Balance – Again, software development is not something a business may want to do at the cheapest price – it may cost them further down the road if the software requires fixing and improving.
Undeniably, entrusting some of the key business tasks to nearshore locations has many benefits. Bearing all this in mind, IT nearshoring is surely a great idea to grow a business. There are various details needed to be taken into consideration when working with a business partner, but the milestones of successful nearshoring cooperation come down to these seven key factors that a business cannot afford to forget about:
- Communication is key – It is stating the obvious that the aspect of communication is crucial for running a successful nearshoring project. Nothing valuable ever comes from hiding problems and a good communication strategy is a key to any successful nearshoring relationship. A clear link between the customer and the vendor dictates the quality of the outcomes of nearshoring. It is a good idea to assess any possible differences in communication at the very beginning of the potential cooperation, and then simply maintain high standards.
- Define a clear scope and action plan – Businesses need to make sure they communicate their needs effectively. They need to make sure their partner knows what the deadlines and goals are. Defining clearly the scope of action and following a rigorous plan allows smart distribution of work and ensures satisfaction at the end of the day.
- Understand each other – Businesses need to help the remote software development team to understand the product, the goal of the project and the results desired by the customers. They need to clearly articulate your expectations and project management strategy. Sharing the company’s values, corporate action plan and goals results in building a mutual understanding and empathy.
- Establish a relationship of trust – It is crucial for businesses to get to know the team and visit each other when possible. Meetings or social events build relationships and trust. A relationship of trust enables an added ease of checking progress status and correcting a course of the project if needed.
- Develop a winning team – Building an engaging environment is an important success factor. It can help businesses coordinate efforts towards a shared goal and arouse a feeling of being a part of the bespoke software development journey, wanting to do well or to be the best.
- Focus on leadership and management – The success of your nearshoring project often depends on the management factor. Responsible and reliable project management equals effective decision taking, better problem resolution, controlling the scope of the project and delivering successful products on time. This results in increased control and decreased risk factors.
- Be agile – Maintaining organisational agility greatly helps to master change, tackling problems and managing risk. It allows businesses to benefit from the swiftness in iterating software and from an increased productivity, making human resources available when and where they are needed.
Eventually, a business’s success in outsourced projects comes down to the value of human connections and the mutual commitment and trust instilled by both parties. Therefore, these connections should be where businesses focus the bulk of their energy and resources.
The person responsible for leading the information technology strategy within a company is often the Chief Information Officer (CIO). CIOs also have to keep in mind that there needs to be synchronisation between the technology department and other verticals of the business and partners to which the company has outsourced products. As leaders in the technology domain of any organisation, CIOs must keep themselves updated on trends emerging on the tech market using resources like blogs and podcasts. They are largely responsible for picking up and choosing the best possible nearshoring solution for the company.
In conclusion, outsourcing will continue to be a viable tool for businesses in order to reduce costs and get work done. Depending on each company’s goals, deciding what fits the individual company best when outsourcing is an internal task. Nearshoring is a valuable option because it not only saves money but also time, stress, communication errors or cultural barriers. It allows businesses to take on more work because they get a better deal on some of the more tedious work while allowing important projects to remain in-house. In addition, nearshoring usually brings a higher quality of work than what you would find by choosing to offshore a software development project.