Outsourcing software services has been growing non-stop in the US recently -with an expected annual rate of 4%– due to several factors such as:
- Economic uncertainty: need for lowering costs
- Digital acceleration: need for hyperspecialized professionals
- Local talent shortage: need for faster hiring processes
This trend has made the difference between different models more clear. One of the most important distinctions is the one between Nearshore and Offshore outsourcing.
Let’s see each of their quirks, and which is better depending on each business’s needs.
Nearshore vs Offshore: Each Model’s Definition
First of all, we should find what the main distinction between “near” and “off” -shore is. Usually, nearshore countries considered with respect to the US are Canada and Mexico. However, for the software industry, in which remote work has been almost fully adopted since the COVID-19 pandemic, distance isn’t the key aspect. Even in the case of nearby countries, making frequent trips and in-person meetings is rare.
To consider another country “near”, the main factor to take into account is the time zone. For this reason, Latin American countries like Argentina and Brazil are considered nearshore despite being thousands of miles away. While they have 1 or 2 hours of difference from the US, other regions like Eastern Europe and Asia have usually +7 hours.
Nearshore vs Offshore: Which One To Choose and Why?
1) Cost Reduction
The most popular cause for outsourcing is lowering costs. As we’ve analyzed in this article, hiring developers in the US has become increasingly expensive due to the talent shortage, which has strongly boosted 2 trends:
- Higher salaries
- Increasing hiring costs
In the first case, the demand for software engineers keeps growing, exceeding by far the number of people who are upskilling and entering the job market. Because of the talent shortage, finding qualified professionals in the area is becoming harder and more expensive every year. Firstly, because senior, qualified talent is being strongly asked for; in the second place, because the need for software solutions and the complexity of the technologies keeps increasing.
In this sense, outsourcing is helpful as it loosens the pressure on a single market and opens to wider talent pools. In this respect, both Nearshoring and Offshoring come in handy: there are highly skilled professionals willing to work for affordable rates in different regions like Latin America, Eastern Europe, and Asia.
2) Seamless Scale-Up
Besides the importance of lowering costs, the main end when looking for new talent is to scale up. And succeeding here requires paying attention to some important points.
On the one hand, as we said above, countries in Latin America like Argentina, Brazil, Colombia, and Mexico have almost a full workday overlap with the US. This way, teams can seamlessly collaborate and, therefore, it is much easier for them to plan and follow up on their activities.
On the other hand, other major talent pools like Eastern Europe and India share with the US only 1 or 2 hours of the working day, which may cause misalignments in communication and, therefore, add complexity to the day-to-day work of the team members.
Nearshoring has the benefit of opening talent pools that share values with Western cultures, especially the North American culture. In general terms, developing countries from Latin America have traditions and cultural consumptions that are strongly influenced by the US, resulting in more fluent relationships and easier onboarding processes.
Latin America has also the perk of having English as the most frequent second language for professionals. For people who have advanced education, learning English is a must in almost all of these countries. As a result, there’s a large pool of talents that speak fluent English and can communicate perfectly at work.
3) Technical Proficiency
Another factor that makes Nearshoring interesting for the US technology market is the qualification of most professionals. Brazil, Argentina, and Mexico to name the best known are countries with amazing universities and count on large pools of certified, highly-skilled software engineers.
Of course, finding and vetting them isn’t that easy if you’ve never hired Latin American talent before, and most likely a local partner could be needed to succeed in this task.
Accessing The Best Global Talent
This era is full of challenges for businesses of every size and industry. Technology, among all them, requires top professionals capable of leading a process of transformation and digitalization.
In this sense, Offshoring offers a huge talent pool around the globe, but Nearshoring ensures a series of key perks that place it as a much more convenient option.
Do you need help finding the best software engineers in Latin America? Set up an appointment with an Inclusion Cloud advisor and hire top tech talent in 72 hours.