Technology is evolving faster than most of us ever imagined. In fact, it has grown to become closely entwined with every aspect of our personal and professional lives.
The technology solutions available today are also highly complex. This is because today’s tech-savvy user has grown to expect exceptional value from every type of technology they use.
However, this creates a situation where enterprises, across industries, have a significant demand for top tech talent. As supply is not even close to feeding the needs of digitally transformed industries, companies have had to explore other options like outsourcing.
While the outsourcing model was born out of manufacturing, today, as much as 60% of the entire outsourcing industry is made up of IT projects.
When businesses choose to outsource their software development projects, they have two options. They can either “nearshore” or “offshore” their development needs to an established outsourcing partner.
What is Offshoring?
Offshoring can be described as a process where companies outsource their development needs to an established partner overseas, and often, in a far off continent.
What is Nearshoring?
Nearshoring is almost the same as offshoring, the only difference is that your project will be outsourced to a company close by. This means that your team can be right next door in either Mexico or Canada.
Nearshore development is becoming increasingly popular among enterprises of all sizes, but some myths still plague the industry. So let’s take a look at some fundamental myths and truths surrounding nearshore software development and put it to bed, once and for all.
Myth: Nearshoring is Expensive!
When you decide to outsource a software development project, you have to think about the cost. In fact, one of the common myths that we encounter often is related to development costs.
Possibly because of its roots in manufacturing, people tend to believe that offshoring is much cheaper. If we look at it in the context of software development, this approach provides access to highly skilled professionals at a significantly lower cost.
However, the costs are only lower if you look at it at face value!
According to Glassdoor, the average annual salary for a software developer in Bangalore, India is ₹625,500 (or $9,009.70).
The average yearly salary for a software developer in Guadalajara, Mexico is about MXN396,000 (or $20,695.32 at the time of writing this post). If you just look at the salaries, that’s more than double the cost for a single software developer!
However, when you just focus on remuneration packages in specific locations, you miss out on other variables that can have a considerable impact on your final project costs.
For example, you won’t include the benefits of shared time zones, fewer cultural barriers, and similar legal protocols that can help keep costs down (especially when you follow a nearshoring model).
Truth: Nearshoring is Cost-Effective
At first glance, offshoring may seem cheaper, but in reality, your total project costs can quickly add up. For example, if you choose to outsource your development to a continent in a completely different time zone, it’ll be increasingly challenging to manage your project and team in real-time (especially if there’s a 10-12 hour time difference).
Nearshoring also comes with the added benefit of similar cultural norms that can help remote teams work better together. If we take the U.S. and Mexico, for example, the two nations have more in common than not.
They also share most of the same holidays, so both your in-house and nearshore teams can collaborate uninterrupted. If you want to visit your development team from time to time, it’ll be easy to fly in and out of Mexico (or Canada) on the same day, cost-effectively.
Myth: Nearshoring Can Lead to the Loss of Intellectual Property
When you offshore software development, you also run the risk of someone stealing your trade secrets. This is because of a lack of protection or significantly different legal protocols in certain countries. Whenever this happens, it can lead to a loss of competitive advantage and business relevance.
In countries that lack stringent intellectual property laws, you run the risk of proprietary information being leaked. The current trade war with China has heightened the awareness of economic espionage. As modern businesses are interconnected, trade secrets can become increasingly vulnerable.
But enterprises nearshoring their software development needs have no reason to fear. This is because your trade secrets will be protected by robust trade agreements.
Truth: Nearshoring will be protected by USMCA
American companies nearshoring their application development projects don’t have to worry about this because of USMCA or the United States-Mexico-Canada Agreement.
Also known as the “New NAFTA,” this agreement continues the legacy of previous agreements and benefits the nearshore industry. For example, this guarantees intellectual property protection laws and enables more inclusive digital economy regulations.
The latest USMCA agreement ensures the following:
- Free movement of data across the countries
- Freedom of movement with simplified visa procedures
- No tariffs on digital products
- Strong IP protection
Myth: Nearshoring Is Plagued by Miscommunication
In any discussion about outsourcing software development, issues surrounding language barriers will come up. However, where there are legitimate concerns when offshoring to the Asian continent in countries like China and India, the same can’t be said for nearshoring.
This is because countries like Canada and Mexico have more in common than borders. If we take Canada, for example, a recent study found that as much as 56% of Canadians reported that English was their first language.
Truth: Nearshoring Ensures Seamless Communication
While Spanish dominates Mexican life, English is taught as a second language across the country. So even though the majority of the population speaks in Spanish, it doesn’t mean that people can’t converse in English.
In cities like Guadalajara in the state of Jalisco where 62% of the IT workforce live and work, communicating in English isn’t a problem. This has made it easier for tech giants like Cisco, Dell, HP, IBM, Intel, and Oracle to establish and maintain a strong presence in the city.
When you put all these different variables together, you can bet that nearshore development would cost the same or less than offshoring. Furthermore, it will also make each iteration less complicated and even painless.
Regardless of whether you choose to nearshore or offshore your next project, what matters most is the quality of the developers involved. So make sure that you partner with an established outsourcing provider that boasts a wealth of top tech talent.
At Intersog, we have worked extensively both as an offshore and nearshore development partner. This gives us unique insights on how each model works and what you can expect during your development project.
So if you have any questions about nearshoring or offshoring, don’t hesitate to reach out to one of our in-house experts.