What is nearshore outsourcing?
Nearshore outsourcing is a process of delegating parts of business activity to nearby countries (similar time zone and geographical proximity) instead of business' home country (onshore).
Companies around the globe use nearshore outsourcing to cut costs and enhance their capabilities.
In this article, we explain how businesses can maximize the value of their nearshore outsourcing partnerships, give tips on choosing nearshore outsourcing companies, and provide you with a handy list of top nearshore outsourcing companies in Eastern Europe.
Nearshore Outsourcing Benefits
Unlike offshore IT outsourcing, which means delegating software development to a company located in a distant country, nearshore outsourcing offers three distinct benefits:
1. Cost efficiency
The lower cost of nearshore outsourcing is the main factor for European companies to choose nearshoring. For example, hiring a developer in Germany will cost you $81,657 with taxes; in the Netherlands, it will cost you $88,058. Meanwhile, if you hire a developer in Ukraine, you'll pay $40,000–45,000 a year (including taxes) on average for a middle developer.
2. Little (or no) time zone difference
Only 0–2 hours time difference provides for better synchronization between in-house and nearshore teams. Time zone compatibility with a nearshore outsourcing country makes it easy to develop quality software within a reasonable timeframe. When you’re working with a team that operates in a nearby country, neither your in-house, nor nearshore developers will have to work at night, so their risk of burnout will be much lower, and in turn, the quality of the end product will be much better.
3. Geographical proximity
The geographical proximity between a client and a service provider is an important nearshore outsourcing benefit as it allows for greater collaboration during the development process. Shorter distances make business trips more affordable, your nearshore team more real, and the working mode more transparent.
4. Cultural similarity
Nearshore outsourcing destinations share a similar cultural background with client companies. This eliminates the need to clarify expectations and adapt to diverse mindsets. You can communicate tasks and give feedback more effectively, and your nearshore outsourcing partner will inevitably become more involved and invested in your success.
And while significantly reducing expenses, you also keep full control over the development process, retain high quality of your product, and, having chosen your nearshore country correctly, get a team that will understand your market as well as you do.
How to Make the Most of Nearshore Outsourcing
According to the National Outsourcing Association, 70% of companies want to increase their use of outsourcing, while 35% want to do so significantly. These data reveal the value that nearshore outsourcing can bring, as long as it’s used wisely.
Consider these three aspects to help your business enjoy nearshore outsourcing benefits to the fullest:
1. Prioritize Tasks to Outsource
Consider which tasks are causing slowdowns in your company.
According to Clutch, companies most-often outsource tasks that are technical, repetitive, or time-consuming:
- Accounting (37%)
- IT services (37%)
- Digital marketing (34%)
Outsourcing tedious tasks can lead to sizable savings in time and resources that can be reinvested into further growth. This also frees your in-house employees to focus on meaningful, high-value work.
Consider which nearshore countries offer skilled talent that matches your needs and your budget.
If you’re looking for help with IT-related tasks, here are statistics showing a list of countries with the best software developers worldwide.
Nearshore Software Outsourcing
Businesses in Europe often look to Ukraine to access skilled developers.
Many outsourcing providers also have nearshore offices. This means you can inquire about the best offshoring companies, then inquire if these companies also offer nearshore solutions.
2. Consider Your Organizational Structure
A nearshore team should fit within your daily operations and your budget.
With a partner in a nearby timezone, it’s relatively easy to communicate and exchange deliverables.
However, like with any new hire, you must evaluate whether it’s practical to add another entity to your team.
This is because someone in your organization will need to establish and maintain a reliable point of contact with the provider. This person will have to monitor the provider’s performance and ensure the agreed-upon tasks are executed adequately.
Once you’ve decided what to outsource, evaluate whether these responsibilities are better suited for a nearshore or an offshore team.
Say, you’re a U.S. company that’s looking to develop a software product. Should you hire developers from offshore Ukraine and nearshore to other Eastern European countries?
In this scenario, your overseas teams can work simultaneously during the day while your home office is closed for the night, which can accelerate your project timeline without increasing costs.
Evaluate which option is best-aligned with your employees, budget, and can be implemented successfully.
3. Ensure Transparency
A high level of transparency is required to maintain trust.
Make sure that the provider is fully informed about your organizational structure, capabilities, investment areas, etc.
In your turn, make sure that your nearshoring partner has a track record of providing their clients with enough insight into their business model, internal processes, hiring approaches, and administrative issues.
As the client, given complete visibility, you should be able to determine who’s hired to work on your project. Ideally, you want to be able to choose developers for your nearshore team yourself according to your individual needs and requirements.
How to Choose a Nearshore Software Outsourcing Company?
A successful partnership with a nearshore software outsourcing company is based on clear communication, expectations, and follow-through. An ideal partner should be responsive, reliable, and flexible enough to match your changing needs and grow with the demands of their assigned role.
Consider these 4 aspects to shortlist the potential nearshore software outsourcing companies:
When choosing a location, research the level of employee training in the country of interest, its laws, and level of intellectual property security.
2. Tech expertise
Nearshore software outsourcing provides access to top-notch software developers, thus enabling you to close the talent shortage gap in your country.
3. Commitment to security
Intellectual property is essential to software development.As the client, you need to know how your nearshore software outsourcing provider is going to take care of data protection.
A trusted nearshore service provider must demonstrate a track record of solutions implemented to enforce intellectual property contracts and NDAs and to keep your software and code protected.
Prior to making the final decision about which nearshore software outsourcing provider to work with, it’s vital to examine their reputation in the industry.
Ask a prospective candidate for references, then conduct your own research of the company’s reputation, read feedback on Clutch, and review their certificates. Feel free to look through their client list and reach out to their clients for recommendations.
Use rankings and reviews, your network, and any other available resources to reach a decision. If your business contact recommends an offshoring company, inquire whether that provider also offers nearshore solutions.
It’s important for a provider to match your exact needs, so look for a company that’s performed well in domains similar to yours.
Choose an experienced nearshore partner that can handle your requirements without adding to your workload.
Top 5 Nearshore Outsourcing Companies in Eastern Europe
Eastern Europe is a well-established software outsourcing hotspot housing over 3000 nearshore outsourcing companies. The region boasts over 1.3 m highly-qualified tech professionals and is known for cost effectiveness and negligible time difference (1–2 hours) with European countries.
Nearshoring/outsourcing to Ukraine, Poland, Belarus, and other Eastern European countries is a popular business decision among Western European companies. 77.7% of German and 66.6% of Dutch businesses prefer Eastern Europe to other nearshoring destinations.
Here’s a list of the best nearshore outsourcing companies in Eastern Europe:
1. Grid Dynamics
Grid Dynamics is a digital-native technology services provider that accelerates growth and bolsters competitive advantage for Fortune 1000 companies. The company has 15+ years of experience in digital transformation and software innovation, most notably open-source cloud-native programs.
Our clients have the option of choosing the engagement model which best suits their requirements, including team extension, dedicated teams, pod teams, and remote development centers. Grid Dynamics has offices throughout Eastern Europe and Central Europe and Latin America, meaning that we have the resources to cater to the needs of companies of any size, no matter where they are located.
2. IN2 Group
IN2 Group is a nearshore outsourcing company with 26 years of experience that specializes in software development for versatile business domains. The company is based in Zagreb, Croatia. Since 2018, IN2 Group has been a part of the CSI Group. IN2 Group is a reliable vendor certified by Oracle and Microsoft and is a Magento Commerce Solution Partner.
3. STX Next
STX Next is an IT outsourcing company based in Poland with a headcount of 350+ employees. The company has 15+ years of experience in providing full-cycle web development to clients from various industries. STX Next’s clients are predominantly based in the US, the Middle East, and Europe.
Altoros is an international IT outsourcing company with over 300 employees based in the US, Argentina, and Belarus. This nearshore outsourcing company provides customers with end-to-end development solutions. Such global giants as Allstate, WMG, Cisco, Autodesk, RightScale, Joyent, Couchbase are Altoros’ customers.
Webtown is a Hungarian company specializing in Agile software development in Eastern Europe. Webtown has 10+ years of commercial experience in the development of online solutions based on the Liferay Digital Experience Platform (DXP).
Author: Grayson Kemper is a Content & Editorial Manager for Clutch, a B2B research, ratings, and reviews company in Washington, D.C.