As a tech CTO or major decision-maker who aims to keep your company ahead of the competition, you are faced with many decisions. Many of them could make or break the ability to complete mission-critical projects for your company.
Among these decisions include where to hire talented programmers who are reliable, get projects completed quickly, and can shift gears at any instant.
Further, you must consider the cost of such help so it doesn’t eat too much into your bottom line. It’s a constant balancing act for you: making sure you forward the goals of the company while, at the same time, keeping costs in check.
Most CTOs and hiring managers are only familiar with outsourcing and keeping employees in the country. However, there’s a fantastic medium that most hiring managers don’t consider when it comes to staying ahead of the competition.
The Definition Of Nearshoring
Nearshoring is the term for sourcing workers from neighboring countries within the same time zone. If a company is headquartered in the U.S., workers come from Latin America.
The biggest perk of nearshoring is you get the best of both worlds. Generally, the costs of offshored vs. nearshored workers are similar, but you don’t have to deal with many drawbacks of traditional outsourcing.
For one, you don’t have to worry about time zone alignment. This is a big drawback of traditional outsourcing, and most workers are sourced in Asia, Russia, and other areas where there’s a huge time zone difference.
This can be difficult if you need to make a massive pivot on a project, and your workers aren’t going to get your directive until you go to bed at night. Having offshored workers means there will be delays in communication because of the massive time zone difference.
With nearshoring, all the workers are in the same time zone. This means there will be more responsive communication and better collaboration since all parties are in the same time zone.
Popular Nearshoring vs. Offshoring Destinations for U.S. Tech Teams
This could be critical in the cutthroat tech industry when rolling out a new initiative ahead of the competition and being first in the market. You don’t want any roadblocks that can hamper progress toward ensuring your projects are completed on time and under budget.
Cultural Alignment = A More Cohesive Team That Assimilates To Your Work Culture
There’s a common misconception about a canyon-sized cultural gap between U.S. culture and cultures in our neighboring countries.
Many of our neighboring countries share the same or similar culture. For example, Mexico, a popular nearshoring destination, holds very similar cultural values to the U.S. since the two countries do business regularly.
Further, many people in Mexico are fluent in English, meaning there won’t be any language barriers that could hamper the workflow and progress of a tech company.
Finally, Mexico celebrates many of the same holidays as the U.S., which means there will be no future disruptions in workflow and planning.
Another nearshoring hub is Colombia, where the professional environment is becoming increasingly aligned with U.S. practices, such as innovation and efficiency.
Colombian professionals are known for their flexibility and problem-solving skills, which are key qualities for professionals who work in the tech space, where you have to be quick and adaptable.
In Argentina, professionals are often highly educated in technology or engineering and understand Western business practices deeply.
So, the misconception that the culture of neighboring countries is vastly different than the U.S. will lead to roadblocks when onboarding and growing a robust tech team is simply false.
The common nearshoring hubs share very similar cultures, with few communication errors that could lead to costly project delays and having to answer to your superiors and stakeholders.
Travel Expenses: Proximity Offers A Cost Saving Advantage
Reducing travel expenses is one of the often overlooked benefits of nearshoring. Companies can collaborate with teams in neighboring countries, saving a lot on travel costs compared to offshoring teams farther away.
For example, a U.S. company working with a nearshore team in Mexico or Colombia can easily and relatively cheaply arrange face-to-face meetings, as flights to these countries are typically shorter and cheaper than flights to far away offshore destinations in Asia or Eastern Europe.
This proximity provides more chances to make on-site visits without the high expense of intercontinental travel.
While plenty can be accomplished via phone, email, or virtual meetings, nothing can replace in-person meetings when it comes to developing strong relationships, resolving complex problems, or establishing alignment on long-term goals.
Frequent in-person meetings can improve communication and teamwork, thereby fostering a sense of cohesion and productivity. Companies can enjoy the advantages of these interactions with nearshore teams without over-extending the travel budget.
Further, because of proximity, teams can schedule visits more conveniently for important project phases, training sessions, or strategic planning.
This flexibility improves project quality and guarantees budget predictability by helping reduce the high and often fluctuating travel costs of offshore engagements.
In short, the geographic closeness of nearshoring to the U.S. lowers travel costs and increases collaboration possibilities, ultimately improving project success without inflating the budget.
The Costs Of Nearshoring Vs. Outsourcing Compared
When augmenting your tech team, knowing the numbers is critical to make the right decisions and prevent mistakes that could jeopardize your budget.
That’s why it’s critical to understand the cost differences between keeping nearshoring and offshoring. The truth is that their differences may not be as significant as commonly perceived.
If you are evaluating strategies to augment your tech team,, you need to understand the cost implications of nearshoring versus offshoring. Although both methods are focused on minimizing costs, there is likely a better cost differential between them than thought.
As discussed, offshoring means working with teams in far away countries, such as in Asia, where labor costs is low. For example, an average Indian developer will charge $7.24 per hour.
On the other hand, nearshoring implies working with teams from neighboring or nearby countries, e.g. Latin America, with higher rates than in the traditional offshoring countries but lower than domestic rates.
According to a report by nCube, the average hourly rates for developers are as follows:
- United States: $100–$150
- Latin America: $40–$70
- Eastern Europe: $35–$65
- Asia: $20–$40
Based on these figures, although offshoring to Asia provides the lowest rate, nearshoring to Latin America is a more cost-effective alternative, with rates considerably lower than in the U.S.
Common Misconceptions About Nearshoring
“But is the talent pool the same as in the U.S.?”
Another incorrect assumption concerning nearshoring is that the talent pool in nearby countries is smaller than in traditional offshoring destinations.
The truth is Latin America has also become a vibrant tech hub, with countries like Mexico, Colombia, Argentina and Brazil producing an increasing number of highly skilled developers, engineers and tech specialists every year.
Over the past few years, Latin America's education systems have relied on a lot on technology and engineering, and more and more universities have been providing advanced degrees and specialized training programs in tech professions.
Further, the majority of Latin American countries possess mature tech communities which are developing in conjunction with government support and private sector investment in tech infrastructure and innovation hubs.
Additionally, Latin American professionals who work with U.S. companies regularly have become well versed in Western business practices and industry standards.
The region’s talent pool is extensive and highly capable and competitive, as they have the skills to perform in cloud computing, machine learning and all other modern tech.
“Isn’t managing remote teams difficult?”
While they are in the same time zone, managing remote teams across borders is one common concern of nearshoring. But nearshoring actually makes remote management easier than traditional offshoring.
Nearshore teams work on the same schedule as U.S. companies, making real time communication much easier, as managers can hold daily check ins, impromptu meetings and take care of problems as they arise.
Further, many nearshore companies focus on remote collaboration and have adopted the latest project management tools and practices to simplify workflows.
Tools like Slack, Trello and Zoom make it almost as easy to manage tasks, to keep track of progress and to keep in close contact with each other as if the teams were in-house.
Nearshore teams can become integral parts of the company with clear processes and expectations in place, management is easy and productive.
“But, aren’t there high turnover rates with workers outside of the country?”
A common misconception regarding nearshoring is that employee turnover rates are high, causing projects to fail and productivity to drop.
In reality, the work environment in tech markets of nearshore countries is stable, especially in the Latin America. Companies in these regions tend to invest in developing longterm relationship and professional growth which leads to lower turnover and more consistent team.
Further, nearshore employees cooperating with U.S. clients tend to get competitive salaries, possibility of career growth and cultural matching with U.S. companies, which brings the employee high satisfaction and loyal work culture.
“But what about legal and contractual differences?”
Another misconception about nearshoring is that it’s complex to manage legal and contractual agreements between different countries.
But nearshoring partners in places such as Latin America have become seasoned at navigating international business laws, particularly with U.S. clients.
Those nearshore providers operate under frameworks that are aligned with U.S. standards for intellectual property protection, data privacy and labor laws.
In fact, several countries, like Mexico and Colombia, have trade agreements with the U.S. which simplifies legal proceedings and reinforces contract enforcement between companies.
Working with experienced nearshore teams, companies enjoy the flexibility to work with cross border teams as well as the security of strong contractual protections.
“But, aren’t there language barriers and potential communication issues?”
A common myth about nearshoring is the fear of language barriers. But the reality is that most nearshore countries, especially Latin America, have a high percentage of English speaking professionals with high levels of English language proficiency, especially in the tech industry.
English language education is a high priority for countries such as Mexico, Colombia, and Argentina, and is especially emphasized in the professional world.
This guarantees that developers and tech specialists can speak English fluently with U.S. teams.
In addition, nearshore professionals are experienced in shared tools and remote work practices that are widely used in the US, such as Slack, Microsoft Teams, and Zoom.
The familiarity makes for effective communication, so nearshore teams can integrate well and with ease with U.S. companies, keep regular updates, and avoid misunderstandings that could delay projects.
In short, nearshoring provides access to professionals who are skilled, not only technically, but also in English and used to U.S. business communication standards.
Conclusion
In summary, while offshoring may offer lower hourly rates, nearshoring balances cost savings and operational efficiency.
The difference in costs between nearshoring and offshoring is small, especially considering the potential benefits of improved communication, cultural alignment, and overall productivity.
If you’d like to take the next step and see how Bydrec can help you accelerate your software projects so you can one-up the competition and sleep better at night, click here to schedule a discovery call with us:
