Nearshore Software Outsourcing – the SouthAm- Eastern Europe Wave Gets Momentum in the US and the UK
November 1, 2015 – Mihai Popa
The new digital economy is fast becoming a reality. Global economies, from Canada in the Americas to UK in Europe and India in Asia, are passing decrees and resolutions that will safeguard a prosperous future in the digital economy.
The UK has one of the strongest digital markets on the globe, and has its government-sanctioned digital strategy, which includes a healthy dose of adoption for agile development processes. According to Neil Crockett of the Connected Digital Economy Catapult (CDEC), the UK internet economy is estimated to be bigger than that of any other nation. Leading academics are working daily in the media, internet, communication and cyber-security industries, and motivating an open data movement.
Mobile devices, cloud computing, social networking and internet of things (convergence between the real and the virtual worlds) are simply transferring the way you do business with your customers. Consumers are becoming increasingly powerful, and enterprises are faced with new ways of building competitive advantage. It is the onset of this digital economy that has fueled, to great lengths, the search for software development talent nearshore, following a bad reputation earned by some offshore destinations recently.
From Offshoring to Nearshoring
Nearshore software development involves transferring work by an organization to another organization or team within its own region. And where offshoring has over the years been the primary approach, enabling organizations to focus on core responsibilities, reallocate resources to innovation, reduce operational and managerial costs, limit investments in additional infrastructure and improve overall competitiveness, nearshoring eventually carries the day.
Custom nearshore software development offers all the advantages that an organization gets from offshoring software development works and in addition presents less risks. One of the reasons why this is so is the time zone compatibility between the hiring firm and the hired nearshore outsourcing centre. This makes it possible for the management of the organization to monitor progress during normal working hours and stay more in communication. And as any stakeholder in any of the thousands of software outsourcing companies will concur, communication is one of the key ingredients that are essential to make an outsourced project successful.
Nearshore Outsourcing of Software Development Tasks
Driven by pressure to save on costs, global corporations have made large investments in offshoring centres. However, do minimize cultural risks and time zone issues that can make entire projects risky and difficult to accomplish, the outsourcing trend has adopted a new model – Nearshoring.
The concept of nearshore software development can be useful in enabling the organization to achieve and concentrate on core business and free local resources for other tasks. With nearshore software outsourcing to Romania, Poland or the Ukraine, the cost and managerial overhead that would otherwise have been involved in running a full blown in-house IT department in London or elsewhere in the UK is conveniently diverted to research and innovation, two activities that are core in ensuring that the organization remains competitive on a long term basis.
When is Nearshore Custom Software Development Beneficial?
With an experienced and skilled nearshore software outsourcing provider, the recorded benefits go far beyond the usual cost saving advantage. Creating sustainable value in software development can in many ways result to flexible processes and relationships that make possible innovative business models such as the ‘Managed Client Team’ (a.k.a. “Nearshore Development Center”, or “Dedicated Nearshore Team”) approach where the nearshore software team is managed directly by the customer. When set up and run by an experienced nearshore outsourcing company, which knows how to address lack of collocation and maintain an agile development approach, the results can be highly successful.
Here are a few common benefits that will be achieved when working in collaboration with an experienced, agile outsourcing expert:
- Compensation of staff shortages
- Significant savings on cost
- Mitigation during peak periods
- Improved development cycles
- Focus on core application development through load distribution to the outsourced team
For the organization, setting up an external, nearshore software development team is a delicate process, but which becomes easy once the supplier choice has been made. Requirements must be discussed, defined and implemented carefully with the corresponding nearshore team. The customer may then start delegating the project via a single contact point that is provided by the nearshore software development outsourcing partner. Based on an extensive analysis examining the practice of nearshoring for as long as it has existed, here are a few IT software needs that are highly suitable for outsource development:
Suitability for Outsource Nearshore Development
- New website applications
- New cloud apps
- Custom software development
- New releases or a modernization of the legacy system that has been serving the organization
- Development of modules for an existing system or application
Nearshore Software Development Regional Centres
Over the years, India has earned its reputation as a premier outsourcing hub. Many corporations in the United States and Europe have been driven by the low costs in India as the primary factor when considering their offshore outsourcing centres. However, the priorities have evolved over time, and for more complex tasks, nearshoring became increasingly the solution of choice. Here are some factors to consider:
- Where is your organization based?
- What location offers the best value in terms of cultural understanding?
- What outsourcing hub presents the best option to avoid the language barrier?
- What nearshore software center will present the best value for communication and coordination within the same time zone?
Eastern Europe as a Nearshore Outsourcing Centre
Despite competition from regions such as Asia, Eastern Europe has been maintaining its strategic and skills-wise importance as a leading outsourcing hub. In fact, in a study carried out in 2012 to establish the top 100 top outsourcing sites, at least 20 were from Eastern Europe. Powered by a highly skilled technical labour pool, and recording 500 to 1, 500 tertiary graduates for every 100, 000 of the population, this region has emerged the immediate choice for many West European buyers of high-value services. Cities such as Krakow in Poland, Prague in the Czech Republic and – the biggest East European city within EU borders – Bucharest in Romania (home to www.dotnear.com), have established themselves as stellar outsourcing destinations for high value custom software development services.
Latin America as a Nearshoring Hub
Latin America has over the years arrived front and centre as a desirable nearshoring destination, mostly for firms in Northern and Southern America. Latin America offers significant value and resources for businesses in the region. To start with, the region’s cost advantage, culture affinity and abundant resources have just been a few of the strengths that the region has been capitalizing on. In addition, Latin America’s time zones and bi lingual work force make the region better suited for the Northern America economic powerhouses.
The digital economy has been many things for corporations and nations alike. Economic powerhouses such as the UK and the United States have had several research firms working exclusively to innovate new solutions that are geared to motivate and guide the way things evolve as far as growing the new economy is concerned. But for the organization striving to build competitive advantage, provide better services to consumers and expand its presence on mobile and computing devices, the need for nearshore software development sometimes presents itself as a necessity. Harnessing the powers of trends in IT (such as nearshoring) , and making the right choice in that regard, can in many ways help add value to an organization in terms of reduced costs and improved organizational processes.