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Interested in nearshore software development? You’re in good company.
Tech giants routinely hire nearshore software development firms to get their projects off the ground faster — often for a fraction of onshore development costs.
It’s widely known that Google nearshored Project Ara and that WhatsApp relied heavily on outsourced talent before Facebook acquired it. But did you know that Skype also used nearshoring to develop its platform, which boasted 300 million monthly active users during its heyday?
And it’s not just big tech that’s embracing nearshore outsourcing. In 2022, 21% of small businesses intended to work with a nearshore firm — a 6% jump from the previous year.
Companies of all sizes realize the rewards of staying closer to home. In this blog, we cover everything you need to know about nearshore software development so you can decide if it’s the right approach for your project.
Fundamentally, nearshoring means outsourcing development projects (especially software development) to companies in neighboring countries that offer lower labor costs.
Nearshoring to LATAM is especially attractive for companies looking to reduce labor costs without the challenges of managing cultural and time zone disparities. It also affords greater project management oversight by letting clients and their nearshore partners work closely.
Nearshore is just one of three software development outsourcing models, the other two are onshore and offshore. Here’s how the three models stack up against each other.
|How it works||Projects are outsourced to companies in your home country||Projects are outsourced to companies in nearby countries in adjacent time zones||Projects are outsourced to companies in countries on the other side of the world, in a different time zone|
|When to choose||You want to remove concerns about language barriers and cultural differences|
You want to meet with your development team in person
Budget is less of a concern
An onshore team is required for security purposes
|You want a similar culture|
You want easier collaboration, without worrying about a language barrier
You need a team immediately and don’t want to go through an internal hiring process
You need to extend the budget runway
|You want to reduce costs as much as possible|
|Benefits||Common culture and language|
Easier to potentially meet in person
|Similar or same working hours|
Fewer language barriers
Lower labor costs than onshore, and similar-quality output
Fewer cultural differences
Faster than hiring an in-house team
|Risks||Higher costs than nearshoring or offshoring||Security or confidentiality concerns|
Could run into some language barriers, but this can be mitigated by working with the right nearshore partner, setting up the right kind of contract, and putting protections in place (like NDAs, etc.)
|Language barriers make communication difficult|
Different time zones can mean that working days don’t line up, extending the length of projects
Cultural differences between countries can add challenges
Quality might be harder to guarantee
As you can see, nearshore software development is the middle ground between hiring a local team and hiring a company halfway around the world. It combines onshoring’s collaborative advantages with offshoring’s cost-effectiveness.
Key takeaway: Nearshore software development offers the advantages of onshore outsourcing at a reduced cost. Cultural and time zone compatibility also facilitates effective real-time communication, which can be especially valuable when managing complex software development projects.
For these reasons, nearshoring makes sense for Agile projects where consistent collaboration can be the deciding factor between success and failure. Working with a nearshore partner is also recommended for full project outsourcing that requires close cooperation and for sizable projects that require frequent on-site visits.
Nearshore software development in LATAM provides access to world-class software engineers specializing in UI, full-stack, mobile, enterprise, and game development, among other areas.
Brazil is a particularly good source of tech talent. Just look at these numbers:
Add in an excellent tech support infrastructure (including more than 74 technology parks), and it’s obvious why the country is a frontrunner in AI innovation, too.
Read more in our blog post about why LATAM is becoming fertile grounds for nearshore software development.
Several factors make communicating and streamlining project management with neighboring developers easier.
When your regular working hours align with the vendor’s, there’s no need to work overtime or take calls at odd hours, which can be disruptive to both the team and the project.
Think about it — if you’re in San Francisco, meeting with someone from Mumbai during business hours is impossible because of the 13-hour difference between these cities. This communication gap could potentially result in less control over quality and deadlines.
You’ll only deal with a two-hour time difference by nearshoring to a nearby country like Brazil. You can work with the vendor in real time and conveniently track progress.
With your vendor only a short flight away, it’s relatively simple to arrange live meetings whenever in-person communication is necessary. You can make onsite visits more frequently because the cost of travel shouldn’t be too restrictive.
Effective communication goes beyond just English proficiency. It also involves awareness of cultural differences, societal norms, and nonverbal cues. Not surprisingly, countries that are geographically farther from each other have a greater cultural distance, and offshoring to distant locations increases linguistic and cultural obstacles.
In contrast, nearshore sites often share working patterns and corporate values with their client companies, promoting easier organizational and personal collaboration. This cultural affinity creates better alignment and reduces the likelihood of misunderstandings.
Nearshoring provides access to top talent at a fraction of the cost of onshore development. To illustrate, a software developer in Brazil earns BRL 336,000 (USD 61,658) per year on average — that’s less than half of what a US-based developer earns (USD 120,168).
What’s more, nearshore software development removes the burden of HR administration tasks like hiring, recruitment, onboarding, and training. This frees up money you would otherwise spend on retention, insurance, and infrastructure costs associated with in-house employees.
More importantly, nearshore software development allows clients to quickly scale up or down as required. This flexibility is the key to staying nimble and competitive for companies with changing requirements and limited IT budgets.
You may also like: How Much Does It Cost To Build a Mobile App?
In a saturated marketplace where speed is king, a fast time to market (TTM) has been shown to improve profitability, while delays can be financially devastating.
Speed is so important that products released six months late earn 33% less profit over five years. Interestingly, the profit margin is only reduced by 4% if the same product is launched on time, even if the project goes 50% over budget.
Nearshoring to a dedicated team is a well-established approach to achieving a faster TTM. There’s no learning curve because the team already has experts who specialize in your requirements.
You don’t have to set up the technology infrastructure for your project, and you can focus on your core business and pre-launch activities like marketing, target audience outreach, and end-user acceptance.
Of course, the only way to reap all the benefits of nearshoring is to work with the right software development firm.
Consider these 8 factors when selecting a nearshore partner:
Choose a company that will take time to understand your goals and map out the best strategy to ensure your software’s performance, scalability, usability, and maintainability. They should also have well-defined development, project management, QA, and support processes in place to deliver your product on time and within budget.
Have they successfully completed projects in your specific technology and in your industry? Review their portfolio to see what they’ve accomplished for other clients.
Find out more about their qualifications and experience by checking their awards, certifications, and even their key employees’ LinkedIn pages.
Want to partner with Cheesecake Lab? You’ll be happy to know that Clutch has named us the #1 web app development company in LATAM.
Do they have the necessary hardware and software to support your project and integrate with your own technology? If you need a partner that can invest in additional technologies specific to your project, ask if they have this ability.
Choose a nearshore company with policies and procedures to protect your data from unauthorized access, theft, and damage.
Look for reviews and ratings on websites like Clutch and Glassdoor to see what clients and employees are saying about the firm.
The best nearshore partners can communicate effectively in your language and understand your culture. They invest in improving not just their technical skills but also their English proficiency.
Can they work on your project straightaway? Choose a nearshore partner that’s ready to plug and play a team of specialists with the skill sets you require, including dedicated project managers, frontend and backend engineers, UI/UX designers, and QAs, among other experts.
Being one of the world’s top countries for offshore business services, Brazil is an excellent choice for nearshore software development. The country is among the top five ideal locations for IT outsourcing due to its favorable investment climate and skilled technical workforce.
Find out more about Florianopolis, the Silicon Valley of Brazil.
As the highest-ranked company in Clutch’s list of top developers in Latin America, Cheesecake Labs has the expertise and experience to develop a top-quality product tailored to your vision and objectives. We’ve honed our approach over nearly a decade with more than 300 projects. When you work with us, you can expect excellence at every stage of development.
Cheesecake Labs has helped a long list of businesses build impactful digital solutions. Check out some of the nearshore software development projects we’ve completed:
Some software development firms simply send one engineer or two extra pairs of hands to augment the client’s staff. That’s okay, but that’s not how we do things.
Instead, we provide a complete package — a dedicated team of highly-skilled experts carefully selected to meet your specific requirements.
A typical team consists of a tech lead and at least two engineers with practical experience in building the type of product you want to create. Depending on the size and complexity of your project, it might make sense to add more engineers and include a product owner and QA expert, too.
This dedicated team is an efficient unit that moves as one. They’ve worked together before, making collaboration easier. They’re also equipped with all the resources needed to ensure the development process goes smoothly.
Need more information? Find out more about our dedicated team services.
Cheesecake Labs’ nearshore software development services combine the collaborative benefits of onshoring with the cost efficiency of offshoring. If you want the best of both worlds, our nearshoring model might be the right fit. Interested in nearshoring your software project? Get in touch, and let’s make things happen!
A nearshore software development company offers services from a country or region that is geographically close to the client’s home country.
Nearshore development companies offer various services, including application development, web development, mobile app development, software testing, and quality assurance.
Nearshore development provides cost savings, access to a larger pool of skilled software developers, and increased flexibility for businesses seeking software development services.
The key difference between the two lies in their geographical proximity to the client’s home country, which affects communication, collaboration, travel, and cultural affinity.
A nearshore development company is located in a neighboring country or region. This proximity facilitates better project management and travel between the client and the development team. Nearshoring often reduces costs compared to onshore or in-house development while still offering high-quality results.
In contrast, an offshore development company is located in a more distant and often culturally-distinct country. Offshoring can be cheaper than nearshoring. However, managing time zone differences, language barriers, cultural differences, and longer travel times requires more effort.
Location: Look for a company that is located in a nearby country or region with a similar time zone and cultural affinity to your home country. This can help facilitate easier communication and collaboration with the development team.
Technical expertise: Ensure that the company has a team of highly skilled developers with expertise in the technology stack required for your project.
Industry experience: Choose a company with a proven track record in delivering software development projects in your industry or a related field.
Reputation: Look for a company with a good reputation and positive client reviews. Check Clutch and G2 for unbiased ratings.
Communication: Evaluate the company’s ability to provide clear and frequent updates on the project status. Check if they are responsive to your queries and concerns.
Pricing and flexibility: Ensure the company’s pricing model matches your budget. Look for flexibility in accommodating changes in project requirements or scope.
The cost of working with a nearshore development company varies depending on several factors, including the company’s location, pricing model, development team’s size and expertise, the project’s complexity, and the duration of the engagement.
Some companies charge hourly, while others offer fixed-price contracts or a hybrid model. Some firms let you hire a team of developers for a fixed monthly fee.
While cost is important, it should not be the sole determining factor when choosing a nearshore development company. Be sure to evaluate the company’s technical expertise, communication skills, industry experience, and reputation before deciding. Learn more about how much it costs to build an app on Cheesecake Lab’s blog.
There’s no universal information available on the success rate of nearshore software development projects. That said, Agile-based developments have an 88.2% success rate. This goes down to 47% when traditional waterfall methodologies are used. Because Agile is highly collaborative, a nearshore company is often the better choice for Agile projects.
Any software development venture carries risks, whether onshore, nearshore, or offshore. To mitigate them, be sure to:
Establish clear communication channels and protocols to avoid any misunderstandings that can lead to project delays or misaligned expectations.
Establish a schedule that accommodates both teams’ working hours and have a plan for urgent issues that may arise outside of regular working hours.
Establish clear quality control procedures, regular progress updates, and milestones to monitor progress and ensure the project is on track.
Have a clear understanding of the legal and regulatory requirements and work with a company compliant with all applicable laws and regulations.
Be aware of cultural differences and establish a culture of respect.
Jeremy Stephan is no stranger to building digital products. In fact, he's worked with Disney, NBC, Mercedes-Benz, HotelTonight, and many other companies in helping to guide them through the app design and development process. Jeremy has led client engagement in the digital space for over 10 years and served as a mentor within the TechStars network.