Nearshoring vs Offshoring – choosing the right fit for your business

Over the last few years, Nordic companies have become the EU’s tech and innovation powerhouses. The recent dynamics makes it increasingly difficult for recruiters to find software developers to fill in the open positions. Consequently, investing in your IT department and employing additional software developers could have its downsides.

One would be the fact that recruiting new in-house talent takes time, and it will often be difficult to find a person with the desired qualifications at short notice.

One possible alternative is outsourcing. If a local collaborator is not the preferred choice, nearshoring and offshoring both offer the opportunity to unlock technology potential, by extending your team outside of your company.

In this new article, our goal is to explore the opportunities and the potential risks that both IT solutions present.



How to decide between Nearshoring and Offshoring?

The main difference between nearshore and offshore consists in the distance.

Offshoring means outsourcing to a country that is in a remote geographical area, like the Philippines or India. The work process has to take several factors into account: time differences, cultural differences, and linguistic barriers.

Nearshoring is gaining ground over the last few years, due to it being a close-to-home type of outsourcing: flight distances of 2-3 hours, 1-hour time differences, cultural similarities and high proficiency in English.



For financial reasons, in the past, many companies decided to use offshore outsourcing, as it provided a lower hourly wage for IT consultants based in developing countries.

It is true that having a team in a different time zone, together with your core team’s efforts, allows you to better support your client’s needs and deliver solutions 24/7. Thus resulting in an improved level of customer satisfaction. This offshoring benefit will also contribute to increasing your competitive edge in your industry.

When outsourcing, it is important to look at other issues besides just cost. There are significant risks involved with offshore outsourcing to e.g. Asia that may seriously affect the actual Return on Investment (ROI). Differences in culture, language barriers, difficulties in communication, high staff turnover, Visa requirements, and time zone differences may affect the collaboration process, and ultimately, the projects.



Besides cultural compatibility and proximity, nearshoring provides high employee loyalty, meaning very low staff turnover. This way workflows are less likely to be interrupted, less time is spent building up project and company-specific knowledge, as it all stays within the team.

In our experience, the actual costs of offshore and nearshore outsourcing are quite comparable when all factors are taken into account, and it can help you to scale your development quickly in case of an acute situation.

Distance is also an important factor in the cost of a project, nearshoring meaning more affordable travel fees, no VISA requirements, uncomplicated equipment shipments, short traveling distances, and as a result, a greater extent of control and team bonding.

Instead of spending time finding people with the right skills, willing to work the desired hours, through offshoring, a more efficient solution would be to pursue your business goals by outsourcing to a cost-effective destination within EU.

Along with all the benefits, nearshoring also carries some risks that are worth being taken into consideration before making a decision. Based on the location of the nearshoring country, your projects may involve higher labor costs compared to offshoring and the talent pool is not as vast as with offshoring options.

Better control also means the ability to outsource projects that involve sensitive information. By choosing the level of information sharing that you feel comfortable with, signing an NDA and having security protocols in place, you can make sure that confidential data is protected.


Are you considering outsourcing?

Any company considering nearshoring or offshoring as a way of growing their business opportunities should go through a few steps, before choosing a partnership type.

Researching and evaluating outsourcing opportunities and available IT suppliers, according to your business strategy is a good place to start planning. Subsequently, the choice between nearshoring and offshoring will depend on the type of relationship management your company wants or requires for your projects.

If the chosen path is nearshoring, you can then consider countries like Romania, one of Europe’s thriving technology hubs, as a partner.

For any clarifications about nearshoring, you are welcome to contact our team and evaluate the benefits of partnering with a Romanian company with Danish roots.

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