IT Nearshoring – The New Trend In IT Outsourcing Industry
IT Nearshoring – The New Trend In IT Outsourcing Industry
The IT industry is booming and companies are always looking for new ways to keep up with the competition, find new growth opportunities or simply optimize their costs. Globalization and local IT skills shortages have encouraged many US and EU organizations to look for additional resources abroad. This is how the outsourcing process was born.
This article will discuss the particular topic – the newest trend in the IT industry is called “IT nearshoring” which allows taking advantage of global talents while still being able to maintain quality, process control, lower risk, and a close working relationship with their team, processes, and values.
The global IT skills gap
Let’s start our story from the beginning – the root cause of outsourcing. Recent years have shown, that the rapid growth of US and EU IT markets due to internat, digital transformation and big data trends. This created enourmous preassure on the job market. Almost every company need an IT department to manage daily operations. Despite these high demands, there are not enough specialists with the necessary qualifications to fill all the available positions. The lack of qualified professionals in different areas is preventing companies from expanding their business or upgrading their processes. This represents persueded the organizations who want to grow their business and can’t find the required skills locally to move critical IT processes abroad. The solution to that was the IT ousourcing.
The differences between outsourcing, offshoring, and nearshoring
Before jumping into the main topic let’s describe each of these business expressions briefly. IT outsourcing, IT offshoring, or IT nearshoring are terms often used interchangeably that refer to the business practice of contracting a company in another country (nearshore) to provide certain information technology (IT) services and/or consulting. Let’s explain their differences here:
- – IT Outsourcing refers to when a company hires external resources for part of its operation in the same country or abroad.
- – IT Offshoring refers to to the outsourcing of IT jobs to another, distinct country (usually Asia, different time zones and cultures).
- – IT Nearshoring is similar to outsourcing, but instead of sending work abroad, it is outsourced to another nearby country.
The challenges of of IT offshoring
IT offshoring and IT offshore outsourcing were very popular in the last decade, especially when it came to low-skilled jobs such as data entry and customer support. But recently we can observe a gradual decrease in companies moving their critical-path services (ERP, CRM or other applications) abroad. The main reason for this is the increased risk associated with the offshoring of such processes.
IT offshoring is a process that can result in a lot of challenges for companies. When moving critical business functions to another country, companies are putting some part of business at risk.
First of all, there is a cultural challenge. Seperate companies in distinct countries usually have different standards, procedures, working schedules, work ethtics etc.. Moving your product development team to another country might also cause much less control over the development process than when it is done locally. Language barriers are also a big problem in IT offshoring. You cannot conduct daily stand-ups, team meetings, or product demos if the team members don’t share a common language. Another big challenge is that of quality control. Offshore teams are often not as qualified and experienced as the in-house team and they can produce lower-quality work. This can result in increased costs down the road because you will need to constantly spend time and money on inspections, rework, and bug fixes. a
When outsourcing business processes you give up control over the process itself. This might leads to unpredictable results because you have no influence over the working process or team members. For example, if your offshore team doesn’t deliver good-quality work then you might be the one held responsible for that.
The advantages of IT nearshoring
Nearshoring allows a company to take advantage of the already existing infrastructure and new, fresh IT talent pools. It is a win-win situation for because in addition to the cost benefits, the nearshore team you also gain from increased process control. The risks usually accompaning offshoring are more-less mitigated by more control capability. Working with closer geographically and culturally region also makes it easier to communcate, travel and align with the final goal.
Here is the list of main IT nearshoring benefits
- Cost Savings – Nearshoring offers significant cost savings, as compared to both traditional outsourcing and offshoring. The combination of lower labor costs and the infrastructure available in many nearby countries makes it a very attractive.
- Quality – Although there are some risks associated with nearshoring, many companies have had a positive experience with it. The quality of work depends on the particular company and its management capabilities.
- Flexibility – Nearshoring allows companies to save time due to shorter delivery times and easy access to project managers.
- Process Control – When working in the same/nearby country, high process control is achievable, which is something that cannot be taken for granted when outsourcing to a very distinct location with another work culture, time zones.
- Responsibility – It’s easier to take responsibility and build trust within a local team as opposed to sending work abroad. This is one of the main reasons why nearshoring allows companies to save time and money in the long run.
- Risk Reduction – Nearshoring is a lower-risk option than both outsourcing and offshoring. The close proximity of the nearshore team minimizes the potential for cultural misunderstandings and allows for easier communication. It’s also important to to rethink the IP and patent law matters. Nearshoring your software development team to safe country accepting US/EU standards should be always a priority.
- Saved Time and Money – In addition to the benefits mentioned above, nearshoring also saves time and money due to the shorter delivery times and easy access to experienced IT Project Managers (local IT Partner team).
Nearshoring is still a relatively new concept, but it is quickly gaining in popularity due to the many benefits it offers. Companies that are looking for a more efficient and cost-effective way to outsource their IT work should consider nearshoring as an option.
IT nearshoring and Build-Operate-Transfer model
Under the BOT model, a company contracts a third-party IT local partner to build and operate recruitment and management projects for a set period of time. At the end of the contract, the project is turned over to the owner. This allows the company to avoid many of the risks associated with outsourcing and offshoring.
Build-Operate-Transfer (BOT) model is one of the most efficient ways to build a successful business venture. The BOT model also offers several benefits when it comes to outsourcing IT projects like:
- Reduced Risk – Unlike outsourcing and offshoring, the BOT model offers a lower risk because it involves working with a local partner. This close proximity ensures that there is better communication and fewer cultural misunderstandings.
- Increased Control – The BOT model allows for increased control over the entire project, from start to finish. This is an important benefit because it allows companies to take control of their IT projects without leaving the country.
- Increased Flexibility – Not only are there fewer limitations due to time zone differences but working with a local partner means shorter project delivery times and greater flexibility.
- Digital Independence – The BOT model gives companies digital independence by allowing them to build recruitment and management projects on their own. This allows companies to take control of their IT future without leaving the country.
- Access to Technical Infrastructure – With a local partner, access is granted to technical infrastructure that may not be available otherwise due to time zone differences or other logistical problems. (Here is an article describing the full process of the Build-Operate-Transfer model.)
All of these factors make BOT model one of the most efficient ways to outsource IT projects. When it comes to IT outsourcing or nearshoring, the BOT model is quickly becoming the preferred option for many companies. It offers a number of benefits, including reduced risk, increased control, and increased flexibility. In addition, working with a local partner provides access to technical infrastructure that may not be available
Creating first BOT Software Team or Software Development Center in Poland
Poland has an extremely interesting location specially for (BOT model) between west and east. GMT+6 from New York, GMT+1 from London, GMT+0 from Berlin, Amsterdam, or Stockholm – making it a much better option than India or China. Poland is also a part of the EU which is a good proof of stability, security, and western work standards.
Although Poland is a member of the EU since 2004, it has still to offer very attractively labour costs even in the IT industry. The average rates are around 50% lower than in Europe and 60% lower than in the US. Yes, it is true that you could find more competitive countries for outsourcing – but in IT the end game is to find quality for an attractive price – not the opposite. Considering all cons of Poland the rates are still a bargain. The below table shows the differences for 5 countries.
Poland’s software developers skills rank
According to the Global Skills Index, Poland’s software developers’ skills rank third in the world. This is due to their strong engineering and mathematical backgrounds, as well as their proficiency in foreign languages.
This makes Poland a great choice for outsourcing IT projects, as they have the skills and resources to get the job done. For more information regarding this matter plese take a look at this article.
How to find a reliable IT nearshoring partner?
When looking for nearshoring companies or nearshorinf teams, it is important to do your research and ask the right questions. Here are some business tips:
- – Make sure the company has experience in IT nearshoring and is familiar with the latest trends.
- – Ask for references from other companies that have worked with them.
- – Check to see if they have a good reputation and are members of organizations such as the Nearshore Alliance.
- – Review their pricing model and make sure it is reasonable, transparent, and fair.
- – Ask about their infrastructure, resources and whether they have experience working with the specific technologies you need.
- – Make sure the company has a solid process for managing projects and that their team has a good work ethic.
- – Before signing a contract, make sure they have a good communication process with regular meetings and shared online tools.
Where to find a quality IT nearshoring partner?
If your company is located in US or EU, the good place to start is a CEE region that offers a wide range of good quality nearshoring companies with a lot of experience in IT Outsourcing. The CEE region includes countries such as Poland, the Czech Republic, Hungary, Romania, Bulgaria, and Slovakia.
Let’s take a closer look at Poland. The IT talents pool in Poland is one of the largest in Europe and the cost of labor is still relatively low. This might be a huge opportunity to hire quality for a fair rate. The Polish market for IT services is growing rapidly, and many companies are already taking advantage of the benefits offered by nearshoring. There are over 800 local IT Partners offering outsourcing and nearshoring services in Poland, so there is no shortage of options to choose from.
NxTide is one of the leading nearshoring company in Poland. We’ve been in business since 2015 providing services for the most difficult IT and startup projects. Over the years, we have worked as a nearshore partner and developed or expertise in IT recruitment and operations as well as business partnerships with local IT companies enabling us to deliver measurable results at an affordable cost and the most important – on time. Our headquarters is in Kraków, however, we operate in all major cities in Poland. If you are interested in setting up your software development team or IT Hub in Poland with professional nearshore company – please visit our website and book a short call with our representative.
NxTide is a specialized company focusing on building local Software Teams or larger Software Development Hubs in major cities in Poland. We take care of all recruitment and quality control processes making it faster and more cost-effective for you. Here is some more information about our expertise:
Over 7 years experience in creating a variety of software development teams
Over 60 teams and 300 engineers successfully hired and deployed
Several dedicated HR and IT Project Management Teams acting on your behalf
Please take a closer look on a dedicated and flexible offer we have prepared based on market needs:
1) Software Development Teams: dedicated to clients looking to expand their software development teams or create small remote teams from scratch.
2) Nearshore / Offshore Development Center: dedicated to larger and permanent projects. We’ve implemented the innovative “Build Operate Transfer” model to make the whole process faster, more efficient, and transparent.
Please read more about us here: https://nxtide.com/about-us/
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