In 2024, nearshoring has become one of the most attractive options for companies looking to expand their development capabilities without the high costs and management challenges of in-house teams. With the increasing demand for rapid digital transformation, businesses are seeking more efficient, cost-effective, and flexible ways to scale their development teams. Nearshoring offers a strategic solution that provides access to top talent in nearby regions, allowing businesses to maintain better communication, collaboration, and quality control compared to offshoring to distant locations.
This ultimate guide to nearshoring in 2024 will explore everything you need to know about building and managing a nearshored development team. We’ll dive into what nearshoring is, its advantages over other outsourcing models, how to choose the right region, and the best practices for a successful nearshoring experience.
What is nearshoring?
Nearshoring is the practice of outsourcing software development or other business functions to a nearby country, usually within the same or similar time zones. It stands in contrast to offshoring, where companies outsource work to far-away countries, often across multiple time zones, making real-time collaboration difficult.
For example, a company based in Germany might nearshore its development to Poland or Portugal, where there is a pool of skilled developers, lower labor costs, and cultural similarities. Nearshoring offers the cost advantages of outsourcing while maintaining better alignment in terms of time zones, communication, and cultural compatibility.
In 2024, nearshoring has grown significantly, especially in Europe. According to a 2023 survey by Deloitte, nearshoring has become the preferred outsourcing model for 45% of companies, a trend driven by the increasing need for faster development cycles, better control over outsourced teams, and improved collaboration.
Nearshoring vs offshoring vs onshoring
Before diving into the specifics of nearshoring, it’s essential to understand the key differences between the three common outsourcing models: onshoring, offshoring, and nearshoring.
Onshoring
Onshoring involves outsourcing development work to teams within the same country. This option is often the easiest in terms of communication and collaboration, as it removes time zone differences and minimizes cultural barriers. However, it comes with higher costs due to the higher wages in developed economies like the United States, Germany, or the United Kingdom.
Offshoring
Offshoring refers to outsourcing development work to teams in distant countries, often in Asia or other regions with a significant time difference from the client company. This model is typically the most cost-effective, as labor rates are much lower in regions like India or the Philippines. However, communication delays, cultural differences, and time zone mismatches can create significant challenges, especially for fast-paced, agile development environments.
Nearshoring
Nearshoring is the middle ground between onshoring and offshoring, offering a balanced combination of cost savings and effective collaboration. By outsourcing to nearby countries with similar time zones and cultural contexts, businesses can achieve greater efficiency and better communication while still enjoying lower labor costs. This makes nearshoring an ideal solution for businesses looking to scale their development efforts without the complications associated with offshoring.
Why nearshoring is gaining popularity in 2024
As we move through 2024, nearshoring has become increasingly popular for several reasons:
1. Shorter time to market
In today’s competitive landscape, speed is critical. The ability to bring products to market faster can make or break a business. By working with a nearshore team, companies benefit from better alignment in terms of working hours, making it easier to collaborate in real-time and shorten development cycles.
For instance, Eastern Europe has emerged as a nearshoring hub for Western European businesses, thanks to its highly skilled workforce and similar time zones. According to a report by Stack Overflow, Poland, Ukraine, and Romania are among the top destinations for nearshoring due to their vast talent pools and competitive labor costs. These regions provide excellent developers who can work alongside your in-house team, ensuring faster turnaround times and more seamless project management.
2. Reduced costs without sacrificing quality
Nearshoring offers significant cost savings without the drastic cultural and logistical challenges of offshoring. Wages in nearshore countries are often much lower than those in Western Europe or the United States, yet the talent pool is equally skilled. For example, developers in Portugal or Poland typically command lower salaries than their counterparts in Germany or the UK, even though they have comparable education levels and experience.
Moreover, the Deloitte Global Outsourcing Survey 2023 shows that companies leveraging nearshoring can reduce development costs by up to 40%, compared to onshoring, while maintaining high levels of service quality and productivity.
3. Access to a broader talent pool
One of the main reasons companies nearshore their development teams is to tap into highly skilled developers who may not be available locally. In 2024, the global shortage of software developers is more pronounced than ever, particularly in major tech hubs like San Francisco, Berlin, and London.
According to a report by CodinGame and CoderPad published in 2023, the demand for developers has outstripped supply by 1.5 million jobs in Europe alone, making it challenging for companies to find and retain talent locally. Nearshoring opens up access to talent in emerging tech hubs like Croatia, Portugal, and Hungary, where universities produce highly skilled developers, and competition for talent is less intense.
4. Improved cultural and time zone alignment
Cultural differences and time zone gaps can be significant challenges when working with offshore teams. Miscommunications can lead to costly mistakes and delays, especially in agile development environments where continuous collaboration is essential.
Nearshoring solves this issue by offering teams that are geographically closer and culturally more aligned. For example, nearshoring to Eastern Europe for Western European companies provides a shared cultural context, as well as workday overlap, leading to smoother communication and fewer misunderstandings.
Moreover, with similar time zones, real-time collaboration is far more feasible compared to offshoring, where significant time zone differences might delay communication by a day or more. Having a nearshore team in a similar time zone allows businesses to adopt agile methodologies more effectively, ensuring faster decision-making and reducing bottlenecks.
5. Enhanced security and compliance
Data security and regulatory compliance are critical concerns for companies outsourcing their development work. When outsourcing to distant locations, ensuring adherence to strict regulations like GDPR (General Data Protection Regulation) becomes more challenging.
Nearshoring provides greater control over data security and compliance, especially when working with countries that have strong data protection laws similar to those in the client’s home country. For instance, most Eastern Europeancountries are part of the European Union and adhere to GDPR standards, ensuring that your nearshore development team complies with stringent data protection laws. This is a key advantage for businesses in finance, healthcare, and e-commerce, where data security is paramount.
Top regions for nearshoring in 2024
Choosing the right nearshoring location is critical to the success of your project. Different regions offer different advantages, from cost savings to talent availability. Below are some of the top nearshoring regions in 2024:
1. Eastern Europe: a top nearshoring hub
Countries in Eastern Europe have become some of the most popular nearshoring destinations for companies based in Western Europe. Nations like Poland, Ukraine, Romania, and Hungary offer a combination of highly educated developers, competitive costs, and cultural proximity.
Poland, in particular, has a thriving tech scene, with more than 400,000 software developers and a robust educational system that produces thousands of new graduates annually. The Global Skill Index 2023 ranked Poland among the top countries for software development skills, making it an attractive nearshoring destination for companies seeking top-tier talent.
2. Portugal: nearshoring in the West
Portugal has emerged as a popular nearshoring option for companies in both Western Europe and the United States. With a time zone only 1 hour behind London, Portugal provides an ideal location for real-time collaboration.
Portuguese developers are known for their high technical proficiency, and the country ranks 13th in Europe for developer skills according to Coursera’s 2023 Global Skills Report. Lisbon has also become a growing tech hub, attracting startups and major tech companies alike, thanks to government incentives and a high quality of life that appeals to international talent.
3. Latin America: an emerging nearshoring destination
For North American companies, Latin America offers an attractive nearshoring option. Countries like Mexico, Argentina, Brazil, and Colombia have large pools of skilled developers and are in the same or similar time zones as the United States, making collaboration much easier compared to offshoring to Asia.
Latin America’s software industry is growing rapidly, with governments investing in tech education and infrastructure. The Brazilian software market, for example, is expected to reach $48 billion by 2025, according to a 2023 study byIDC, making it one of the fastest-growing tech ecosystems in the region.
Best practices for nearshoring success in 2024
To ensure the success of your nearshoring initiative, it’s crucial to follow best practices for managing remote teams and building strong relationships with your nearshore partners. Here are some strategies to keep in mind:
1. Define clear goals and expectations
Before embarking on a nearshoring project, it’s essential to define your project goals, key performance indicators (KPIs), and expectations. Ensure that both your in-house team and your nearshore partner are aligned on project timelines, milestones, and deliverables. Clear communication is critical, especially when working with teams in different countries.
2. Prioritize communication and collaboration
Strong communication is the foundation of any successful outsourcing project. Use tools like Slack, Microsoft Teams, or Zoom to keep lines of communication open and ensure that your nearshore team is an integral part of daily operations. Establish regular stand-up meetings, project check-ins, and feedback loops to keep everyone on the same page.
3. Foster a collaborative culture
Building a collaborative culture between your in-house and nearshore teams is essential for long-term success. Treat your nearshore team as an extension of your own company, rather than a separate entity. Encourage collaboration by involving your nearshore team in all stages of the project, from planning to execution. Providing equal opportunities for input fosters a sense of ownership and commitment.
4. Invest in technology and tools
Using the right technology stack and collaboration tools can make the difference between success and failure in nearshoring. Invest in project management tools like Jira or Asana to manage workflows, and use GitHub or GitLab for version control. Cloud-based solutions like AWS or Microsoft Azure enable seamless integration between your in-house and nearshore teams, making it easier to collaborate on codebases and monitor project progress.
5. Visit your nearshore team
While the majority of collaboration can happen online, nothing beats face-to-face meetings when it comes to building strong relationships. Schedule regular visits to your nearshore location to meet the team in person, discuss project goals, and foster a stronger sense of collaboration. These visits can help build trust, resolve any communication issues, and solidify your long-term partnership.
Conclusion: why nearshoring is the future of software development
In 2024, nearshoring continues to be the most practical and efficient solution for companies looking to scale their development efforts without sacrificing quality or incurring the high costs of onshoring. With its unique combination of cost savings, talent access, cultural alignment, and real-time collaboration, nearshoring allows businesses to stay competitive in a fast-paced, tech-driven market.
Whether you’re a startup seeking rapid growth or an established enterprise looking to expand your development capabilities, nearshoring offers a flexible, scalable, and effective way to meet your business goals. By choosing the right region, building a strong partnership, and following best practices for collaboration, nearshoring can be a powerful tool in your company’s growth strategy in 2024 and beyond.
