Global spending on digital transformation in 2022 is expected to reach USD 1.8 trillion. With an unprecedented demand for IT specialists, necessary for the implementation of transformation projects, many companies are looking for other solutions than recruitment. One of the most popular is nearshoring in the Agile model – let’s take a closer look and see if it is worth a try.
Digital transformation dramatically increased the need for IT talents
According to McKinsey, 9/10 of C-level managers conducted at least one large-scale digital transformation project over the period 2020-2022. The demand for IT talents is huge. And although the pandemic caused an influx of fresh blood to the IT industry, competences of regular and senior developers (most willingly recruited), are still inaccessible on the market. Current technological trends resulted in the fact that the most wanted IT experts are among others: database architects, information security analysts, software developers, systems and networks administrators, cloud architects, and DevOps engineers. Not all these experts are recruitable (especially when needed) because they are simply lacking on the market.
What options do we have? Offshoring vs. Nearshoring
Outsourcing of IT services is not a new service on a market. However, it has come a long way since its beginning to this day. According to Statista data, currently 64% of all services in this model include outsourcing software development, and 51% – outsourcing application maintenance. It is also worth knowing that various models are also available as part of outsourcing.
What is offshoring
Offshoring means delegating work to external suppliers in countries located, most often, outside the continent. In the common understanding, offshoring is equal to outsourcing services, probably because many service centers have developed in APAC countries and for a long time it was there that the heart of outsourcing was beating. This model is also available today.
What is nearshoring
Nearshoring assumes that the work can be outsourced to a company that has a service center located not far from the business. This model has become more and more popular as competence centers gathering qualified staff have started to emerge in many Eastern European countries.
Benefits of nearshoring
- Working in the same time zone – compared to offshoring services, it is a significant advantage. Even if we are currently traveling less than before the pandemic, including business trips, working in a similar time zone is conducive to maintaining contact. If the client needs to contact an external team, he does not have to wait for business hours to get an answer or have a problem solved.
- Working in a similar culture – cooperation with people from other cultures enriches us and broadens our horizons but may also cause unintended misunderstandings. By choosing the nearshoring model, the company can minimize such risks.
- Good price – quality ratio – nearshoring services are cost-effective, because you pay only for the real time of specialists devoted to work on the project (Time & Material model). Nearshoring specialists are professionals who have experience in many projects, which is why the services provided are at a high level.
- Better control over project – compared to offshoring, it is easier to maintain control over the project when you can contact the supplier team easily and quickly.
Challenges of nearshoring
- Effective communication – despite the proximity and similar culture, communication will still be a challenge. It is worth making sure that the supplier’s specialists can demonstrate a high level of English or other business language skills.
- Risk of Biases (Us vs. They) – in the case of external suppliers, there is a risk of biases, especially if the onboarding of external employees is not taken care of with due diligence.
Choosing the right nearshore software development company
Choosing the right nearshore software development company is a real challenge. If you want to gain a competitive advantage, consider:
- Competence – make sure that the software house has these competences and implemented projects requiring knowledge of specific tools. Take the time to get to know people and carry out technical verification of candidates.
- Customer approach – during initial talks with business representatives, pay attention not only to the offer, but to how they treat you as a customer. Do they ask questions? Are they keeping in touch? What do other customers say about them? It’s worth checking out before you start working with them.
- Innovation approach – the right approach to innovation and openness to new technologies in the IT industry is a must-have. Ideally, the supplier should have competence in the field of proven technologies as well as the tools necessary to use the latest technological trends
- Organizational culture – it consists of vision, mission, values, CSR activities, but also the general atmosphere in the company. People working in a friendly atmosphere, who share a similar approach to professional and non-professional matters, can achieve great results.
- Added value – benefits you didn’t expect. These will be all kinds of good practices, knowledge, new tools or management methods. Not all companies are able to provide this and again, the opinions of other customers will be a good source of knowledge, e.g. In the Clutch portal, and a case study describing the cooperation.
Mitigate any risks with Agile
Since the creation of Manifesto for Agile software development in Utah in 2001, agile project management methodologies have gained enormous popularity in the IT world. If you still have doubts whether nearshoring is an option for you, using Agile can help minimize potential risks.
Agile consists of several practices facilitating work. It assumes that we should put:
- People and interactions over processes and tools
- functioning software over detailed documentation
- Cooperation with the client over contract negotiations
- Responding to changes over sticking to the plan
What can Agile bring to nearshoring?
- Better communication – thanks to the focus on people, cooperation is good, more effective. There are frequent interactions, which is important in the case of cooperation with people from outside of the company.
- Improving quality – digital products are delivered in short cycles. Agile team, e.g., working in the Scrum framework, releases working functionality within a week or two. This way, it is easier to take care of quality in IT nearshoring projects.
- Improved efficiency – agile methodologies focus on iterations (Scrum), visualization (Kanban), and rapid adaptation to changing challenges (Extreme Programming), making it easier to capture risks, blockers and monitor progress.
An interest in digital projects is huge. The market has lacked IT talent for many years and the pandemic has only deepened this problem. Nearshoring of services in the Agile model opens the way for many companies to implement projects that would have to wait many months for the recruitment of appropriate staff, or perhaps would never start.