Offshore & Nearshore Software Development: Practical Guide to Choose Your Best IT Vendor
Nearshore development is the outsourcing of technical activities or the implementation of software projects to nearby countries. For example, if your company is located in the United States, nearshore outsourcing destinations are Mexico, or possibly Brazil, Chile, and Argentina.
The phenomenon of offshore and nearshore software development arose mostly due to lower pricing, as well as the search for expertise or extra talent.
The results of this cooperation are stunning: services like Slack, Opera, GitHub, WhatsApp, and even Skype were developed by outsourced programming teams.
This practical guide covers the following points to help you with IT outsourcing decisions, namely:
- 5 key criteria to help you choose the best software development vendor
- Offshore and nearshore software development rates in key regions [LatAm, Asia, Eastern Europe]
- Latest statistics in offshore and nearshore development locations
- Top 5 ultimate tips to manage a remote team successfully
- The benefits of offshore and nearshore development
So, let’s read on!
Infographic: Outsourcing Software Development in 2020: Key Insights & Processes
It is worth noting that the main difference between nearshore, onshore, and offshore outsourcing lies solely in the distance.
- Offshore software development services are delivered from distant locales. For example, US projects are carried out in Eastern Europe or India.
- Onshore software development is the process of delegating software development tasks to companies located within the same country.
The following infographic presents the top offshore and nearshore development regions, key insights, and statistics regarding outsourcing IT activities.
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Nearshore Development: 5 Key Factors to Consider
The Forbes Technology Council, Alex Robbio, thinks that nearshore development is the most productive operation model in this time of digital transformation.
Still, to succeed, one should figure out the location where it is better to outsource, and understand the potential challenges, as well as benefits.
Here, we provide key insights for each outsourcing region in terms of time zone, expertise, and cultural differences.
1. Nearshore Outsourcing Locations
Since most traditional businesses are embracing digital change, nearshore outsourcing has become a business model on the rise.
Local markets sometimes suffer from a lack of talent, have a need to cut operational costs, can reduce expenditures on IT departments, etc. In these situations, nearshore development is the best solution to bridge the gaps.
Nearshore software development: Options for American and Canadian clients
Although the United States leads the world in innovation, the country also features the highest salary rates that drive entrepreneurs to search for a cheaper workforce via nearshore programming services.
Let’s now check out and compare how much programmers from different countries make.
In the United States, the median software developer receives an annual salary of $81,195. Generally, the salaries range from $40,000 to $153,000.
Canada: average salaries for software developers vary between $50,000 and $150,000, since wages in Canada don’t differ much from those in the US.
Locales like South and Central America offer various nearshore development services with more acceptable rates.
- Argentine: the yearly compensation for a junior developer is $6,597. The salary of a middle developer is $12 808. An average salary is $12,780.
- Mexico: the yearly salary for a junior developer is $16,800. A middle developer receives $20,380 in annual compensation. Average: $20,400.
- Brazil: the yearly salary for a middle developer is $17,546. A junior developer receives $10,938 annually. On average, a developer gets $15,142.
When considering nearshore, as well as offshore programming, face to face meetings are essential for the successful completion of projects.
Minding travel conditions is also necessary when you consider hiring a software development outsourcing company. The flight statistics may highly variable, especially for the USA and Canada. It can take as long as 8 hours to travel from New York to Brazil and up to 11 hours to Argentina. The same traveling time is needed if you want to visit Ukraine, for instance.
Nearshore software development: Options for clients from Europe
The best countries to outsource software development to in this region are Ukraine, Poland, and Belarus. They feature a sufficient amount of proficient developers and are ready to cover the demand for the vast range of technologies.
- Poland: a junior software developer receives a yearly compensation of $13,661. A middle-level developer receives $24,287.
- Belarus: the average yearly salary is $16,203. The hourly rate for mid-level developers is $40. Junior developers: $25.
- Ukraine: a junior developer in Ukraine works at an hourly rate of $20. An average yearly compensation for this experience niche is $12,400. A mid-level developer would typically charge $25-35 and have a yearly salary of $16,400.
Is there a difference between nearshore and offshore outsourcing?
Although nearshore development teams are located closer to the border of your country, the list of benefits erases the difference between offshore and nearshore software. This is especially true once a capable software development vendor has been found. The benefits are as follows:
- Budget savings. This is the greatest advantage to working with IT companies outside your country’s borders. You can end up saving up 70% on software development.
- Timely feedback. You receive updates on your business in the morning hours and have time to review and comment on the work that has been done. This is true especially if you are based in the USA and your team is located in Eastern Europe. The team can provide you with the necessary adjustments the next morning.
- High level of expertise. Due to a great technical basis and the recent growth of the IT industry, countries like Ukraine and Poland have many talented and highly experienced specialists.
- Rare technology specialists. If a demand for uncommon technologies in your country is pressing, you may find a specialist overseas. For example, in Eastern Europe, mainly in Ukraine, you can find rare, but in-demand specialists in Scala technology.
- Meeting in-person. If you consider outsourcing to LatAm, it makes no difference with offshore software development in Eastern Europe. A flight from the USA to Ukraine takes almost as long as to Brazil.
Eastern Europe, Ukraine in particular, offers great nearshore opportunities for European clients and makes a great offshore development center if you are located in the USA or Canada.
2. Rates for Offshore & Nearshore Software Development Services
As mentioned, budget savings are the most important factor driving the rise of IT outsourcing. Yet, software development imposes lots of distinct services, including business analysis, project management, UX/UI design, and quality assurance performed by different specialists and programmers.
The total cost for offshore or nearshore software development services will vary greatly from company to company based on certain aspects, namely:
- Team size: the more people involved, the higher the price
- Location: based on the economy, IT services and rates for programmers differ from country to country
- Expertise: rare and more in-demand technologies have higher costs for implementation
- Experience: the number of successfully completed projects, as well as the status of former clients, influences the price-forming process greatly
- Agreement details: different cooperation models, the need for frequent trips, risks management will also influence the price of the project.
The table below shows the average hourly rates in key IT outsourcing destinations in relation to the position.
|North America||Western Europe||Eastern Europe
|Business Analyst||$110 – $205||$55-$80||$40 – $65||$30 - $40||$30 - $35|
|Software Architect||$200 – $300||$90 - $150||$40 - $80||$35 – $50||$40 - $60|
|Project Manager||$135 – $235||$55 - $70||$35 - $50||$35 - $50||$25 - $30|
|UX/UI Designer||$80 – $165||$50 – $100||$35 – $55||$25 – $35||$20 - $30|
|Jr. Developer||$105 – $110||$80 - $60||$25 – $40||$20 – $25||$25 - $35|
|Middle Developer||$130 – $140||$65 - $80||$35 – $50||$25 – $35||$30 - $50|
|Sr. Developer||$155 – $165||$80 - $100||$45 – $70||$30 – $40||$45- $55|
|Jr. QA||$75 – $80||$35-$45||$25 – $30||$15 – $25||$10 - $15|
|Middle QA||$100 – $105||$45 - $55||$30 – $40||$20 – $30||$10 - $20|
|Sr. QA||$145 – $170||$50 - $75||$35 – $45||$25 – $35||$15 - $25|
The nearshore and offshore software development rates by country clearly show that various IT services are twice as cheap in the outsourcing destinations than doing the same job locally in the US.
Want to know the precise cost of a web or mobile app project?
Our team has created a complete guide on app development cost. The guide is based on industry research and our 10+ years of software development experience. The article covers key factors that determine the final project price in greater detail, and provides budget ranges and costs for IT services.
3. Key Expertise and Experience of a Vendor
Offshore and nearshore software development accumulates numerous benefits, including budget savings and an abundance of talented specialists.
Yet, there are some common pitfalls when choosing the right IT vendor. In order to avoid a negative experience, here is a list of recommendations:
- Check the company's background- navigate through social networks, websites, and check the number of years operating in the IT outsourcing field
- Check portfolio and number of completed projects- the overall number of projects is a great indicator of the company's proficiency, as well as whether or not the portfolio contains projects in your niche.
- Get in touch with former clients in your location - if possible, ask the company for contact details so you can speak over the phone.
- Evaluate the team and number of available resources
- Pay attention to the company's ranking -you can find a lot of statistics through services like HackerRank and GoodFirms. You can also get great insight into companies outsourcing software development on Clutch.
Today, there are about 18.5 million professional software developers in the world. A high concentration of these professionals is in the US (19%), China (10%), and India (9%).
When it comes to the Eastern European market, the concentration of specialists is also high. For example, Ukraine is famous for having a multitude of IT experts. According to the top IT-statistics resource in Ukraine, Dou.ua, this meant 150K+ software developers in 2019.
As well, the same source states that the top 50 IT companies open about 5,000 positions monthly. This is an indicator of stable growth and service demand. Moreover, about 30 of the best Ukrainian universities accept about 20K students who desire to study informational technology annually.
As a concluding point, Ukraine is ranked 11th worldwide, according to HackerRank, by the level of proficiency in tech capabilities.
Note: We are a top-rated Ukrainian software development company with more than 10 years of experience that includes 200+ successfully completed projects. Our experienced specialists will gladly dedicate their skill to boost your business with high-quality products and services.
Contact our team to receive a piece of advice in terms of software development and IT outsourcing. Our software architect and business analyst will provide you with a one hour free consultation. This information will definitely help you with your business objectives.
4. Communication & Cooperation Procedures for Software Outsourcing
The knowledge of communication technologies, work procedures, legislation and foreign languages is a must for a successful project, therefore make sure that:
- Your nearshore software development vendor is literate in applying effective development methodologies like Agile and Scrum.
- The company or the team you hire has an established procedure in the elicitation of product requirements (e.g. discovery stage, can be called business analysis).
- The vendor has an established, flawless communication procedure, including frequent meetups, reports, and timely feedback, as well as fast responses to change requests.
- The team has a level of English that is at least intermediate and upper intermediate levels.
- The collaboration with your IT-vendor is free from fraudulent risks, and you have proof of that in the form of legal documents, like NDA agreements.
- The team complies with the GDPR guides (for Europe) and with US data privacy legislation, including the California Consumer Privacy Act.
- Security activities inside the company are reflected in a knowledge of the latest field updates, regular vulnerability scans, strict security procedures inside the work done by teams, and use of the latest software.
Ukrainian developer teams meet the requirements mentioned above. The majority of IT specialists have an intermediate level of English or higher, as Ukraine has been involved in IT outsourcing for a long period of time and there are dozens of companies on the market.
5. Cultural Aspects that Influence Nearshore Software Development
Nearshore software development and agile methodology provide the framework for fast and effective development processes. Yet, this framework may be disrupted by cultural differences and unexpected mix-ups.
For successful nearshore development, we recommend minding cultural differences.
Hofstede’s Cultural Dimensions index may be a beneficial tool in this process. This resource displays the attitude of different cultures towards factors like power distance, collectivism or individualism, short-term vs. long-term orientation, etc. In other words, it can show how people perceive pressure, attaining personal goals, meeting deadlines, etc. These factors may influence the nearshore outsourcing experience firmly.
For example, countries like the United States and Canada are great when working together as they share common cultural attributes and have similar levels of individualism.
In contrast, it is harder to effectively do business with companies from China or Japan since these are high-context cultures with indirect communication. This means that things being said do not always transmit the same meaning. These cultures have a high level of collectivism and put group goals over personal ones.
In conclusion, there is a tendency for North American and European companies to increasingly outsource to Eastern Europe, since cultural similarities make it easier to build a long-lasting partnership.
Pro Tips to Manage Remote Development Teams Efficiently
Once you hire a software development company by completing the process shown in the diagram below, the next challenge includes setting an effective cooperation process.
The best practices for nearshore software development include your personal involvement at every stage of the process and sharing your strategy, setting proper work procedures, establishing respectful relations with your colleagues, and sending regular feedback, which is then supported by in-person meetings.
Below, we’ll brief you on each of the tips in detail.
1. Share Your Strategy & Get Involved
Nearshore outsourcing starts with maximum involvement. You should present the idea for your project and describe what you want to be done very precisely. That includes:
- sharing your product vision
- setting and discussing goals and deliverables
- getting involved in different stages of project development (forecast deadlines, make a change request, test the idea with early adopters, etc.)
2. Arrange Work Procedures
Whether working with a nearshore software development team or hiring an offshore software company, arranging effective working procedures is not possible without the proper tools.
Since 2005 the number of employees working remotely increased by 115%. This has caused a boom in telecommuting software, and as a result, you now have a plethora of options to choose from.
The following tools may come in handy when managing your IT team remotely:
- Project management software: tools like Jira, Trello, Asana, PivotalTracker, Workzone, etc.
- Microsoft Office 365: includes a list of software like Skype for Business, Teams, email, calendar, the best on- and offline Office Suites, as well as augmented security options that may protect sensitive information from hijacking, phishing, etc.
- Google Suite: outsourcing IT with Google Suite is easy thanks to storage, sharing, meeting, planning, mailing, and other necessary functionality.
- Video conferencing: tools like Zoho Meeting, ClickMeeting, GoToMeeting, Cisco Webex Meetings, BlueJeans Meetings, Join.me, Zoom Meeting.
Nearshore software development, like any other type of outsourcing programming service, assumes the use of methodological approaches.
Facing difficulties in choosing which development framework fits best for your project’s needs?
Our article Kanban vs. Scrum: Which to Use will explain the pros and cons of every method, as well as give a detailed description of each.
Based on the duration of the project and the agreement terms with your IT provider, you may pay a fixed-price or on an hourly basis (time & material). It is possible to agree on a monthly, weekly, semi-monthly, or semi-weekly basis. There are multiple services like Harvest, Clockify, ManicTime, Toggl that will simplify the time-tracking process of the team’s work and create invoices based on these hours.
When it comes to invoicing, you may execute payment through the following options like bank transactions, services like PayPal or Payoneer, Wire transfer, via financial agreement between two parties of a contract (escrow).
Whatever payment option you choose, be aware that all of them are subject to specific fees and are limited by terms. For example, PayPal transfers are subject to a 2.9% fee for orders originating in the US, and 4.4% fees for orders outside the US. Credit card payments are limited to $5,000 per transaction, and wire transfers have a special extra payment from ($30-$50).
3. Build Trust & Reward Your Developers
Praise is a great tool to boost your team’s work.
If you want to move in the right direction, you have to be able to give constructive feedback. As well, you can reward your remote developers with bonuses, new gadgets, etc, as well as provide the necessary equipment and hardware to test software projects. In this way, you are investing in your project. This generosity is sure to leave a lasting impression with regard to your cooperation.
4. Provide Regular Feedback
Respond promptly to emails from your project manager since they communicate your directions to the team. Keep in touch with your team throughout the process of product development. Decide how often you are going to conduct project meetings and what communication tools you will use (Slack, Jira, Skype, or others).
5. Meet In-person
Personal meetings and project workshops with your nearshore & offshore development team make the whole cooperation process far more effective. Moreover, it helps you build trust and connection with employees and boosts their inspiration to invest effort and their best ideas into a common business. The following practices are welcomed:
- invite programmers to your country (to the US for instance) to see your business operations real-life
- visit their office to have an estimation of their needs and existing resources
- arrange informal meetings, parties, and team-building activities to establish friendly relations with team members
- invite your vendor team to conferences and workshops to make sure you share the same vision for business growth
Offshore & Nearshore Software Development: Is there a Difference?
Due to closer cultural proximity with Europe and the US, offshore development teams from Eastern Europe are the most comfortable to work with.
Nearshore development teams in Mexico have the same rates when compared with Eastern Europe (e.g. Ukraine). On the other hand, you receive a higher quality service and a pool of the top programmers in this region.
Additionally, in a country like Ukraine, you may find a perfect price to quality ratio, with a high level of expertise at affordable rates at an average of $40, allowing you to save up to 50% of your budget.
With more than 150K software developers, 1,000+ local software companies, and more than 100 international companies with subsidiaries in Ukraine, you may hire a reliable vendor that will save your money while developing a high-quality product.
This makes the country a great nearshore software development destination for Western Europe; Ukraine also makes an attractive offshore development spot for the US and Canada.
We at MLSDev do know how to build a project from scratch and what it takes to create not just a product, but a successful business with thousands of users. GoPuff is an on-demand delivery service and online store with thousands of daily users in 20+ US states. Check out this GoPuff Case Study in greater detail.
MLSDev is an excellent team of professional offshore developers, able to cover any of the demands of your software projects. Contact us for a free consultation and an estimate to start on your next stellar project!