What is a Nearshore Software Development: Practical Guide to Choose Your Best IT Vendor

Nearshore software development is the process of outsourcing tech operations, web, or app development to a nearby country. For instance, a company located in the USA can choose Mexico as its nearshore outsourcing destination due to geographic proximity and reduced costs.

This phenomenon appeared primarily due to cost reduction compared to hiring your own team and searching for specific IT talents in neighboring countries.

Just imagine services like Slack, Opera, GitHub, WhatsApp, and Skype were created with nearshore development services.

In this guide, we cover aspects of understanding “what is nearshore software development”, help find proper development partners, and ensure project success, namely:

• 5 criteria to pay attention to when choosing among nearshore software development companies
• Rates on IT services in key outsourcing regions [LatAm, Asia, Eastern Europe]
• Latest statistics in nearshore outsourcing locations
• Top 5 ultimate tips for managing an outsourced team successfully
• Main benefits of offshore and nearshore development

Continue reading to learn more.

What is Nearshore Software Development: Key Insights

It is worth noting that the main difference between nearshore, onshore, and offshore outsourcing lies in the distance.

• Nearshore software development - means addressing an IT company located in close geographical proximity to your county, usually in the same time zone.
• Offshore software development services are delivered from more distant locales and time zones. For example, US projects are carried out in Eastern Europe or India.
• Onshore development is the process of delegating IT development tasks and outsourcing web development to companies located within the same country, also called onshore outsourcing.

The infographic below showcases the main aspects of outsourcing IT activities and software development projects to different countries, particularly Ukraine.

Infographic: Offshore & Nearshore Software Outsourcing

Advantages Provided by Nearshore Software Development Services

The benefits provided by nearshore software development or other outsourcing models are as follows.

1. Cost-efficiency

This is the most significant advantage of working with nearshore software development teams outside your country’s borders. You can end up saving up to 70% on a software development project.

2. Higher flexibility & timely feedback

You receive updates on your business in the morning hours and have time to review and comment on the work that the nearshore development company has done. This is true primarily if you are based in the USA and your dedicated team is located in Eastern Europe. The team of nearshore developers can provide you with the necessary adjustments the following day.

3. High level of technical expertise

Due to a tremendous technical basis and the recent growth of the IT industry, countries like Ukraine and Poland have many talented and highly experienced specialists.

4. Access to rare technology specialists

If there is demand for unique technology, you may find a nearshore company or specialists overseas. For example, in Eastern Europe, mainly in Ukraine, you can find rare but in-demand specialists in Scala and AI/ML technologies.

5. Possibility to control the development process

If you consider an IT outsourcing company in LatAm, it makes no difference with offshore software development in Eastern Europe. For example, a flight from the USA to Ukraine takes almost as long as to Brazil.

Offshore & Nearshore Software Outsourcing: Is there a Difference?

Although nearshore development teams are located closer to your country's border, the list of benefits erases the difference between offshore outsourcing and nearshore software development. This is especially true once a capable IT vendor has been found.

Onshore vs Offshore vs Nearshore Development Costs

Nearshore teams in Mexico have the same rates compared to Eastern Europe (e.g. Ukraine). Ukraine, in particular, offers excellent nearshore development opportunities for European clients and makes a great offshore development center if you are located in the USA or Canada.

In a country like Ukraine, you may find an excellent 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. Also, due to closer cultural alignment with Europe and the US, offshore development teams from Eastern Europe are the most comfortable to work with.

Feedback from Clients about MLSDev

Our team is a top-rated Ukrainian IT company offering offshore and nearshore development services with more than 10 years of experience. Our expertise includes 200+ successfully completed projects. Our experienced specialists will gladly dedicate their skills to boosting your business with high-quality products and services.

5 Main Factors to Consider for Nearshore Development

The Forbes Technology Council, Alex Robbio, thinks that nearshore software development is the most productive operation model in this time of digital transformation.

Here, we provide key insights for each nearshore software outsourcing region regarding time zone, expertise, rates, and cultural differences.

1. Nearshore Outsourcing Locations

Your local market may suffer from a deficiency of tech expertise, or you may need to cut operational costs, and reduce your IT department. In these situations, offshore teams is the best solution to bridge the gaps from other time zones.

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.

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.

Therefore, locales like South and Central America offer various outsourcing software development services with more acceptable rates for companies from the USA.

1. Argentine: on average the salary is $12,780, which is considerably less than in the USA and Canada.
2. Mexico: the average salary constitutes $20,400.
3. Brazil: on average, a developer gets $15,142.

Nearshore Software Development: Options for European Clients

The best countries to outsource software development for Europe are Ukraine and Poland. They feature a sufficient amount of proficient developers for IT staff augmentation and are ready to cover the demand for the vast range of technologies.

1. Poland: a junior software developer receives a yearly compensation of $13,661. A middle-level developer receives $24,287.
2. 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.

2. Rates for Offshore & Nearshore Software Development

As mentioned, budget savings are the most crucial factor driving the rise to outsource development. Yet, software development projects impose lots of specific services, including business analysis, project management, UX/UI design, and quality assurance performed by different specialists and programmers.

The table below shows the average hourly rates in popular offshore and nearshore development destinations.

The total cost of using an offshore or nearshore outsourcing model will vary 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.

As you see, offshore or nearshore software development rates vary per country. At the same time, IT services are twice as cheap in outsourcing destinations than doing the same job locally in the USA.

Want to determine rough costs for your IT projects?

Discover the guide on app development cost created by the MLSDev team based on industry research and our 10+ years of software development experience.

3. Nearshore Software Development Companies Expertise

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%).

Regarding the Eastern and Western European markets, the concentration of skilled developers is also high. For example, Ukraine is famous for having a multitude of IT experts. According to the research, the market accounts for 285K+ software developers in 2021. Also, Ukraine is ranked 11th worldwide, according to HackerRank, by the level of proficiency in tech capabilities.

4. Communication & Cooperation Procedures for Nearshore Outsourcing

The knowledge of communication technologies, work procedures, legislation and foreign languages is a must for a successful project and creating a nearshore development center, therefore make sure that:

• Your nearshore software development vendor is literate in applying effective development methodologies like Scrum and Agile methodology.
• The nearshore provider 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.
• Software engineers and other specialists have at least intermediate and upper intermediate levels of English to remove all communication gaps.
• 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 nearshore team complies with the GDPR guides (for Europe), general data protection regulation, and US data privacy legislation, including the California Consumer Privacy Act.
• Security activities inside the development team are reflected in a knowledge of the latest field updates, regular vulnerability scans, strict security procedures inside the work done by teams, and the use of the latest software.

5. Cultural Aspects that Influence Nearshore Software Development

When outsourcing software development projects, 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.

Hofstede’s Cultural Dimensions

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.

Thus, there is a tendency for North American and European companies to increasingly opt for outsourcing software development to Eastern Europe, since cultural similarities make it easier to build a long-lasting partnership.

Pro Tips to Manage Remote Development Teams Efficiently

The best practices for nearshore software development include 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 supported by in-person meetings.

Step-By-Step Process to Outsource Software Development

Once you use nearshore software, ensure the hiring process is completed according to the following advice.

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 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 impossible without the proper tools.

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 like Scrum and Kanban.

Based on the duration of the project and the agreement terms with your nearshore development provider, you may pay a fixed-price or on an hourly basis (time & material outsourcing model). 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.

Nearshore Software Development Model

3. Build Trust & Reward Nearshore Software Engineers

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 about your cooperation.

4. Provide Regular Feedback

Respond promptly to emails from your project manager since they communicate your directions to software engineers. 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 development team make the cooperation process far more effective and remove language barriers more quickly.

Moreover, this practice enables companies to 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 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, including your on house team or developers
• Invite your in-house team and nearshore software companies to conferences and workshops to make sure you share the same vision for business growth

All in all, we at MLSDev, a nearshore software development company, 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.

Gopuff: On-demand Delivery Service in the USA

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