5 important advantages for your IT & software projects
Outsourcing software development has become best practice for many companies. However, it is not only the cost pressure that is high for local developers. Specialists in the DACH region are also hard to find – the keyword here is a shortage of skilled labour.
As a solution, one trend has almost become established: nearshoring. The German Federal Association of IT SMEs speaks of nearshoring as a strategic competitive advantage for SMEs in order to secure access to the necessary expertise with high scalability and cost efficiency.
Just a trend or a sustainable and sensible development? In this article, we show you the benefits and risks of outsourcing via nearshoring and how to find the right partner for your project.
Nearshoring basically means relocating processes or services – e.g. having software developed – to geographically neighbouring countries. This is important for many companies: In Western Europe, these are often Central, Eastern or Southern European countries, i.e. the project is implemented within the EU. Collaboration with the development teams usually takes place via a nearshoring partner.
If we assume nearshore software development, the overarching goal of nearshoring is to ensure efficient software development. This includes operating more cost-efficiently while ensuring the same quality and legal certainty as in the home market, such as software development in Switzerland or Germany.
Let’s take a closer look at the nearshoring advantages and opportunities.
The importance of nearshoring for companies goes far beyond ‘just’ saving costs. Outsourcing software development holds a lot of potential in terms of efficiency, flexibility and – if carried out professionally – can become a productivity booster for the digitalisation of your company. So there are some good reasons for nearshoring:
When it comes to nearshoring and its advantages, cost efficiency and simple budgeting are the most important arguments for many companies. As the responsibility for the development team lies with your nearshoring partner, you save, among other things:
What’s more, instead of billing the items individually, they are included in an hourly rate so that you can simply budget for the service. To give you a concrete idea of the savings, we have compared the costs in a model calculation.
Recruiting is time-consuming, expensive and, in the case of IT experts in the DACH region, usually not crowned with success. By contrast, if you rely on IT nearshoring, you can outsource recruiting and gain access to a broad talent pool of developers and IT experts. This saves you the race for local developers and, of course, the associated costs and effort.
However, the choice of location for nearshoring is important here. The advantage only arises if you can assume a high standard of training locally, which is why we have opted for Slovakia, for example. In addition, your nearshoring partner should use a standardised selection process that ensures the professional suitability of the team members.
With a development team from the DACH region or an in-house team, you can assume that they are in tune with your corporate culture and work ethic. Or simply put, the developers ‘tick the right boxes’ and you understand each other straight away. This is not automatically the case with international teams – problems often arise, especially with offshore outsourcing in distant countries.
With nearshoring, on the other hand, you have the great advantage of reducing cultural differences by working with partners in neighbouring countries. This simplifies communication and minimises misunderstandings. Similar time zones also enable efficient coordination and fast response times.
Depending on the company and business case, software projects do not always require a consistently high level of personnel deployment. Outsourcing software development is the right step to be able to scale more flexibly.
Medium-sized companies in particular need software development in the short and medium term for the implementation of digitalisation projects. Once the project goals have been achieved, it is almost impossible to continue employing staff in a meaningful way and you are forced to reduce the team.
Nearshoring has the advantage that you can scale the team size relatively freely in coordination with your nearshoring partner, depending on the actual effort required. Two points are important for this to work in practice:
Nearshoring partners are often very efficient and realise projects much faster than many internal structures allow. This leads to a shorter time-to-market and you benefit more quickly from the advantages of your software solution.
To make this possible, you should select a nearshoring partner that works with agile methods and approaches the rollout of the solution using the MVP approach. This will give you feedback that you can use for optimisation while your product is already generating initial sales or the new software is already measurably reducing your operating costs.
In addition, your team often benefits from familiarising themselves with new procedures and possibly even integrating them into their own processes – nearshoring as a productivity advantage, so to speak.
Nearshoring IT and software projects therefore offers many advantages, but – like everything in life – also has disadvantages and risks. You should be aware of these challenges so that you can proactively address them and utilise the full potential of nearshoring.
Geographical proximity does not automatically mean that nearshore developers also speak German. However, our experience shows that technical expertise is much more important and that translation tools and clear communication are the decisive factors.
Solution approach: Make sure that there is a common basis for communication. At Riwers, for example, all developers speak English. An external team can also learn the company’s internal documentation very quickly and without significant costs using standard translation tools.
It is often assumed that external developers do not apply the same quality standards as an in-house team. Apart from the fact that a permanent position is no guarantee of quality, you should of course ensure that your nearshoring partner carries out QA tests when selecting them.
Solution: Before working together, check whether the nearshoring partner thinks about QA in the process and what the procedure looks like. Also ask how the recruitment criteria for the nearshoring team ensure technical expertise.
Outsourcing customised software development abroad often raises questions about the protection of sensitive data. Data leaks or a lack of security precautions can ultimately have serious consequences.
Solution: Work with nearshoring partners who comply with strict security regulations and the relevant data protection laws. This also means that the nearshoring location must be in a country that is politically stable and an established constitutional state (e.g. EU, Schengen, EFTA, Eurozone, etc.).
Locations outside of these constitutional organisations should be examined in particular detail, as there may be some pitfalls in the legal collaboration with your company. Clear contractual regulations on the handling of data create additional security.
Software is usually not a one-off project, but an ongoing one. Many companies therefore ask themselves whether they are not becoming too dependent by working with a nearshoring partner and whether it would be better to build up in-house resources instead.
Solution: Firstly, the basis of good software development (whether nearshoring or not) is always clean code and good documentation that another developer can refer to at any time. You can also control the form of collaboration yourself.
At Riwers, for example, you can choose whether you want us to take over the software development completely for you or whether you want to bring external developers in-house using a model such as software teams, so that there is a transfer of knowledge at the same time.
As we have already mentioned several times, one factor is crucial for successful nearshoring – finding the right nearshoring partner. You should therefore consider the following criteria to ensure that the collaboration runs effectively and smoothly:
As a nearshoring partner from Switzerland, Riwers offers you a local contact with a development centre in Slovakia. This means that we are subject to local law, offer you access to an international talent pool and can customise our services to your needs.
This can mean that we work with you remotely, on-site or in a hybrid model. We can either cover individual software development entirely for you or support your in-house resources by providing specialised software teams or even a software department as a service.
So let’s come back to our initial question: is nearshoring just a trend or does it really make sense? In our opinion and experience, nearshoring is definitely a trend, but one that has come to stay. In the vast majority of cases, companies that rely on nearshoring never want to go back because they experience the benefits mentioned on a daily basis.
Nearshoring offers companies tangible benefits, from major cost savings and an effective response to the shortage of skilled labour to decisive competitive advantages. At the same time, cultural and geographical proximity facilitate communication, especially in comparison to offshore outsourcing.
Would you like to find out more about software development in the nearshoring model?