The Covid-19 pandemic has brought about two simultaneous but seemingly paradoxical trends: remote work and deglobalization. Leaders trust their team members to deliver from afar, but they’re not so confident these days in global supply chains.
While manufacturing supply chains have faced particular disruptions, the software development sector has also come under scrutiny. The halt in global travel has hampered U.S. companies’ access to many overseas programming hubs.
With that said, no industry experts we are aware of foresee a slowdown in the offshoring of programming work. Large companies and startups alike will continue to tap into less expensive labor markets.
How can leaders square the trend toward global software development with its supply chain risks? Through a strategy known as nearshore outsourcing.
Nearshore Outsourcing in Software Development
In the context of software development, nearshore outsourcing is the exportation of programming work from mature markets to developing ones in relative geographic proximity. A Texas-based SaaS company is engaging in nearshore outsourcing when it hires programmers in Mexico, for instance.
Interest in nearshore outsourcing among the Fortune 500 has skyrocketed during the pandemic, according to global consulting firm MJV Technology & Innovation. “We have seen that the pandemic has accelerated deglobalization,” MJV CEO Mauricio Vianna says, “as manufacturing and development in farshore locations have been suspended. Companies are shifting to nearshoring to solve the problems of a hyper-globalized production chain.”
But what, exactly, separates nearshore from farshore outsourcing? And what does it take to outsource to nearby markets effectively?
Nearshore vs. Farshore
The distinction between “nearshore” and “farshore” isn’t always clear. One key variable is proximity: Executives are looking for locales that they could reach within a few hours’ plane ride.
American business leaders can’t hop on a plane to Siberia and arrive the same day. Companies like MJV have offices across South America, which is much more reachable from North American cities.
Another consideration is the time difference between office locations. “I believe the biggest of the benefits of nearshore over farshore outsourcing is the proximity of the teams,” Vianna explains. “By being on the same or in a very close timezone, farshoring problems like working hours, alignment meetings, and longer trips are avoided. Besides, companies don’t need to wait twelve hours to get an answer or talk with the development team.”
A third is cultural similarity. American software developers will have a much easier time relating to their Canadian counterparts than, say, those based in China. “Education, business practices and work-life customs are very similar in America and Canada,” notes Evelyn Ackah, founder of Ackah Law, a Canadian business immigration law firm. “Most American project managers, as well as end-users, would not recognize an American product that was developed in Canada.”
Common Nearshoring Mistakes
To be sure, there are risks associated with nearshore outsourcing. Whether a company is pivoting its software development from either a farshore location or an in-house team, these must be mitigated.
Just as in a farshore outsourcing project, cost savings are top of mind for executives. But vetting a nearshore partner who can deliver the required results on the desired budget is where many companies fall short. “Your choice of partner should not be a decision based solely on cost,” warns Vianna.
Security is also critical. Any form of offshoring can expose companies to data security liabilities. Due diligence is necessary to ensure that potential partners are compliant with relevant data privacy and security regulations in both local and international markets.
Beware, too, of labor laws. Nearshoring company MobSquad was recently accused of misusing a temporary foreign worker program. When in doubt, ask for proof of compliance.
Finding a Nearshore Outsourcing Team
Nearshore outsourcing offers all the benefits of outsourcing without many of the headaches of a foreshore location. Still, cultural fit and production capacity should not be overlooked.
Vianna recommends looking for outsourcing partners with multidisciplinary teams that are familiar with modern programming languages. And don’t forget to check for value alignment. Ethics matter, wherever a development team is based or whatever its contribution.
Finding a nearshoring provider that ticks all the boxes is just as tough as locating one that specializes in farshore outsourcing. Scrutinizing another company’s culture, creative philosophy, and values is no small task. But with any partner, checking for fit on all three fronts must be a priority.