Nearshoring: Benefits and Challenges

Does nearshoring still make a difference? How can you make it a successful business model?

We all know that finding the right people for software development projects is a big challenge. However, in recent years, it appeared that we all had exceptional financial opportunities to find and retain talent. Even today, we still experience solid competition regarding talent. As a result, salaries increase, and costs to keep our precious professionals happy rise.

Will these times, where IT leaders have to fight to get the right talent, come to an end? That remains the question, but I don’t think so. As we continue to anticipate a shortage of software engineers in the coming years, the only thing that could alleviate the scarcity of talent is a complete economic downturn.

Now we see—and many IT leaders are currently experiencing—the first signals of an economic decline. Economists and political leaders debate whether companies should limit their spending or increase their investments. Often, their first reaction is to reduce budgets. Either way, the need for high-quality software solutions will remain and probably increase in the upcoming years.

For companies, the necessity to automate processes is increasing. It is due to a lack of personnel, the high cost of employment, and the changes in business models.

What could we do when we face lower budgets and higher costs of finding and keeping talent? Some of us (look at my business model) will say nearshoring.

In this article, we will dive deeper into nearshoring. We will discuss how to make nearshoring successful for organizations.

What is nearshoring?

Nearshoring is when a team or additional capacity is based geographically close to the company’s headquarters. An important factor is that both the organization buying nearshoring and the solution provider are in the same region or time zone. In contrast, offshoring, a term that is often more familiar to us, is outsourcing to a solution provider in a location that is geographically far from the company’s headquarters.


Although the main reasons for companies to outsource were and probably still are lower rates and availability of talents, or better said, the lack of talent in the region the company is in, there are some other interesting benefits of nearshoring.

• Core values and culture

Countries in the same region often have similar core values or cultures that at least fit the one the company has itself. This means that working together is often quite easy. However, this should not be taken for granted. A lot of time and effort needs to be put into this to make sure that eventually, the operations run smoothly. (More about this topic in the challenges section of this blog).

• Reduced Travel Time & Costs

Even though the idea is to outsource to a third-party solution provider and depend on this supplier to solve the challenges related to capacity and knowledge, it is still nice to know that within a couple of hours both parties are able to meet in one of the offices, in the same time zone and lower costs, and discuss vision, architecture, planning, and other business issues face to face.

• Talent

Talent is difficult to find, especially within one city. There are many schools and universities with high-quality education in all parts of Europe that are focusing on the tech market. Today’s technology gives us the opportunity to hire talents also outside of our own “city walls” and opens a bigger market to find talent.


Let's say a company finds a solution provider that has:

  • a great culture;
  • flexible capacity;
  • delivers high-quality software development services against lower costs.

If this is the case, why doesn't nearshoring become a more common practice?

There are some reasons for this, but luckily there are also good solutions to them. Let's see these.

Many companies that try to nearshore their software development have tried other options before. Hiring contractors, consultancy firms, attracting new talents, hiring interns, starting mentorship programs, and maybe even outsourcing offshore. In the end, if an organization is not a good fit to run software development projects, the result will always be the same. With introducing more capacity that is not at the same location and has different culture and mentality, the problems will not be solved, they will even get worse.

• Unclear goals

Having unclear goals will lead to miscommunication and inadequate solutions. Developers that understand the need, the vision, and goals of the organization that they work for will create much better solutions. This is the same for nearshore teams and in-house teams. Having the right people on board that can translate the customer need into a vision and clear backlog is crucial for the success of every development out there.

• Culture

Before choosing a solution provider make sure to investigate the culture in the area the solution provider is in. Trust is important, but only believing the salespeople everything they state about the company is not enough. Make sure to have a clear picture of things like working hours, working ethic, communication styles, hierarchy, and other factors that are important for your company.

Let's take Dutch culture as an example. Dutch people always have their own opinion that they are not afraid to share with anyone. This is not common in many other countries. The Dutch think that expressing themselves freely means they are transparent. However, this directness could lead to bad interpretations of messages on the side of the solution provider.

Some companies don't have hierarchal structures and assume their solution provider understands how this works. It can lead to miscommunication if the solution provider's culture consists of people that are used to hierarchy, that have been raised in a way that they have to listen to elderly and more experienced people.

Working with a solution provider means the company must invest in cooperation and that starts with understanding the mentality. Nearshoring solution providers are usually experienced in working with companies from other countries, but make sure you are aligned on all important points.

• Perspective

Once upon a time, the work was divided into 2 categories: cool and challenging assignments and the leftovers or less important and interesting tasks. The in-house people needed perspective on cool tasks, so the leftovers were pushed to the outsourcing team. This is bad.

Building a successful team depends on the amount of perspective the company offers to everyone. Companies who want to work with nearshore teams should realize the team members on the other side of the monitor still believe perspective is more valuable than money, which means that these people should be treated as part of the organization. The cool thing is that they will pay back the trust!


When it comes to increasing productivity, saving costs, or finding talents and knowledge, nearshoring is a great option. Nowadays technology makes communication easier and there are numerous examples of how nearshoring is really helping companies to achieve their goals.

In order to make nearshoring a success, a company should:

  • invest in setting up a good structure;
  • make sure that visions and customer needs are clear;
  • properly document processes;
  • working a standardized way.

Nowadays scrum and kanban are known by every well-organized software development organization and could help reach good cooperation between companies and solution providers. Combining this with old-fashioned team building and focusing on team dynamics in your way of working will lead to success!

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