Under the conditions of globalization, more and more countries of the world are becoming IT outsourcing centers. Recent trends show that for many companies that want to delegate software development to an outsourcing company, geographic proximity, cost, and language skills are the determining factors in choosing a developer. As a result, the usual model of offshoring-onshoring is gradually giving way to nearshoring.
What is the difference between the main types of outsourcing?
Offshoring is the process by which a particular company is responsible for subcontracting a particular activity or process in its value chain. Offshoring consists of subcontracting certain services in certain other geographical areas, the purpose of which is to reduce costs. Many times the production process is moved to countries where labor is generally cheaper. This reduces the aforementioned costs.
Services can also be outsourced to contractors. Offshoring of services is widespread in companies. The process of offshoring in the services sector can serve to outsource customer service to a service provider. In this way, they are responsible for managing the customer service from a location where the service is cheaper and allows the company to save costs.
Onshoring is the same as outsourcing, just within the same country. With onshoring, companies can forget about cultural differences, time zone issues, legal aspects as well as taxes. Onshoring is most often used to save money because of the difference in average salaries (for example, between the provinces and the capital), or in the absence of specialized specialists nearby.
What is Nearshoring?
The need for nearshoring occurs when part of the work is outsourced, to save time or money. But, unlike standard outsourcing, in nearshoring, the company that provides the services is geographically nearby.
This type of outsourcing is especially popular among Western European companies, which prefer to order web development of their products in Eastern European countries. Nowadays, nearshore outsourcing meaning a good alternative to offshoring and onshoring.
Under such conditions, Eastern Europe (in particular Ukraine, and Poland) is becoming an attractive outsourcing destination among Western European countries. Such countries demonstrate rapid growth rates in the IT market, offer low prices, and have a favorable location concerning many European countries (Great Britain, Germany, France, Italy, Switzerland, etc.).
Nearshore outsourcing advantages and disadvantages
Advantages of IT outsourcing
Delegating some tasks that are not essential for the in-house staff can free up time for the main ones. For the development of a new product or software solution, it is not necessary to form a new department or staff the old one, thus increasing the staff and expenses. There is no problem with legalizing new employees, writing job descriptions, etc. Full-time employees will be able to devote all their time to their core duties while continuing to develop the company in priority areas. As a consequence, both sales and productivity will only improve.
● Geographical freedom
A key advantage of nearshore development services is their independence from geography. Every single employee of such a company can work from anywhere in the world. But if a client cares about a time zone, he can easily find a team that meets his geographical criteria.
● Wide choice of specialists
Online retailers can select dedicated developers with the IT skills needed for e-commerce or retail. The overall number of IT workers is forecast to reach 60+ million in 2023. While there were 10 million fewer in the industry in 2019. Systems analysts, support agents, administrators, and software developers are still seen as the main jobs in this industry.
● Flexible legal approach
E-commerce businesses can hire a nearshore outsourcing company or an individual developer on the web, following reviews by e-commerce subjects. Typically, a non-disclosure agreement and a service agreement are sufficient. Once the terms of reference are prepared, terms and costs are discussed, and companies start working with IT staff. Companies in e-commerce do not incur excessive costs related to hiring employees and may outsource non-recurring projects.
● Financial benefit
Adopting nearshore software development services implies the lowest costs for project implementation. Brands can avoid paying and waiting longer than the deadline. The development and implementation of programs such as B2B portals and CRMs can improve customer experience and automate online sales operations. Outsourced crews likewise provide technical support for commercial websites over a set time.
Recruitment, onboarding, and training take much longer than delegating tasks to applicants or nearshore software development companies. When a brand is willing to implement a project in a short period, outsourcing is more effective overall. Setting precise terms of reference, goalsб exact budget, and time frame will get the project off the ground without any delays.
An essential ingredient for online shop success is a website, its design, SEO promotion, and customer interaction software. Nearshore software engineering services should be managed by professionals with the necessary expertise, experience, and hardware.
Customers have a variety of ways to engage with a brand. Among these are email, phone, online chat, and numerous social media platforms. Outsourcing those services helps businesses and retailers stay in touch, responding promptly to customer issues. Order handling may also be outsourced to freelancers. They provide prompt feedback on items sold, and campaigns, respond to requests, and gather information on customer feedback.
Disadvantages of nearshore software outsourcing
Switching research, development, and production to non-verified companies can lead to data security breaches. This is evident in GDPR violations, product ideas, and business marketing strategies stealing. Generally, an outsourced team holds access to website payments and personal customer information in databases. Delegating tasks to a partner in e-commerce outsourcing requires checking their credibility.
● Price range
Developer wages are among the highest, so finding a reliable “cheaper” option isn’t always possible. E-commerce and retail IT products are offered by companies in different countries, so you need to choose a specialist by several measures. Applying modern technology and trendy IT solutions makes the cost of work higher. It is possible to optimize the expense by hiring a team that already has strong e-commerce expertise.
● Degree of control
External companies work on their schedule, and can’t devote all their time to one customer every day. Other clients and projects also require attention, so it’s important to set dates for reporting on work done. Monitoring tasks can be done remotely with fixed days to communicate and make edits to the IT product for e-commerce.
● Working hours
Online shop owners can cooperate with third-party companies from Estonia, Canada, France, and other countries. The cost of services may be lower, but the partners are far away, not being able to meet in person. If the time difference is more than 5 hours, urgent messages about product updates or changes in the industry may be read later than necessary. In such a case, the importance of scheduling and scheduling online meetings between outsourcing parties increases. In e-commerce, hourly nuances can also have a positive effect, e.g. external staff for 24/7 support.
● Cultural differences
Developers from other countries may not understand buyers’ needs and motivations due to mentalities. This will not affect the writing of code, but it will cause disagreement during the goal-setting of the final project. Also, communicating in foreign languages may be a problem if the translation is not correct. Important information about products or customers will be perceived differently and this will be reflected in IT solutions.
Nearshore outsourcing examples
IT specialist services are essential for online shop owners, retailers, and trading platform administrators. Collaborating with external teams to create a commercial website may be a better and quicker solution than training employees. Digital technology is being introduced into e-commerce, requiring the creation of IT products to automate and promote the marketplace commerce brand.
Examples of services that entrepreneurs can outsource to IT outsourcing:
● Development of e-commerce platforms: design creation, source code writing, product launch. Attractive visual design and user-friendly navigation are more likely to attract users.
● Customer support: PBX and telephony services. The brand will get call-backs thanks to system integration with the software.
● Website promotion: search engine optimization (SEO) and search engine marketing (SEM) services. Nearshore outsourcing service company will be able to appear more frequently in search engine rankings and increase the number of visitors to the site.
● Creation of mobile and web applications: PIM software, B2B portals, advertisement platforms. The company automates its work with new enterprise solutions.
● Maintenance and creation of virtual assistants: chatbots for 24/7 support, online consultants. The brand will be able to outsource product downloads and page optimization.
● Implementation and development of loyalty programs: a system of personal accounts, working with segments, connecting clients. The company will be able to expand its user base and notify them about promotions and discounts.
Creating e-commerce software is usually a one-time job, so it’s easier to hire a freelance team to work on such tasks. An outsourced contractor brings the technical expertise, skills, and hardware to implement a specified IT solution quickly. Looking at the advantages and disadvantages of outsourcing IT can help you understand your brand’s priorities while outsourcing to freelance teams.
When choosing between different types of outsourcing, a company should not rely on luck or the advice of a friend, or the head of another company. Because every case is unique and requires an individual approach. It is crucial to consider all the subtleties of the project, the company’s structure, budget, legal aspects, as well as the pros and cons of nearshoring. And only based on all this data should one make a final decision.