What Is Nearshoring? Everything You Need to Know
Nearshoring has emerged as a powerful tool for companies to do more with less. When internal resources are not sufficient, nearshoring becomes an attractive way to obtain immediate labor to meet a business objective such as software development. In this guide, we'll explain exactly what nearshoring is, its advantages, how it differs from other approaches, and when it's a good idea for you.
What is nearshoring?
Nearshoring means outsourcing certain tasks to nearby countries where the rates are lower, but the quality of work is just as high. Partnering with workers from a geographically close country is more attractive to companies, as it allows everyone involved to work in the same or a similar time zone.
In addition, communication and travel are much easier this way. Nearshoring combines cost savings with convenience to make companies more efficient without going into debt.
What is nearshoring in Mexico?
Mexico's proximity to the United States makes it the perfect partner for nearshoring. It shares borders and time zones, which facilitates communication and travel. In addition, English is widely spoken among Mexican professionals.
Production costs are lower in Mexico, but skilled workers are plentiful. That's why big companies like Amazon and Tesla are investing so heavily in moving some operations to Mexico.
Benefits of nearshoring
These are some of the advantages that companies obtain when contracting nearshoring services.
Cost efficiency
The rates for U.S. professionals are increasingly high, which makes it difficult to implement a project. Especially if a team of people with different qualifications has to be assembled. Near-shoring reduces operating costs, as nearby locations charge less. And with lower rates, you can build larger teams to tackle your project faster. Plus, with nearshore teams, you don't have to pay employee benefits.
With this profitability, you can use a nearshoring service in the short term and then hire an internal employee to maintain the project. So, in the long term, it is also economically beneficial.
Compared to offshoring, it also reduces travel costs, as you work with a professional from a neighboring country.
Best collaboration
International teams often have difficulties in some respects when they are too international. For example, U.S. and European schedules are very different. Teams would work at different times and collaboration would suffer. And when it comes to IT projects, you can't afford to wait 8 hours for your collaborator to wake up, for example. Downtime is very costly for most companies.
Shared time zones enable real-time communication. Working hours overlap more, increasing productivity.
Cultural similarities also enhance mutual understanding. Neighbors often share business practices, which simplifies collaboration protocols.
Agility
Nearshoring offers flexibility in operations, as nearshoring companies can respond quickly to changes. Proximity allows for quick adjustments to market demands.
It is also easier to scale up or down. Companies can adjust the size of their nearshore teams as needed to maximize the use of their budget.
What is an example of nearshoring?
This is what a typical nearshoring service looks like. A US company needs to develop a software solution that requires advanced technologies such as AI. However, they don't have the time or resources to create an in-house team. Choose a company that performs nearshoring in Mexico.
Nearshoring providers go through a brief discovery phase to understand the client's needs. Then, the client must choose whether to outsource the entire project or hire individual talent.
For the first option, the nearshoring software development company manages its operations to deliver the project, taking into account the client's feedback. In the second case, the company matches the client with the ideal talent, who is then managed directly by the company. In this case, the client fully oversees the tasks performed.
Differences with other outsourcing solutions
Nearshoring is not the only way to hire personnel outside your country. Here are some other methods and how they compare to nearshoring.
Nearshoring vs. Offshoring
Offshoring means sending tasks to distant countries. It seeks lower prices globally at the cost of greater distance, which complicates logistics and collaboration.
For U.S. companies, offshoring often involves Asian or European workers. The problem is that, with different time zones, it is more difficult to work in real time.
Nearshoring vs. Onshoring
Onshoring is basically hiring workers within your own country. It prioritizes local employment and control. Costs are higher, but management is direct.
In terms of talent, there are no major differences. Local talent may be more in tune with local circumstances, which in some projects may be important. But in general, when it comes to IT projects, Mexico and other LATAM countries have equally qualified developers and engineers.
Nearshoring vs. Reshoring
Reshoring is when companies move their production back home from abroad. This occurs when a company uses nearshoring or offshoring services and then decides to move those same operations back home. They do this to control quality and be close to customers. It reduces transportation costs.
