Nearshoring is one of the types of outsourcing in the IT industry, together with onshoring and offshoring. Nearshoring means delegating software development or IT services to a neighboring or closely located country. What are the best countries for nearshoring? Well, it depends on the location of a business. Here are 6 excellent destinations for Nearshoring Your IT Business
Top 6 Nearshoring Countries
When it comes to Europe, nearshoring Ukraine is very beneficial. Ukrainian IT specialists are known for the quality of their work, they are highly educated, and the rates are much lower than in other EU countries. There is a huge talent pool of 200,000 developers to choose from.
And IT professionals have a good knowledge of English, which makes communication smooth and easy. The IT infrastructure is extensive and hosts more than 100 R&D centers. Nearshoring in Europe is also perfect when it comes to business ethics and values, as Ukraine is a European country, which has a similar mentality.
Brazil quickly became one of the top nearshoring opportunities on the other continent. The Brazilian IT market has grown 9.8% in 2018, which is a significant rate. The country now holds 39% of the whole Latin American IT industry.
There are about 470,000 developers and the rates are significantly lower than in the US or Canada. The time difference is also small and the IT infrastructure is highly developed with tech parks and research centers.
This is another important nearshoring hub of the region that some call “Silicon Valley of Latin America”. Mexico offers a bit lower rates than Brazil and it is the closest country to the US, which makes it very attractive to US businesses as well as NAFTA membership. There are about 200,000 developers out there.
The country invests in STEM education (around 120 universities). The industry and infrastructure experience growth and IT services sale revenue has reached $9.25 billion in 2018 here.
When it comes to Asia, Indonesia has become a major player in IT nearshoring. It is the 10th largest economy in the world and it has a large workforce to offer. The median age of the population is 28 and it is the fourth most populous nation in the world.
The rates here are lower than in other outsourcing destinations of the region (Malaysia, Vietnam, and Thailand). The government also supports the IT industry and invest in education and infrastructure development.
Vietnam has immense nearshoring potential. After all, they are competing with China when it comes to manufacturing and competitive prices. The rates here are lower and the workforce is skilled and has experience.
The government signed the Free Trade Agreement with Europe. There are more than 80,000 IT graduates and 9,000 new ones enter the workforce each year. The country has attracted investment from industry giants like Samsung, LG, and Microsoft.
Poland is another European destination when it comes to IT nearshoring. The industry here grows about 5% a year and local developers are skilled and educated. There are about 250,000 developers in Poland.
The country is located in central Europe and professionals have a good command of English. The rates are higher than in Ukraine but still lower than in many other EU countries. The local ICT market is expected to reach $13 billion in revenue by 2022.
Benefits of Nearshoring for Businesses
In 2019, the global outsourcing market reached $92.5 in cost. And nearshoring gains more traction each year. It has to do with many advantages a nearshoring business model has to offer to international companies, such as:
- Reduction of costs due to lower rates;
- Fast development and release of products with more workforce;
- Direct and easy communication and management due to proximity;
- Less cultural or language barriers in comparison to other forms of outsourcing;
- Speed-up digital transformation of the company, ability to compete with industry leaders;
- Availability of talent that cannot be accessed locally;
- Ideal price to quality ratio;
- Scalability and flexibility of the projects.
Delegating IT development or services to providers in a neighboring country allows getting all the perks of the industry while focusing on the core competencies of the company.
How COVID-19 Impacted Nearshoring
The nearshoring industry is one of the few that was boosted by the COVID-19 pandemic. It made the adoption of remote work faster. Statistically, 50% of US employees were able to work remotely in March 2020.
This turned out to be an effective alternative to traditional means. In such a case, why not hire professionals from neighboring countries remotely? Especially since employees would like to work remotely as well.
Also, the pandemic showed the necessity of digital transformation for almost all businesses in the world. And to access that they need skilled IT service providers. So there is a high demand for ICT professionals. Many countries experience a lack of skilled workforce. It is often much easier to find high-level specialists abroad.
IT nearshoring is an extremely beneficial business model in the modern world. It allows saving costs while endorsing digital transformation and fast development. It helps to reduce product release time and stay on top of the industry.