Globalization in Tech Development: The Shift From Offshoring to Nearshoring

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Technological diffusion—the growth of technology across borders—is a key driver of technological globalization, which is directly linked with economic growth and higher standards of living. This also impacts the way businesses operate, as it paves the way for outsourcing key business functions.

As corporations realized the role of technology in faster business transformations, they started rethinking their business processes with regard to sourcing and revenue models. Enter offshore software development as a cost-saving solution. With access to cheap but expert labor, it greatly impacted most businesses’ bottom line.

**Shortcomings of offshore development****

Although companies greatly benefit from offshore development, with tax benefits and access to a wider knowledge base, its long-term drawbacks were gradually realized. Language barriers and time zone differences brought with them great inefficiencies in project management. The financial freedom and increased flexibility associated with offshore software development offers rewards, but it has its pitfalls.

**Lack of control on projects****

Offshore software development is laden with management problems. The difference in time zones—previously considered a non-issue—now haunts offshoring clients. This takes a toll on project quality troubleshooting. Lag times of up to 12 hours can cause a major dent in the company’s revenue, as issues are not promptly resolved, especially in a live production environment.

When offshore developers are unable to comprehensively understand project requirements due to language barriers, it leads to unmet expectations and a stalled workflow. These communication gaps tend to cause a significant delay in project deadlines, incurring costs that businesses want to avoid. No matter how efficient the project manager may be, less control over operations can easily lead to failed projects.

**Potential risks and unreliability****

Although Asia is a Mecca for low-cost services and offshore software development, the risks associated with it are undeniable. Political instability and an unreliable infrastructure are a few reasons why offshore software development poses great risks. Risks to intellectual property and disclosure of confidential elements are one of them.

Intellectual property is also often recycled for competitor projects. The underdeveloped and less impactful regulatory systems prevailing in these nations may throw your projects under the bus, with a high likelihood of theft and fraud. The time difference also adds to the possibility of network and security failures while the team is fast asleep.

**Unmet quality standards****

Delayed support and habitual delays in delivery lead to project failures. Even if quality guidelines are provided to the offshore team, the differences in work ethics and culture affect the quality of the product. Not understanding a business’s requirements results in a subpar product, and ultimately impacts the reputation and revenue of the parent company, not to mention, a loss of clients.

In light of the illusory benefits associated with offshoring, executives have started reconsidering offshore development as their go-to revenue model. This led to a noticeable shift in the dynamics of outsourcing altogether, as companies started nearshoring IT projects to not sacrifice the quality and speed of their projects.

**Transpiration of nearshore software development****

New horizons opened up for companies in the US as they overcame the problems of offshoring development, maintaining product quality in addition to a low-cost workforce. What’s more, it allows them to support technical industries in North America, specifically ones on the South of the US-Mexico border.

**Easier collaboration****

Outsourcing in nearshore countries like Costa Rica and Mexico meant that the parent company was closer to the software project team, leading to ease of collaboration and, as a result, higher profits. Internal queries were resolved faster, with better control over the team.

This also meant that the developers were in close proximity to the client base, increasing overall reliability, while also allowing in-person meetings between the company and the outsourced developers.

Also “nearsourcing” tends to be more fluid, as the cultures bleed into each other. They have a shared business sense and tend to work more smoothly together compared to an outsourced team.

**Similar time zones—increased productivity****

As Latin America has emerged as a tech hub, the time difference is no longer a problem. This means increased productivity, as employees are not required to work night shifts.

**Optimum time-to-market opportunities****

Nearshore developers generally deliver products in a more timely manner, allowing the company to work on its marketing and sales business strategies. Since there are no unplanned schedules that the company has to make up for, this impacts overall revenue and profitability.

**Quality assurance****

When support and tech teams are easy to reach, customers find it easier to rely on the company to address their technical queries and provide support in a timely manner. Specifically for projects developed under agile methodologies, continuous feedback and the stakeholder engagement need to be dealt with.

For outsourced developers, differences in time zones make this very hard. With nearshore agile software development, the user experience and functionality of the product is easily guaranteed, while reviews and changes from users are incorporated without delays.

**A modern infrastructure****

The regulatory laws and modern infrastructure of Latin American countries protect companies from the risk of theft of intellectual property. Employing neighbors as developers means that they are more aware of law structures and social and business standpoints, along with political changes that could impact the business. This gives the company better control over their outsourced team and leads to an easier transition.

**Bilingual workers****

With their proficiency in the English language, a nearshore team is easier to communicate with from the customer’s perspective as well as the company’s. Easier understanding of business requirements leads to improved efficiency, customer satisfaction, and less wasted efforts. The team finds it easier to align themselves with the business needs and sees the bigger picture.

**Latin America: The new Asia?****

Latin American countries have proved to be massive tech hubs, with Mexico increasingly becoming a favored destination for nearshore software development. American businesses are greatly benefitting from the quality and cost advantages of the Mexican labor force, in addition to the aforementioned geographical advantages.

Similarly, Costa Rica is at the heart of cutting-edge technology, with a high level of IT training in the workforce. As nearshoring promises lower operational costs combined with the productivity of on-site staff, it is no surprise that businesses are now setting up shop south of the border for software development solutions.

As an IT outsourcing company based out of Costa Rica, weKnow Inc. provides staff augmentation services in addition to specialization in Drupal and Gatsby development. Contact us to avail our nearshore development services in Mexico, Costa Rica and the greater Latin America.