Nearshore Software Development: What It Is and Why Use It

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Fred Monnier
By
Fred Monnier
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Chief Staffing Operations Officer
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Table of Contents

Nearshore software development is becoming popular with the normalization of remote work. Learn the advantages and best destinations for nearshoring.
Published on
March 30, 2022
Updated on
June 11, 2024

In the last couple of years, the talent search ware developers and engineers has become global. Businesses of all sizes chose onshore, offshore, or nearshore outsourcing their workforce to bridge the talent gap. Offshoring software development has been flourishing for the previous decade, forming into a global billion-dollar market with a value of approximately $413.7 billion in 2021.

However, many small businesses find offshoring talent challenging due to financial regulations. Nearshoring software development stands as a middle ground, helping software companies build a global workforce without the common offshoring challenges.

What Is Nearshore Software Development?

Nearshore software development is an offshoring operation where you look for software developers and engineers in countries that are geographically close to your home country. This offshore model looks at a limited geographical area where services are mainly obtained from countries closer to the homeland and within a one to three-hour time difference.

What Is the Nearshore Model?

The nearshore software outsourcing model combines the cost effectiveness of offshoring and the proximity of onshoring in order to provide companies with an optimal choice between the two outsourcing approaches. For example, a U.S.-based company may outsource software development to Mexico as a nearshoring approach. Because of its geographical proximity to the U.S., site visits are more practical, and minimal time zone differences foster collaboration.

Benefits of Nearshoring Software Development 

A nearshore software development model has plenty of benefits for businesses that want to hire remote developers and build a global workforce. Compared to offshoring or onshoring, companies may discover key advantages when using the nearshoring model.

Similar Time Zone Alignment

One of the issues with offshoring software development is the time zone inconvenience. Distant countries have a noticeable time difference. When teams work in different timeframes, they may struggle to communicate and work simultaneously on projects, which affects the entire bottom line through lower efficiency.

Since countries are nearby in nearshoring, businesses don't have to worry about the issues with time zone differences. Because the working hours of all teams are similar, coordination and communication come effortlessly.

Closer Proximity to Headquarters

Another benefit of hiring talent from nearby countries is the traveling convenience. If the country of nearshoring software development is close to your business location, you and your employees can quickly travel back and forth at need. Whenever the work demands, your employees can come to the headquarters at low costs, which means more money being funneled into product development.

Access to a Larger Talent Pool

Even if your country has the talent and resources for custom software development, finding, hiring, and managing a remote tech team takes a lot of effort. Nearshore software development companies usually have a team of experts ready to help, especially in accessing the local talent you may not be familiar with. The support is particularly convenient for companies that need to start their project fast and don't have the time to put together a team or travel distances to set things up.

Disadvantages of Nearshoring Software Development

Although the benefits of nearshoring software development prevail over the disadvantages, you may want to consider a few risks before you hire remote software engineers.

It Can Be Costly

Offshore software development can sometimes be more cost-effective if you pick a destination in Asia or Eastern Europe. You may get provided with a lot more services from around the globe than within a few countries nearby. Consequently, the more options you have in offshore outsourcing, the higher the chances you'll save on business costs.

Possibility of a Limited Talent Pool

The services you're looking for may not necessarily be standard in the countries close to you. As a result, you'll have a limited number of choices and, therefore, access to a smaller talent pool. If you hire remote developers purely out of necessity, you may face performance risks. Fortunately, a talent acquisition partner can help you avoid this by accessing a wider talent pool in every nearby country.

A Language Barrier Could Exist

If countries are close to the U.S., that doesn't always mean they have proficient English speakers. When nearshoring software developers, it's essential to avoid the language barrier by adequate recruitment testing. Otherwise, you may find your in-house team miscommunicating when working on projects. However, it's worth noting that the language barrier is always a risk when building a remote workforce and is not related to nearshoring per se.  

Companies That Nearshore Software Engineers

Many U.S. companies rely on nearshore developers, including the giants such as Google, Apple, and Facebook. Setting up data centers for such world-class companies is not an easy task, and nearshoring is the ideal solution. Having remote programmers in nearby countries proves cost-effective and supplies the resources and tech talent these companies need for providing quality services quickly.

Why Nearshoring Latin America Is Optimal

If you're thinking of looking for nearshore software development companies, then Latin America may be an excellent choice. A survey conducted by Stack Overflow showed that 60% of current Latin American developers specialize as backend developers, and the other 30% are educators or academic researchers, which suggests a large talent pool in this region. Latin America also has other things to offer to the U.S. companies looking to nearshore the software development process.

Same or Adjacent Time Zones

As previously mentioned, similar time zones of two collaborating countries keep the communication going and prevent work barriers. Companies that offshore their projects often have to deal with a 5-12 hour time difference, which causes them to alter work schedules. In comparison, Latin America has nearly identical time zones to the U.S., making it easier to align office timings and work schedules.

English Proficiency

If partners working together have a language barrier, things could get lost in translation or miscommunication, negatively impacting the project and overall business results. Companies especially face this problem in offshoring, where teams usually speak English as their second language.

The chances of companies encountering a language barrier in Latin America are relatively low. According to Statista, several Latin American cities scored high on the "high proficiency" range (550-599 points) in the English Proficiency Index 2020.

Similar Culture to the U.S.

Countries in the same region often share values, work ethics, organizational structure, and way of thinking in general. A shared culture of two collaborating companies allows teams to work efficiently on projects and better understand each other. Since Latin America and the U.S. have similar cultures, you'll experience all these benefits when nearshoring software development to this country.

Cost-Effective to Offshoring Software Development

Whether you outsource or nearshore software development, you get to save quite some costs on office space, supplies, and utilities. However, when you hire remote Latin American talent, you also have the benefit of working in similar time zones. Seamless communication and similar work hours can have a significant impact on the business's bottom line in the long term. As nearshoring software development contributes to work efficiency, you'll quickly see better business results and increased revenue without extra expenses.

Best Countries for Nearshoring Software Development

If you think nearshoring software development to Latin America is the best option for you, we have a couple of countries to recommend. The following countries have some of the top nearshore software development companies you can rely on:

Mexico

Mexico is the closest nearshore software development destination to the U.S., with over 225,000 developers in the country. The country has top tech talent and a reputable I.T. education system. According to employment data from Mexico, there are over 1.7 million employees in the technical services sector. HackerRank Challenges also placed Mexico as 33rd in Programmer Skill Rankings.

Nine of Mexico's universities have made it to the Best Global Universities list, according to U.S. News & World Report. The World Economic Forum also states these universities are among the ones with the most engineering graduates in Latin America. 

Not only does Mexico have top-rated companies like Ingenia Agency and Smart Thinking, but it also has new tech initiatives in private and governmental sectors, including INADEM (Instituto Nacional del Emprendedor) grants and Creative Digital City. Unfortunately, as for English language skills in Latin America, Mexico doesn't rank the best, according to the EF EPI score. So you need to consider the possibility of a language barrier if you're thinking of nearshoring here.

The good news is that because Mexico shares a border with the U.S., developers are familiar with the country's culture, including workplace culture. As for time zones, depending on where you are in Mexico, the time zone can be PST, CST, and EST, the same as in the U.S.

Costa Rica

The World Economic Forum reports the country ranks first in human capital, and the Coursera statistics show it ranks second in programming skills in Latin America. Global Rankings also puts Costa Rica 27th in programming skills.

Even more importantly, the country provides its students with quality education and has received the highest educational score in Latin America, according to the World Economic Forum, with 4,000 students graduating from the engineering program every year. Due to the quality education, developers in Costa Rica have a range of programming skills with the highest demand in PHP, ASP.NET, and Java, according to the Market Share research.

As for the tech scene, Costa Rica is flourishing. According to the World Economic Forum, Costa Rica ranked 37th for its production process sophistication and came 1st in LATAM for innovation. The country also has successful start-ups, including GreenCloud and Zero Army.

Another great news is that Costa Rica has the top English skills in all Latin America with top rankings in TOEFL. Moreover, it ranks second in Latin America according to the E.F. English Proficiency Index.

The country also shows cultural and work culture compatibility with the U.S. Without the time difference between CST and Costa Rica, handling the remote workforce from the U.S. becomes even more manageable.

Colombia

Columbia is another country in Latin America where you can nearshore teams. According to GitHub, Colombia has experienced a 31% year-over-year growth in its number of developers. Colombia also ranks 45th in programmer skills ratings in the HackerRank Challenges.

It's essential to note that Columbian universities see 13,000 graduates per year from tech programs. In addition, the country accounts for creating the highest number of engineering students, about 25%, in the whole of Latin America. Therefore, it comes as no surprise that Columbia has many successful software development companies, including a unicorn company called Rappi. Other well-known companies include UruIT, PSL Corp, and TEAM International.

Colombia has excellent schools for software development in terms of tech educational background, with favorite Colombian languages being Java, C++, Python, SQL, and Ruby. Colombian developers also blend well with U.S. companies and are ranked the best by the World Bank Group for the "ease of doing business."

Furthermore, Colombia ranks in the top 20 globally as the best software development offshoring destination, according to Diceus. However, Colombia has a lower English language ranking which may cause a language barrier with the U.S. software development teams, coming at 11th place in Latin America according to EF EPI. The good thing is that the government has introduced several language programs aiming to become bilingual by 2025. U.S. companies nearshoring software development in Columbia also have the benefit of working with their hires in the same time zone (eastern standard time or EST).

Brazil

According to GitHub, Brazil has over 4.3 million developers—the highest in Latin America. The country is overloaded with tremendous human resources, having around 100,000 graduates from 1,714 IT-related technical and graduate courses.

Coursera's Global Rankings reports that Brazil takes 30th place in Programmer Skills and 13th in the TopCoder ranking in the world. Furthermore, the country secures 38th place in HackerRank Challenges globally.

Brazil has a significant number of Java programmers, with common programming languages being JavaScript, SQL, Java, HTML, CSS, C#, and Python. It's even more impressive to know that 65% of Fortune 500 companies have offices in Brazil. These include Spotify, Airbnb, Google, Netflix, and Amazon. In addition, the country also has top-rated software outsourcing companies, including Vizir and Vinta Software.

Brazilian developers also have an excellent tech background, with six universities appearing in the top 500 universities in the world, according to the U.S. News & World Report. However, you may have a problem with developers' English speaking skills as they rank average in Latin America according to the country's EF EPI score. But Brazilians are ranked as very good in cultural compatibility with the United States.

As for time zones, time in Brazil is one hour ahead of EST, which is very convenient for U.S. companies.

Argentina

Argentina has around 134,000 software developers, which makes it an excellent place in Latin America to hire remote software developers. Even more importantly, if you want to nearshore application development specifically, this may be the perfect country for you.

According to the 2018 App Economy report, there are 40,150 jobs in Argentina app development. Approximately 35% of Argentinean talent works on app development, taking the lead in the global app economy. What also makes Argentina excellent for nearshoring talent are the schools. With seven Argentinian universities ranked in the top 50 in Latin America, you can rest assured your workforce will be highly educated. Furthermore, students are offered 200 IT degrees in several top-class universities.

According to the 2020 Coursera Global Skills Index (GSI) report, Argentina ranks #1 worldwide in technological skills. In a Stack Overflow survey, developers report Python as their favorite language and state receiving the most inquiries about Java and C programs.

We should also highlight that about 15% of the population in Argentina speaks English and has the highest English proficiency in all of Latin America. In addition, the county ranks 27th in the world according to the EF EPI Rankings. The lack of a language barrier and the cultural compatibility with the U.S. attracts many companies to Argentina. The other factor is the similar time zones (two-hour difference compared to EST).

Our Trusted Nearshore Development Company

If nearshore software development services from Latin America sounds like a good idea for your business, start recruiting today. The process of locating talent and bringing employees on board can be challenging, but with the right partner, you can avoid potential issues and build your new workforce in a breeze.

Revelo is a talent platform that will connect you with pre-vetted remote software engineers all around Latin America in just three steps. Once you schedule a call with us, you get a chance to tell us all your recruiting objectives. After three days, we'll find candidate samples for you. It's as simple as that.

You get to review the chosen candidates, narrow down the list, and conduct the interviews. Revelo will be there to help you every step of the way, from recruiting candidates to onboarding and managing your hires. As a result, you'll have much more time and means to focus on developing your brand with your new remote workforce.

Are you excited to hear more about how partnering up with us can aid you in expanding your business? Register with Revelo today.

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