Nearshore software development: all You need to know

11 min read
October 11, 2022

Want to try outsourcing your development, but you haven’t taken the plunge yet?

That’s understandable. Outsourcing isn’t for everyone.

Despite its numerous benefits, like reduced costs and faster turnaround time, outsourcing also has its pitfalls.

Things like time zone differences, language barriers, and a bad cultural fit can discourage some clients from giving it a go.

But what if there’s a way to minimize all these problems and still get the benefits?

That’s where nearshoring comes in.

In this article, we’ll discuss nearshoring, why it could be better than other outsourcing methods, and when it’s appropriate to adopt it.

What is nearshore development?

Nearshoring is an outsourcing approach where you hire a development team from a nearby country.

Usually, the location should have a time zone difference of three hours or less to be considered a nearshore destination.

For instance, when a Swiss company hires our DECODE team in Croatia, that’s a great example of this approach.

Nearshoring is a good compromise between offshoring (outsourcing from a distant country) and onshoring (hiring within your country).

Onshoring vs nearshoring vs offshoring

Source: DECODE

The reason is that nearshoring gives you the benefits of onshoring and offshoring while minimizing the drawbacks of each.

Nearshoring gives you access to a wider talent pool. This is a great solution if your home country lacks the needed expertise.

For example, if you want to hire a finance expert for your app but can’t find one, nearshoring gives you a better chance of finding the person you need, but without the common outsourcing obstacles like large time differences or cultural disparities.

software development outsourcing

This is a boon for companies who need to find talent remotely yet want to retain real-time meetings and collaborations.

In-person meet-ups are also possible as travel costs aren’t as high as they are with offshoring.

offshore dev challenges

Source: Cleveroad

Like other types of outsourcing, nearshoring is a great way to extend your in-house development team without taking on more employees yourself.

For instance, this is great for handling temporary surges in workload or if you need to develop a new app and your in-house developers are busy with another project.

Let’s take a look at some of the benefits of nearshore development.

Why choose nearshore development?

Why should you choose to nearshore when other outsourcing options like offshoring and onshoring are available? Here are some good reasons.

Affordable cost of development

As with outsourcing in general, the main benefit of onshoring is cost efficiency.

Compared to an in-house team, a nearshore team is less expensive.

That’s because hiring permanent employees carries a lot of hidden costs, such as taxes, benefits, and training. You end up paying up to 1.4 times more when you hire in-house:

compensation costs vs true employment costs

Source: Upwork

In addition, nearshoring opens you up to a wider talent pool. Thus, you have a better chance of finding a low-cost yet quality developer.

For instance, if you run a company in a Western European country, consider that the average hourly rate of developers from North America and Western Europe is around $55-$66.

Contrast this with the median hourly rate of $35 among developers from popular nearshore destinations like Bulgaria or Poland.

For a company from the US, the contrast is even more pronounced.

A developer’s hourly rate there can even go as high as $150 if you hire in top cities like San Francisco or New York, whereas in neighboring Mexico, half of that amount for the same kind of work is considered to be on the high end.

In most cases, you can slash your development costs by up to 50% with nearshoring.

Source: Eastern Peak

Of course, nearshoring isn’t as flexible with cost compared to offshoring, given the wider choices. However, given the right locations, you can still get a sizable reduction.

For example, compare the hourly rates of two popular outsourcing destinations—Eastern Europe (averaging $20-$50) and India (around $8-$20).

Even if Eastern European developers charged double than their Indian counterparts, it’s still low compared to North America or Western Europe.

Moreover, you’ll get additional benefits from onshore Eastern European developers like DECODE.

Most Eastern European countries are part of the EU, which means they have excellent data privacy regulations for your protection.

Plus, Eastern Europe boasts some of the best development talent in the world and high English proficiency to boot.

Wider talent pool

As mentioned earlier, nearshoring allows you to tap into a wider talent pool than you would have access to if you were searching locally.

This is a great solution if you can’t find the expertise you need in your home country.

For instance, say you’re developing an advanced fintech app and need the foremost financial expert to contribute their knowledge.

If you’re living in a country with a less-developed financial scene, chances of finding them are slim. But if you nearshore, you have a better chance of getting who you need.

It’s also much easier to form a development team with the right skill set when nearshoring than when hiring in-house.

A dedicated software team is an outsourced group that functions just like an in house development team except that they are a third party service provider screenshot

Source: Altamira

This is a powerful option that allows you to take on any app niche, even if you don’t have any experience with it.

For example, let’s return to our earlier example and say you want to develop a fintech app. But because you haven’t done it yet, you lack the in-house talent to tackle it.

So you decide on a nearshoring approach and partner with an agency like DECODE.

We’ll tap into a pool of 70+ professionals with varying skills and form a team that’s 100% qualified to work on your project.

Top skills in the fintech industry

Source: Columbia Engineering

The best part of partnering with an onshore agency is that you don’t have to scout, screen, and hire talent yourself—which can get tedious.

All of the hard work is handled by the agency. Thus, you can expect less admin work and more development time for your project.

Close geographical proximity

The greatest appeal of nearshoring is that you don’t need to deal with time zone differences.

For example, if you’re a company based in the UK, a developer in Croatia would be a great fit. Croatia is only ahead by 1 hour, which means a working day in both countries aligns perfectly.

In fact, Eastern Europe is in a great time zone because it’s close to top-tier clients in Europe, as well as some parts of Asia, and Africa.

Europe Time Zone Map

Source: Time Temperature

The benefit is that you can have a remote, outsourced team and still have real-time meetings and collaboration.

You can even visit the team since they’re probably just a short train or plane ride away.

You can also expect real-time communication during development, which is useful for time-sensitive tasks like urgent bug fixes or rushed deadlines.

Of course, a minor drawback is that you can’t have a 24/7 development cycle as you can with offshoring, where you can give a task to your outsourced team by the day’s end, and they will work on it while you sleep.

Unlike nearshoring, with offshoring, you can expect it to potentially be completed the next day.

But nearshoring offsets this weakness with tighter and faster communication.

Fewer barriers to collaboration

The great thing with nearshoring is that you have the flexibility to pick developers with the right culture, language, and infrastructure to fit yours. This can help facilitate smooth collaboration.

This is why countries in Eastern Europe are popular nearshore destinations.

Consider one of the points that we’ve previously mentioned—that most developers in the region have very high levels of English mastery, as measured by the EF English Proficiency Index.

In fact, one country, Croatia, ranks tenth among all European nations.

worldwide English proficiency levels by nation

Source: Bluesyemre

Getting developers who are proficient in English enables you to communicate with them better, including nuances and lingo.

Culture also plays an important role in collaboration since it shapes expectations and influences the way people conduct business.

Fortunately, countries in the same geographical region tend to have similar cultures, like how France, Italy, and Spain share numerous similarities with each other.

On a more technical side, nearshoring also helps you pick countries that have laws and regulations beneficial to you.

For instance, DECODE is located in Croatia, which is part of the EU. That means we need to follow strict regulations like the General Data Protection Regulation (GDPR).

This ensures that your app project is developed with utmost security, privacy, and regulatory compliance.


Source: RSI

Overall, smoother collaboration is where nearshoring truly shines.

How to choose a nearshore development team?

Now that you’ve gone through the benefits of nearshore outsourcing, you’re probably convinced it’s right for you. But how do you go about it? Here are some steps you should take.

Research their business

Choosing the right nearshore outsourcing provider starts with research.

Make a shortlist of the top countries you’d like to look into, then check the software development agencies in that region.

Once you have a list of companies, you must evaluate each carefully. As a guide, here are the specific criteria you should consider:

specific criteria

Source: DECODE

A good place to start would be the reviews of their previous clients. They can tell you much about their work ethic and professionalism or if they can deliver quality work.

A substantial number of positive reviews is a good indicator that you’ll also have a great working experience with them.

Most companies will have reviews posted on their websites, social media page, or Linkedin profile. But a better option would be to check third-party sites like Clutch.

That’s because the reviews you’ll read there will most likely be unbiased and unedited, giving you the most accurate feedback.

DECODE screenshot

Source: Clutch

You shouldn’t forget about pricing. You’ll usually learn about the exact cost of your app project once you schedule a consultation with the agency.

But you can also look at the Clutch page for a ballpark figure.

Also, make sure they use the pricing model that you prefer. The best agencies should support either fixed pricing or time and material pricing.

time and material vs fixed price

Source: DECODE

These initial criteria should enable you to reduce your list to around three or four candidates. Once you’ve done that, it’s time to look closely at their technical capabilities.

Evaluate their specific capabilities

Partnering with the most well-loved and professional agency is useless if they don’t have the expertise to complete your project.

That’s why you need to check their skills and experience and see if it matches your requirements.

A good place to start is with their portfolio. If they’ve already done an app project similar to yours, that’s a great sign.

Case studies are incredibly useful since they can tell you a lot about the technical expertise and methodologies of the agency.

It gives you a taste of how they’ll tackle your project once you work with them.


Source: DECODE

Depending on how involved you’d like to be during development, the agency’s methodology is also a good point to consider.

For instance, at DECODE, we adopt the Agile Methodology, which splits up the development process into sprints.

This allows rapid building and testing, enabling clients to review the app throughout the process.

Agile methodology

Source: DECODE

Don’t forget to check the technologies they use, especially with communication. For instance, if you prefer to communicate in Slack, verify if the agency is willing to use that.

Knowledge of certain protocols is also vital for certain niches, such as PSD2 for fintech apps.

Analyze their company culture

A development team’s internal culture is important, yet many clients fail to consider it.

Everything else will magically improve when your company’s culture meshes with that of your outsourced team.

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Your communication will be better, the collaboration will be smoother, and the work quality will be enhanced.

Not to mention, everyone will feel fulfilled and enjoy their work.

On the flip side, a poor company culture can indicate problems. For instance, if an agency has trouble retaining its developers, then it could cause hiccups when they work on your project.

Not sure what kind of culture your development team has? Here are four types you can use as a guide.

What Is The Meaning Of Company Culture different types of company culture min 1

Source: Project Cubicle

So, how do you find out what a company’s culture is like?

Social media is a great way to do this. For instance, you can hop to their Linkedin page and see what employees say about them.

Another great option is Glassdoor, a platform where employees can leave reviews about their company.

Glasdoor screenshot

Source: Glassdoor

Alternatively, you can contact their employees directly, if possible.

Talking to them one-on-one will allow you to ask follow-up questions and get accurate insights regarding an agency’s culture.

Nearshoring could be right for you

As you can see, nearshoring can be a great alternative to other outsourcing methods.

It’s not as difficult to manage compared to offshoring, yet you can still get the cost-efficiency benefits. And you get the ease of collaboration of onshoring, minus the limited talent pool.

If you’ve been hesitant with outsourcing until now, give nearshoring a try.

Written by

Marko Strizic

Co-founder and CEO

Marko started DECODE with co-founders Peter and Mario, and a decade later, leads the company as CEO. His role is now almost entirely centred around business strategy, though his extensive background in software engineering makes sure he sees the future of the company from every angle. A graduate of the University of Zagreb’s Faculty of Electrical Engineering and Computing, he’s fascinated by the architecture of mobile apps and reactive programming, and a strong believer in life-long learning. Always ready for action. Or an impromptu skiing trip.

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