What is nearshoring?

What offshore, onshore and nearshore software development means is no surprise to anyone in the IT industry. But the meaning differs based on where your company resides. What is nearshore for some is offshore for others. And, onshore doesn’t mean the same in the US as it does in Europe.

It’s not complicated: it’s geographic.

But the underlying factor in all of this is the same: companies need outsourced development services. The front runner for both sides of the Atlantic appears to be the loosely defined nearshore software engineering development. Here we also discuss cultural nearshore development outsourcing.

The rise of nearshore software development.

Have you ever been caught in a traffic jam or stuck at tolls? Picture seven lanes of cars, pickups, semis merging—slowly—into one lane. You can picture it, can’t you? Yes, you can. You have been there and felt the frustration as you sat in your car and saw life passing you by—and not just that Ford Durango who butted in ahead of you.

How does this relate to nearshore software development?

This is exactly what is happening in the IT software development industry in the USA today. The demand for software developers is high—a seven-lane highway of demand filled with people speeding along with great ideas ready to meet reality, then bam! Traffic jam.

The reason? Simple. The employment rate of US software developers stands at 1.9%; national average is over twice that. When you need an experienced development team, your current chances of finding a team in the U.S. (i.e., onshore) are slim to none. Why? High demand, low supply. This means all outsourcing teams nearby [onshore] are most often too busy – or too expensive. Onshore is off the table.

Your dreams could come to a standstill were it not for your other options: nearshore and offshore outsourcing.

What is nearshore outsourcing?

Nearshore outsourcing includes software development companies in neighboring countries. In theory this helps client companies maintain better control over projects in terms of same or similar language, culture, time zones, and, hopefully, a lower per-hour charge.

For US companies, nearshore outsourcing provides only two choices: Canada and Mexico. Companies in Europe are surrounded by onshore and nearshore software developing resources.

What considered offshore outsourcing?

Offshore outsourcing includes software development companies in countries where there is a significant difference in time zones, language, cost and culture.

Offshore can be almost anywhere based on location of company requiring software developers, e.g., China, India, New Zealand, Pakistan, Ukraine, etc.

And, since the US is over twice the size of Europe and its length almost five-sixths of the distance from NYC to Paris [2,900 miles vs. 3,650 miles], almost every software development outsourcing company is going to be offshore.

Unless we consider crucial cultural markers to make many companies “culturally” nearshore software development companies.

Priorities for outsourcing must include cultural differences.

Cost and competence usually top the list of priorities.

Cultural considerations should also be near the top of that list. Why? Time-zone issues aside, when focusing solely on culture, nearshore outsourcing—at least a revamped definition of nearshoring—seems to be the best solution. Why? Because there are six crucial cultural markers that help or hinder companies to work well together.

Does it matter whether you are culturally aware? Yes, it matters. A project might succeed brilliantly or fail miserably just from cultural ignorance or arrogance. When choosing a nearshoring partner, you must understand cultural similarities—and differences.

First, like an iceberg, 80% of culture is hidden below the surface.

Second, most people do not understand or even think about the impact their culture has on them. Because of this lack of awareness, they tend to have misunderstandings when working with people from other cultures. They believe everyone views the world as they do. Not so.

Third, little or no knowledge of your culture and the culture of the people with whom you are working on high-stress, demanding projects could lead to frustration or complete disaster.

Regarding cultural matters, ignorance is not bliss.

What are the six cultural markers?

What are the six crucial cultural markers? How to outsource software development? And where on the cultural map does the US vs. nearshore outsourcing companies sit? You might well be surprised.

1. Individualism vs. Collectivism
2. Competitiveness vs. Cooperation
3. Short term vs. Long term
4. Low Power Distance vs. High Power Distance
5. Low Uncertainty Avoidance vs. High Uncertainty Avoidance
6. Low Context vs. High Context

In this post, we define and compare the first two cultural markers: Individualism vs. Collectivism and Competitiveness vs. Cooperation. The other four will be discussed in later posts. All culture markers matter, but Individualism vs Collectivism matters most.

We then compare countries* finding marked differences in the value of I vs. We.**

* AU[Australia], B [Brazil], C[China], CA[Canada], CSA[Central & South America], D[Denmark], F[France], G[Germany], H[Hungary], I[India], IT[Italy], J[Japan], M[Mexico], N[Norway], NL[Netherlands], NZ[New Zealand], P[Portugal], S[Spain], S[Sweden], SK[South Korea], T[Taiwan], UK[United Kingdom], US[United States].
** G. & G .J. Hofstede, Cultures and Organization: Software of the Mind.

Countries in which individualism ranks highest, from 90% to 65%: US, Australia, United Kingdom, Canada, Netherlands, New Zealand, Italy, Norway, Denmark, Sweden, France, Germany.

Countries in which individualism rank lowest from 5% to 45%: Central & South Americas, China, South Korea, Portugal, Mexico, Brazil, Hungary, Japan, India.

Spain is right in the middle.

How do countries rank living by the clock / punctuality as the soul of business?

The study gives high percentages to cultures with long-term preferences.**

Short Term a.k.a “Ruled by time” from most to least important: Canada, Spain, United Kingdom, Portugal, United States, Australia, New Zealand Sweden, Germany, Italy, Netherlands, France, Norway, Denmark, India, Brazil, South Korea, Japan, Taiwan, China.

Culturally speaking, similar countries are grouped together; hence, easier to work with.

Do cultural differences adversely affect working together?

Yes, cultural differences can impact working relationships. US companies working with teams at disparate ends valuing individualism and importance of time could conceivably continually run into cultural clashes. Most of the countries at the other end of the individualism and time spectrum are countries that charge the lowest per-hour rate. The low-rate dream could become a nightmare because of cultural incompetence on both sides of the ocean.

Enter the solution: cultural nearshore software development.

You can also find more:Why outsource software development in the new article.

The solution

The most viable, safe and secure approach is to search for and choose a nearshoring partner with similar cultural values as yours. The downside is that most of these culturally nearshore countries have high rates for software development.

Ukraine is a welcome exception.

Where is Ukraine on the Individualism vs. Collectivism spectrum? It’s interesting. Remember: 80% of an iceberg is not visible. So, too, culture. Historically, outsourcing software development Ukraine leaned towards individualism, in keeping with its near neighbors to the West. After a hiatus of fifty years exemplifying “surface collectivism”, it is returning to its independent, individualistic nature.

This is especially true of the younger generation—including the software engineers with whom you work: they are the first adopters to every new technology that enhances software development, propelling it—and your app—into the future.