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How to Optimize Your Development Team Through Outsourcing: Practical Guide to Nearshoring

Outsourcing has been around for decades. But since gaining popularity three decades ago, companies are increasingly relying on it to diversify their talent pools. Thanks to its benefits, more than half of companies have long embraced the trend. 

Though outsourcing cuts across different industries, IT leads in outsourcing, with more than a third of tasks going to external teams. In most tech companies, application development remains among the top frequently outsourced functions. According to Avasant, over 60% of companies outsource a part of the app development.

Increased efficiency and flexibility, cost-cutting, and access to niche expertise are some of the benefits that drive companies to outsource. This allows them to counter the challenge of limited in-house skills and execute their projects effectively. 

While drawbacks of outsourcing may not be absent entirely, the unmatched benefits of outsourcing clearly indicate the trend will be part of the business world into the unforeseeable future.  Actually, more than three-quarters of businesses feel positive about their outsourcing partners.

In this article, we focus on the benefits of optimizing your team through nearshoring, which is a type of talent outsourcing. We will also look at the extended vs. dedicated team models of outsourcing to give you ideas on constituting your development team. 

What Is Outsourcing?

In the context of software development, outsourcing involves enlisting the skills and expertise of third parties (external vendors) in the development process. The outsourced team collaborates with the in-house team on assigned projects. Examples of talent you can outsource include; software developer, quality assurance engineer, project manager, business analyst, UX/UI designer, etc.

Types of Outsourcing

Outsourcing services vary depending on the geographical area of the outsourced team. Generally, there are three types of outsourcing in terms of location – offshoring, onshoring, nearshoring.

Offshoring

With offshore outsourcing, the team resides in another country, usually overseas. The most outstanding benefit of offshoring is it's cost-effective since you can find experienced talent overseas at a fraction of onshore services. However, you may face challenges such as language barriers and time zone differences.

Onshoring

Onshoring involves hiring external talent residing in the same country as you do; probably, in another city or region within the same country. The advantage of onshoring is that there may be no time zone differences or significant cultural barriers. On the downside, onshoring is expensive compared to offshoring as the services of local development teams are pretty pricey.

Nearshoring

Nearshoring involves hiring talent outside your country but from a neighboring country. It's the best of the other two options, packing up a load of benefits.

Benefits of Nearshoring

Generally, nearshoring helps companies attain massive economies of scale while cutting costs and achieving efficiency. Below are a few benefits of nearshore outsourcing.

Cost Reduction

Ideally, outsourcing helps businesses cut back the expenses of hiring a fully skilled in-house team. Acquiring all the necessary talent for a specific project would require incurring recruitment costs, hiring office space, and purchasing equipment without forgetting employee training costs, salaries, and other benefits.

While nearshoring may not be as cheaper as offshoring, it's more cost-efficient than onshore outsourcing. Essentially, when nearshoring talent, you look for a neighboring country with lower labor costs than your own. At the end of the day, you spend far too little than you would by hiring a skilled in-house team.

Better Access and Control

In addition to reduced costs, nearshoring allows you to collaborate with the team much better than offshoring. You can visit the crew as often as you can fly since, in most cases, they will be only a couple of hours away. This provides for better access and control as you can monitor their progress and hold physical meetings easily.

Similar Regulations

Nearshore outsourcing makes it easier for the teams to collaborate on projects quickly and navigate any intellectual laws that apply. For instance, countries within the European Union may have shared regulations, which ensures faster and compliant execution of development projects.

Time Zone Compatibility

With offshore outsourcing, the staff often faces time zone difference challenges. For instance, when the teams collaborate on the same project, one group might be unavailable when the other needs them to complete certain tasks.

Luckily, a nearshore team will likely be in the same time zone or slightly different by an hour to three hours. This means the teams can work or hold virtual briefings at the same time, without costly delays. Project managers can also check on the different teams within the same workday as they are only a few flight hours away.

Access to Niche Expertise

Nearshore outsourcing provides access to a vast talent pool. Some nations are pretty advanced than others in terms of tech expertise. With nearshoring, you can source for niche experts from the neighboring countries and benefit from their specialized skills.

Cultural Compatibility

Your outsourced team should be an extension of your in-house team, such that the client perceives them as one unit. This might not be possible with an offshore team due to sharp cultural differences. Nearshore hiring solves this challenge as neighboring countries are likely to share or be familiar with each other's culture and language.

Team's that share similar or close cultures and languages also collaborate better than those with vast disparities. Consequently, better communication eliminates barriers that cause delays leading to increased efficiency.

Better Return on Investment (ROI)

All the benefits of nearshoring we have discussed above culminate in one thing – better ROI. By acquiring high skilled talent from neighboring regions at a fairer cost and coordinating the in-house and outsourced team as one unit, you get to enjoy economies of scale, which translates to a better return on investment.

Outsourcing Models

When nearshoring, you have the option of choosing between two team models – extended and dedicated models.

Extended Development Team Model

With this model, the team you hire becomes an extension of your in-house squad. In any given project, you assign the responsibilities across the two groups, so they work as a single unit. Usually, an extended team is engaged continuously, augmenting the in-house talent.

Essentially, an extended team is hired to fill skill gaps, perform non-core IT tasks, complete backlogged projects, or offer help whenever there are tight project deadlines.

Benefits of Extended Team Model

Complete Immersion – The extended team is wholly immersed in the projects as both teams are invested in the project equally.

Hiring Process Control – With an extended development team model, you can participate in the hiring process by screening the candidates before they're hired. The ability to pick only the candidates who possess the skills a project requires gives you control over the quality of talent coming on board.

Scalability – In-house hiring has its benefits, but outsourcing carries the day when it comes to scaling. This is because you can outsource required skills on a project basis without incurring staff training costs whenever project demands change or new trends hit the market.

Cost Reduction – If your team is lagging on projects, or you require to fill some skill gaps, hiring additional in-house staff might not be the most cost-efficient decision. In-house hiring is costly, with recruitment costs, staff training costs, salaries, and other benefits coming into play. The easiest way of meeting talent demand under such circumstances is outsourcing an extended team. By so doing, you stand to benefit from their skills and input without incurring many costs.

Access to a Broader Talent Pool – If the local market does not have the skills needed in a particular project, outsourcing an extended team allows you the privilege of exploring an international market pool and at lower costs. Even with nearshoring, you can still find your desired skillsets from neighboring countries at lower charges than you would get at home.

Engaged Team Members – With an extended model, the outsourced staff is assigned to your project on a full-time basis. This allows them to immerse fully into the project and become part of your in-house team. In addition, full-time commitment increases the chances of employee engagement, even as they get accustomed to the company culture.  

Dedicated Development Team Model

The other method you can adopt in your nearshoring is the dedicated development team model. It involves hiring a remote team that's fully dedicated to your projects. The difference between a dedicated and extended development team is that the former operates as a separate entity.

Most people hire a dedicated development team for high-volume complex projects with long-term development timelines. Under the arrangement, the service provider avails a team of staff – software developers, project managers, UX/UI designers, etc. – to work exclusively on your projects for an extended duration.

It's like having an in-house team of highly skilled development talent, minus the internal hassles of retaining the staff. While you may not have power over the service provider's hiring processes, you can select the team members whom you want to work with you. This is essential as the team must work cohesively amongst themselves and also with your in-house crew for efficient project execution.

Benefits of Dedicated Team Model

Specialized Team Members – The people who work on your project are selected based on their specialty. Meaning they understand the specific requirements and goals of your projects, which is crucial for their success.

Security – A dedicated team works like an in-house squad. Actually, it's more like an improved in-house team as it consists of highly skilled staff. The only difference is that the team is supported externally by the service provider. Their ability to dedicate and focus exclusively on your business provides security in terms of quality assurance and project completion.

Direct Management – Due to direct management, there's increased project transparency at every level. Moreover, the team is overseen by an in-house project manager, thereby minimizing your managerial responsibilities.

Flexibility – Unlike in-house hiring, this development model offers great flexibility. You can acquire the required skillsets on a need basis without going through the costly staff recruitment process. Besides, the talent pool is available for both short-term and long-term development needs.

Scalability – As your business grows and needs change, you can easily acquire additional talent in line with the new demands.

Cohesiveness – A dedicated team works closely with your in-house staff, which enhances cohesiveness.

Reduced Cost – Lastly, working with a dedicated development team saves you the cost of staff recruitment and retention. Besides, hiring new talent every time you need a particular skill set is not feasible. Even for large companies with huge budgets, doing so can be pretty costly.

Optimize Your Development Team by Outsourcing Talent From Cloudsail

What if you had an extended or dedicated team fully committed to your software development projects. A go-to team with the skillsets you require for every new project you embark on. Imagine the freedom of not worrying about creating and retaining an ideal in-house talent pool to support your short-term and long-term development goals. The convenience of having a ready team for you to select, assign, then invoice.

This is not fantasy. It's actually possible. At Cloudsail, we have the resources to actualize your desires. Whether you want to constitute an extended or dedicated development team, we can help you. We build software designed to transform businesses by streamlining crucial processes. From software developers to project managers, business analysts, UX/UI designers, and quality assurance engineers, we have the talent you require to optimize your development team.

Outsourcing has become an indispensable hiring strategy for growth-oriented businesses. Statistics do not lie. The fact that more than three-fifths of companies outsource a part of their application development shows how deeply founded the trend has become.

This is not just a mere trend. Outsourcing is the only feasible and cost-effective solution of acquiring the skills essential to support ongoing and emerging software development goals. Without this, companies would stagnate for lack of innovations or risk going bankrupt due to unsustainable in-house hiring.

Whenever you need to outsource either an extended or dedicated team, talk to us at Cloudsail. Our talent pool consists of highly-skilled professionals ready to assume your projects and work cohesively with your in-house team for seamless project execution. Our team is located in the European Union, so you're welcome to nearshore with us. You may also reach out to us for offshoring in case you're located in the United States.

Ready to outsource? Let's talk.