Since its inception in the late 1970’s, outsourcing has become a popular way for companies to reduce costs by taking advantage of the lower labor rates in overseas countries. In fact, by 2002, India had 90% of U.S. organizations’ information technology offshore business. It wasn’t until the 1990’s that the concept of nearshoring software development started to take off.
Is Outsourcing Really Saving You Money?
Nowadays, a debate exists as to whether or not outsourcing actually saves companies as much as once originally thought. Yes, you will save money on labor costs, although there are some disadvantages to outsourcing. These disadvantages include time difference, language barriers, and the quality of work that is being produced. Enter nearshoring, a relatively newer concept, that is similar to outsourcing but with significant advantages.
Venice Consulting uses a Nearshoring Project Management Model for its clients – the model provides skilled expertise and quality product at 40% of the cost. Rather than using resources in India and China like that of outsourcing, nearshoring utilizes nearby Latin American. Nearshoring is changing the mindset of outsourcing opponents by mitigating the risk of outsourcing overseas; risks that include loss of control and product quality.
Benefits of Nearshoring Software Development
Nearshoring software development can benefit companies of all sizes – from start-ups to large enterprises. As demonstrated in VCG’s latest project, the launch of an iOS app, VCG used a hybrid nearshoring model to provide the lean, self-funded technology start-up with an innovative hardware diagnostics mobile app for iOS 6 and iOS 7. Nearshoring made it possible for VCG to deliver a production ready iTunes store app on a fixed budget in 12 weeks, something that would not have been possible without the hybrid nearshoring business model. These partnerships make it possible for companies to maximize performance and bring a new, superior quality product back to the U.S.
Advantages of nearshoring include:
- Dramatically lower cost of labor and supplies–up to 40 percent less than the cost of a full US-resourced team.
- Excellent communication and response times due to similarities in time zone and culture, and widespread fluency in English.
- Fast growing IT industry with highly skilled, self-motivated web and application development professionals.
Emerging Nations Becoming Major IT Players
As an emerging nearshore location, Latin America is becoming a major IT player. According to a study issued by the Brookings Institute and the London School of Economics, Santiago, Chile is ranked number five in the world’s ten best economic performing cities, behind Lima and above Shanghai.