What is nearshoring?
Nearshoring refers to the practice of outsourcing business processes or services to neighboring or nearby countries, often within the same region or continent. It is a variation of the broader outsourcing model, but with involved practice of delegating tasks to external service providers. However, unlike traditional outsourcing, which often involves offshoring to distant countries, nearshoring emphasizes geographical proximity.
This concept means companies also transfer business processes to a country where it is cheaper to operate and manufacture compared o the company's current location. It allows companies to take advantage of cost savings while maintaining closer proximity to their home market.
Benefits of Nearshoring
- Talent Pool Availability: Nearshoring enables companies to tap into a wider talent pool that maybe will not be readily available in their own country. By extending their search to nearby regions, organizations can overcome skill shortages and find highly qualified professionals with specific expertise. This access to a diverse talent pool enhances a company's ability to recruit the right people for the job and foster innovation.
- Access to Cost Advantages: One of the primary drivers behind nearshoring we will present in this strategy guide is cost optimization. By relocating certain business functions to nearby countries, companies can benefit from reduced labor and operational costs, without compromising on quality. Countries with lower labor costs, favorable tax incentives, and lower overhead expenses can offer significant cost advantages, making nearshoring an attractive option for many organizations.
- Cultural Proximity and Collaboration: Nearshoring often involves partnering with countries that share similar cultural, linguistic, or time zone characteristics. This proximity fosters effective communication, collaboration, and understanding between teams. Teams working in similar time zones can engage in real-time discussions, minimizing delays and facilitating smoother project management.
- Enhanced Operational Flexibility: Nearshoring offers companies increased operational flexibility. By outsourcing certain functions, organizations can focus on their core competencies while leveraging external expertise for non-core activities. This flexibility allows companies to scale their operations up or down based on business needs, adapt quickly to market changes, and optimize resource allocation.
Nearshoring in Practice
While nearshoring is gaining traction across various industries, nearshore programming is one area that has seen significant growth. Many companies are choosing to outsource software development, IT support, and other technical tasks to neighboring countries known for their strong technology sectors to other companies.
This approach allows companies to access highly skilled software engineers, programmers, and IT specialists at a lower cost than hiring locally. Nearshore programming offers an efficient solution for companies looking to accelerate their software development cycles, reduce time-to-market, and boost overall productivity.
Successful Nearshoring Examples
To better explain the concept of nearshoring, we will present you with three examples.
Hidroxa Medical, a distinctive Swedish company that specializes in selling iontophoresis machines to clinics and individuals, decided to nearshore its development, design, and marketing operations to ZenDev. Hidroxa aimed to enhance its competitiveness and expand beyond the Scandinavian market by establishing an e-commerce platform. To achieve this, they sought a partner well-versed in e-commerce technology, digital marketing, and the art of building a digital brand.
By leveraging the expertise of ZenDev's highly skilled developers, designers, and marketing specialists, Hidroxa experienced a notable boost in its overall revenue, increasing it by 33%. Additionally, they observed a 17% rise in the number of users and a 14% increase in average website session duration.
Another notable example is Kalmar, a leading global provider of sustainable cargo handling solutions for ports, terminals, distribution centers, and heavy industries, faced a significant challenge in digitizing their manual paperwork and data entry processes. This labor-intensive task imposed a heavy workload and involved multiple stakeholders. Kalmar nearshored the development activities to ZenDev, a company that has been serving the Swedish market since 2016. ZenDev's founders, having grown up and been educated in Sweden, possessed a strong understanding of diverse cultures. Additionally, the location of the majority of ZenDev's consultants in Bosnia and Herzegovina offered the advantage of being in the same time zone as Sweden, with direct flights taking only 2.5 hours to reach Gothenburg, Stockholm, or Malmö, and reasonable proximity to other European cities.
ZenDev successfully developed a mobile application that automated Kalmar's workflows. As a result, the app significantly improved the efficiency of operations and communication with customers, leading to an impressive 103% increase in overall efficiency.
Magnetlabbet, a Swedish company specializing in efficient and rapid image diagnostics using the latest medical equipment, recognized the need to enhance its marketing strategies to achieve desired results from paid advertising. They also required a well-developed SEO strategy, prompting them to nearshore their marketing activities. Additionally, they faced technical challenges, such as a predominantly hardcoded website and e-commerce platform that made it difficult to add new content without involving a developer. This resulted in high website maintenance costs for simple tasks, and their checkout solution needed optimization to improve conversion rates. By collaborating with ZenDev, Magnetlabbet successfully overcame these obstacles and achieved impressive outcomes, including:
- An 82.6% increase in organic website visitors.
- A 110% increase in organic conversion rate.
- A remarkable 445% increase in paid conversion rate.
ZenDev also provided a customized checkout solution and aided Magnetlabbet in migrating their hardcoded website sections to a drag-and-drop builder, enabling easy content editing without the need for continuous developer support. This resulted in reduced development costs and improved overall efficiency.
Why Consider Nearshoring
When considering different nearshoring companies, it is a win-win situation to choose a company such as ZenDev that has a wide range of services: software development, team augmentation, UI/UX design, and digital marketing so you can cover more aspects of your business and manage everything in one place, which is also a cost-effective solution.
ZenDev's teams have deep experience working in these various fields for companies in different industries. Feel free to contact our consultants that will be glad to assist you and answer all your questions. Book a free demo call.
Here are some of the reasons to consider nearshoring:
- Increased Agility and Scalability: Nearshoring enables businesses to adapt quickly to changing market dynamics. In other words, by leveraging external partners, organizations can scale their operations up or down based on demand, without the need for significant infrastructure investments.
- Improved Focus on Core Competencies: Outsourcing non-core activities through nearshoring allows companies to concentrate on their core competencies. This strategic allocation of resources can enhance efficiency and foster innovation.
- Market Expansion: Nearshoring to neighboring countries can provide a foothold in new markets. By working with local partners, businesses can gain valuable insights into regional preferences, consumer behavior, and market trends, facilitating expansion strategies.
- Risk Mitigation: Diversifying operations through nearshoring can mitigate risks associated with over-reliance on a single location or market. By spreading operations across multiple regions, businesses can reduce vulnerability to geopolitical uncertainties or natural disasters.
Conclusion
In an increasingly interconnected world, nearshoring has emerged as a strategic choice for many companies seeking to optimize their operations, as they gain more than ever before through this approach. As we explained in this blog, it results in many benefits, from increased savings and operational flexibility, to diversifying the business mix and leveraging the advantages of skilled nearshore teams.
Access to skilled talent, cost savings, cultural compatibility, and increased operational efficiency are just some of the main reasons to consider this strategy. Of course, there are pros and cons with each model, so there may be challenges associated with remote management and time zone differences, careful planning and effective communication can help overcome these obstacles.
By carefully evaluating your company's needs, exploring the advantages of nearshoring, and identifying potential nearshore outsourcing partners, you can leverage this approach to propel your business forward. With the right strategy, nearshoring can enable your company to thrive in a highly competitive global marketplace, providing added support and scalability that cannot be attained solely with an in house team.
Feel free to contact us, and we can provide more information on how we believe a successful nearshore collaboration can be achieved.
