Software developers are essential to business growth. As more companies recognize the value of the IT workforce, competition for tech talent has become fierce.
Nearshore software development has emerged as a solution to the global tech talent shortage. This guide explains the basics of nearshore software development, exploring benefits, top locations, and best practices.
Introduction to nearshore software development
Nearshore software development is the practice of hiring tech talent from neighboring countries. In the US, nearshoring typically refers to sourcing workers from Latin American countries like Mexico, Argentina, and Colombia. Here's how nearshoring differs from other types of outsourcing models:
- Onshoring involves outsourcing to companies in the same country. While onshoring offers simplified communication and legal alignment, the practice comes with higher costs due to US labor rates.
- Offshoring involves outsourcing to distant countries, often with significant time zone differences. While it can offer cost savings, challenges may arise in communication, cultural differences, and time coordination.
- Nearshoring is outsourcing to neighboring countries, typically with similar time zones and culture. Nearshoring is the best of both worlds, balancing cost savings and operational efficiency.
Key benefits of nearshoring
- Time zone alignment. Working in similar time zones promotes communication and quicker decision-making.
- Cost efficiency. US salaries must match the country's high cost of living. The lower cost of living in neighboring countries means salaries can be lower without compromising quality.
- Cultural/linguistic fit. Proximity tends to contribute to shared cultural values and language.
- Access to skilled tech talent. Many popular nearshoring destinations like Latin America are home to an abundance of IT talent.
- Faster turnaround time: Nearshored employees work similar business hours and can collaborate quickly and easily with local teams.
Top nearshore locations for software development
Latin America is a hotspot for nearshore software development, offering skilled talent, cultural compatibility, and favorable time zones for US companies. Top nearshore locations include:
- Argentina: Known for its strong educational system and a high percentage of the population with higher degrees, Argentina offers a skilled workforce in IT, finance, and HR sectors.
- Brazil: With many professionals skilled in frontend development, Java, and cloud computing, Brazil stands out as a tech hub in the region.
- Costa Rica: Offers expertise in cybersecurity and digital marketing, along with a high percentage of internet users, facilitating smooth remote collaborations.
- Peru: Emerging as a machine learning and data management epicenter, Peru provides a growing tech talent pool.
Types of projects ideal for nearshoring
Nearshore software development works well for projects that require collaboration and real-time feedback. This includes complex software development, long-term strategic partnerships, and projects where alignment with the client's working hours is crucial.
Nearshoring is a strategic way to land senior developers with high-demand skills. LatAm, in particular, is home to a growing workforce of AI and machine learning specialists, frontend and backend developers, and cybersecurity experts.
Navigating nearshore development teams
For all its benefits, nearshoring development teams comes with risks. US companies hiring in neighboring countries may face the following challenges:
Payroll and labor laws
Differences in the regulatory landscape from country to country can make compliance complex. Learning about a different country's labor laws, tax policies, and trade agreements can be a hassle.
Intellectual Property (IP) protection and security concerns
Protecting intellectual property is a major concern when outsourcing software development. To protect sensitive information, it's important to implement contracts clearly defining IP ownership and rights, including confidentiality clauses and scope of use.
Transparency and operational visibility
A lack of transparency in a nearshore partner's operations can lead to compliance lapses and project inefficiencies. It's essential to work with a nearshoring partner that offers full visibility into how your resources are managed.
Real-world case studies
At Howdy.com, nearshore software development is our superpower. Don't take our word for it — check out these real-world case studies:
- Fast hiring, long-term retention at Workrise
- 50% cost savings and triple onboarding speed with Truepill
- Building a platform from scratch with Metalsmart
The future of nearshoring in tech
In the next five or 10 years, IT nearshoring is set to take off due to soaring demand, says Howdy.com CTO Frank Licea.
Forward-thinking companies will turn to Latin America, where they'll discover a growing pool of talented tech workers, according to Licea.
"Latin American professionals are often more expensive than other teams around the world, but I firmly believe you get what you pay for," Licea says. "Not only are our time zones aligned, but LatAm employees tend to be extremely hard working and culturally compatible with US teams."
What role will AI play in the future of nearshoring? AI may reduce overall junior-level engineering demand while increasing the need for sophisticated, culturally integrated teams to maintain AI-generated systems, Licea says.
"Nearshore vendors offering only basic software services will struggle as AI advances," Licea predicts. "On flip side, providers focused on building AI-enabled engineering teams with strong cultures will thrive."
How to choose the right nearshore partner
When choosing nearshoring software developers, consider these variables:
- Talent pool size
- Vetting process
- Fee/salary structure
- Included benefits
- Retention rates
- Reputation/reviews
- Insurance/risk management
Of these variables, retention rate is particularly important. Retention indicates that hires are satisfied, engaged, and loyal to their roles and the organization.
At Howdy.com, we're proud of our unparalleled 98% retention rate. Book a demo today to learn how we build happy, productive development teams that stick around for the long haul.
Top 5 nearshore software development companies
Howdy.com - Howdy connects US companies with the 1% of LatAm tech talent. We simplify the hiring process, handling everything from equipment to onboarding to payroll and tax compliance. Howdy brings humanity to the hiring process, supporting your hires with competitive benefits, mentors, and a network of physical offices across Latin America. Our commitment to community, top-tier candidates, and 98% retention rate sets us apart from other nearshore software development companies.
BairesDev. Founded in 2009, BairesDev is a nearshore software development company with engineers from Latin America. Their services include custom software development and data science solutions.
TECLA. TECLA connects U.S. and Canadian companies with software developers from Latin America. Their services include sourcing, interviewing, and handling legal and compliance.
DNAMIC. Primarily for Medtech and healthcare, DNAMIC offers IT services, including custom application design, IT staff augmentation, and disaster recovery solutions.
Innowise. Innowise is a global software development company. Founded in 2007, they offer full-cycle development services.
Conclusion
As LatAm continues to evolve into a tech powerhouse, nearshoring emerges as a strategic solution. The growth of highly specialized LatAm developers, coupled with the cost-effectiveness and time zone alignment, makes nearshoring an attractive option for companies seeking to remain competitive in an increasingly interconnected world.
Ready to start building your nearshore software development team? Book a demo with Howdy.com to get started.
