30 July 2020Comments are off for this post.

Nearshoring, Offshoring, Onshoring – How Does It Work?

What do most companies do when the demand for their goods or services increases and they need to scale up their teams? Usually they try to hire new employees. While this standard solution might seem like an obvious choice, it’s not always as easy as it sounds and it comes with a handful of flaws as well. 

First of all - costs. Hiring additional team members might prove too costly for a lot of companies. It is especially true when we’re talking about hiring skilled professionals, such as software engineers. And then also comes another problem - the lack of potential qualified employees. In a lot of places, hiring a talented, experienced software developer is extremely difficult due to the small pool of talents.

But one thing stands out as probably the biggest challenge when it comes to hiring new employees. It’s usually very hard to predict how your project is going to develop over time. At the moment you might feel like you need new people on board but what if things don’t go as planned and your project gets scaled down? You will be left with a team that’s too big for the job. 

And it works the other way around - your project might grow and you won’t be able to respond to that increasing need for the workforce. That’s why hiring might not be the best option - it doesn’t provide you with a scalable team that is always the right size for your project’s needs.

What are the alternatives though? In this article we will show you three different layers of outsourcing that can be a successful alternative to a laborious local recruitment process - offshoring, onshoring and nearshoring. Let’s have a look at their main benefits and what are the advantages and disadvantages of each option. 

Offshoring

Probably the most well-known out of these three, offshoring has been around for quite some time. As it is the most budget-cutting solution, a lot of companies benefit from offshoring some of their activities. 

Offshoring is basically a transfer of your company’s own activities to distant countries. If your company is based in Europe, offshoring would mean hiring a team in India, China or the Philippines. 

In these far-off countries, the talent pool is enormous and the costs of hiring professionals usually is a small fraction of what would be necessary to hire additional team members back in Europe. 

However, offshoring comes with its own set of challenges. Due to the time zone difference, synchronous communication might be difficult to achieve. When your own local team gets their first coffee of the day, the working day of your offshored team in Manila is coming to an end. This makes the slot for real-time communication particularly tiny, which might be frustrating for both sides and can lead to a slower development of your services.

The other issue that a lot of companies that try offshoring face are cultural differences. Whether it’s about different communication styles, approach to completing tasks, attitude toward conflicts and decision-making, these issues are real and they can be truly detrimental to the company’s success. The same goes for differences in legal systems, which can make such a cooperation rather difficult.

If offshoring sounds too risky for your business, there are two different layers of outsourcing that minimize these risks while keeping a lot of benefits of the original solution. Let’s look at the first one - onshoring.

Onshoring

While offshoring was all about moving parts of your development very far from your location - onshoring is quite the opposite. Onshoring basically means outsourcing to a different place in the same country. If your company is based in Paris, onshoring would mean hiring a team in Nantes or Toulouse. 

It can be a profitable solution for companies based in huge metropolitan areas, where costs of hiring additional team members are huge. The costs of hiring IT professionals in Norwich are much lower than what you need to pay for similarly qualified people in London.

What can be extremely attractive about onshoring is the cultural and geographical proximity of your outsourced team. There’s no time-zone difference so the real-time communication is always available. Usually even face-to-face meetings are easily arrangeable as the distance between your two teams is not so big. 

Choosing onshoring also means that cultural differences don’t play part in this kind of partnership. You don’t have to worry about different approaches, communication issues and ways of working on your project. What is also extremely important is that with onshoring you’re staying in the same legal system, which makes things much, much easier.

But onshoring also has its own downsides. The main problem with onshoring is the financial savings are not even near what the other two options - offshoring and nearshoring - can offer. While onshoring to smaller cities or less costly regions of your own country leads to certain reduction of costs, it might be not significant enough to go through the entire process.

Another issue that a lot of companies report as a downside of onshoring is a rather small pool of talent outside of the major metropolitan areas. The trend around the world is quite obvious - the most talented professionals are moving en masse to the biggest cities in their countries. This leaves onshoring options quite limited when you don’t want to sacrifice the quality of your project.

So what if neither offshoring nor onshoring feels like the right solution for your company’s needs? Fortunately, there’s that third solution that combines the benefits of both offshoring and onshoring - nearshoring! Let’s take a look at how it works!

Nearshoring

To cut​ a long story short, nearshoring is a transfer of your processes and activities to a different yet nearby country. If your company is based in Sweden, nearshoring might be done by hiring a team in Poland or Romania. It’s all about moving your project abroad, yet still keeping it close to your country.

Why is nearshoring such a good option? In a way, it combines the benefits of both offshoring and onshoring, while significantly reducing their risks and flaws. It is especially a good alternative for European companies, where there are plenty of good nearshoring destinations.

First thing that makes nearshoring such a good alternative is a reduction of costs. While onshoring cannot usually lead to massive savings - nearshoring can. The differences in costs between certain European countries are significant. What kind of company doesn’t want to have something done while paying less?

Labour costs reduction is what makes nearshoring similar to offshoring. The other thing that makes these two options similar (and what gives them the advantage over onshoring)  is the available pool of talents. Nearshore destinations usually offer an amazing amount of extremely talented and experienced professionals. 

According to 7N Executive Brief on Outsourcing, some of the best nearshore destinations such as Poland, offer one of the largest pools of skilled IT workforce in Europe. While hiring a skilled IT professional in many Western European countries proves to be a challenge, it is relatively easy in top nearshoring countries such as Hungary, Poland or Czech Republic. The abundance of top talent in these countries makes it easy to form a team to deliver your project.

If you want to learn why Poland is a great nearshoring destination, check our article on this issue!

Looking for a great nearshoring partner?
We've delivered many successfully projects for companies from all over the world

As you can see, nearshoring shares some of its benefits with offshoring. Luckily, nearshoring is not prone to the same problems as offshoring!

First of all, the geographical proximity of nearshore countries makes for a very easy, synchronous communication. These countries are usually either in the same time-zone or the time difference is insignificant to affect the relationship. 

And when you look at the top European nearshore destinations, what also makes them extremely attractive is how well they’re connected with the rest of the continent. If you need a face-to-face meeting or a group workshop that can’t be done online, you just hop on a plane and in 1-2 hours you’re in any major Romanian or Polish city. This is the thing that can’t be done with offshore teams.

The other thing that makes nearshoring so attractive is the cultural proximity. The differences in approaches or ways of work are extremely small and companies that are experienced as being nearshore teams know how to minimize them even further. 

What makes top European nearshore destinations so appreciated is also the language skills of their workforce. Countries like Estonia or Poland offer some of the highest English proficiency levels anywhere in the world, which makes the cooperation with teams there smooth, efficient and enjoyable.

And last but not least, nearshoring in Europe usually means that you’re staying with your processes within one legal entity - the European Union, or in a wider context the European Economic Area. Not only does it make the partnership much safer, but it’s also way easier and financially effective to operate in one economic zone. 

Summing up 

As you can see, outsourcing comes in three different forms. Each has its own set of pros and cons and it’s up to your company’s particular needs to decide which form of outsourcing might be most beneficial for you.

Offshoring is the most cost-cutting option but it’s also the most risky one. Onshoring is a very safe alternative, but the savings are not as impressive and it’s only a viable option for companies based in the biggest metropolitan areas in the world. And then there’s nearshoring, which combines the best of both worlds but it’s only available in a good quality in certain regions, such as Europe.

Outsourcing, such as nearshoring, might look intimidating at first. That’s why it’s important to work with companies that have plenty of experience in this form of cooperation. If you have any questions about how nearshoring looks like in detail and how we make sure our clients are satisfied, don’t wait and contact Setapp for more info! Also don't forget to subscribe to our transport newsletter, where we show the latest and greatest IT solutions for the transport & logistics industry!


2 March 2018Comments are off for this post.

5 reasons why nearshoring in Poland is valuable for the Nordic companies

The Nordic tech industry is expanding each day. No wonder, technology is playing a significant role in this region, both in private and professional life.

We are seeing more and more startups being founded in the Denmark, Sweden, Finland, Norway, and Iceland. More ideas are being born in the heads of young entrepreneurs, which are being supported by a significant inflow of venture capital.

But the technology is not only related to the young Nordic companies. Digitalization has become a more popular “word” in many large corporations, who are making sure to follow current technological trends to keep ahead of their competitors.

So, you have a vision for your new project and products. But who will build it? Well, developers of course, but then a much more significant problem starts to appear - How can you find them?

According to the Hays Global Skills Index 2016the Nordic region is facing a serious tech talent shortage. For example, Denmark is expected to fall short of 19,000 IT professionals by 2030.

Finland currently has an immediate need for 7,000 software developers, and according to the Finnish Information Processing Association, the country will lack over 15,000 skilled professionals by 2020, causing about €3-4 billion in lost GPD per year.

And let’s not forget Sweden. Statistics Sweden estimates there will be a shortage of 30,000 engineers by 2030 and it has already outpaced the USA as the country with the highest labour market stress level.

Based on Hays Global Skills Index 2016, Statistics Sweden and Finnish Information Processing Association

 

Developers in the Nordic region are becoming a scarce resource, and most companies are already feeling it. So how can we face this challenge? One word comes to mind: Outsourcing and more specifically Nearshoring. Recently published Whitelane Research about outsourcing in the Nordic Region states that the appetite for outsourcing is growing - over 44% of respondents plan to use this service more.

Still, as a Business Developer at Setapp from Poland, I constantly communicate with clients from the Nordics and some of them still hesitate to nearshore their development to Poland.

Let me provide you with the most important benefits of nearshoring in Poland:

1. Poland has the most talented developers in the world

According to the Hacker Rank Polish developers are in third place in the global ranking after China and Russia. Considering how large those two countries are, achieving such a result is a huge success. I recommend reading the whole Hacker Rank article because it also provides a detailed ranking of the Best Developers by domain. Polish programmers also dominate various other areas.

It makes sense to develop your project with the best, right?

hacker rank

2. Possibility to obtain professional expertise based on industry experience

When an idea for a product is born, then you probably ask yourself the question: How should we build it to make it successful? Poland is becoming a major European Tech Startup Hub and more successful companies are being born there from industries like FinTech, IoT, Travel, Media, E-sports, Healthcare and more. This confirms that Polish developers know how to create meaningful software and they will be sure to make your product successful too.

3. Talent supply

Remember at the beginning when I mentioned how Nordic countries are facing a severe tech talent shortage? 70.6 K, is the number of  IT students in the 2013/2014 academic year, according to GUS (Central Statistical Office in Poland). Polish tech universities graduate over 15,000 new specialists annually.

More students are aware of the benefits of becoming a developer, so their motivation to learn programming languages is increasing. As a result, the number of well educated IT professionals are growing. It gives the potential outsourcing partners the possibility to gain access to such a valuable talent pool.

4. Communication and cultural fit

Communication and a good cultural fit are one of the leading concerns of many Nordic companies who seek external help. Poland, Denmark, Sweden, and Norway share the same Time Zone CET, and Finland only has a one hour difference (EET). So there will be no need for evening calls.

Also, developing in SCRUM ensures that you are able to communicate with the development team on a daily basis. Regarding the cultural fit, Poland is an open-minded country with a lot of experience in doing international business, so communication is at a very high level. Moreover, 90% of developers speak English very well and many companies provide English lessons for them.

nearshoring in poland

5. Stable economy and similar law

After the fall of the communism, the Polish economy started to grow significantly. Poland has a very stable economy in Europe. So when you want to move your development to Poland, you don’t need to worry about an economic crisis, political problems, or natural disasters. Poland also adheres to all EU copyright and IP (intellectual property) directives. Due to these updated legal matters, there are fewer risks involved.

Conclusion

You may be surprised why I didn’t mention the low costs. Let’s face it - it is obviously an important reason but these days companies more often put the value of the outsourcing partner over the costs. Having a trustworthy tech partner from Poland who is ready to share his professional expertise can be highly valuable for you and for your customers

Still hesitating? Setapp is currently in long-term partnership with Egmont - one of the leading media groups in the Nordic region. But don’t just take our word for it, listen to what Mads Donkin, Egmont's Product Owner, has to say about cooperating with us:

testimonial egmont

 

 

Since such a well-known company chose to nearshore their development needs, do you agree it’ll help you too?

P.S. while you're here check out our blog posts on the best practices for software development:

 

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+48 506 798 998
office@setapp.pl

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OUR OFFICES

PL: Wojskowa 6, 60-792 Poznań, Poland
+48 506 798 998
office@setapp.pl

ISR: 220 Hertzel Street, 7630003 Israel

COMPANY DATA

Setapp Sp. z o.o.

VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

OUR OFFICE

Wojskowa 6, 60-792 Poznań, Poland
+48 506 798 998
office@setapp.pl

COMPANY DATA

Setapp Sp. z o.o.

VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

 COMPANY DATA

Setapp Sp. z o.o.
VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

OUR OFFICES

POL: Wojskowa 6, 60-792 Poznań, Poland
+48 506 798 998
office@setapp.pl

ISR: 220 Hertzel Street, 7630003 Israel

COMPANY DATA

Setapp Sp. z o.o.
VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

OUR OFFICES

PL: Wojskowa 6, 60-792 Poznań, Poland
+48 506 798 998
office@setapp.pl

ISR: 220 Hertzel Street, 7630003 Israel

COMPANY DATA

Setapp Sp. z o.o.

VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

OUR OFFICE

Wojskowa 6, 60-792 Poznań, Poland
+48 506 798 998
office@setapp.pl

COMPANY DATA

Setapp Sp. z o.o.

VAT ID: PL7781465185
REGON: 301183743
KRS: 0000334616

PRIVACY POLICY

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