Less Is More When You Nearshore
There are times when less, truly, is more.
For example, less debt equals more money in your pocket. A vehicle that weighs less can generally go faster. Fewer choices equals more deliberate decisionmaking. And, in the world of IT resources, outsourcing truly stands as a shining example of the potential power of the “less-is-more” paradigm.
One recent study demonstrated that the total cost of engagement (TCE) of an IT developer can be up to 50 percent less for an outsourced solution than to maintain that same resource in-house.
At the same time you’re shaving your expenses, you’ll reap some pretty significant benefits that are the byproduct of software development outsourcing, including assurances that you’ll be benefiting from the latest bleeding-edge technologies, a strict adherence to best practices, a reduction in the time it will take you to get your app or service to market, and an endless well of available high-quality talent.
That said, there are key differences between the three key types of outsourcing: onshore, offshore and nearshore.
Factors that impact the “all-in” rates for outsourced software development resources include:
- Location: Regional factors, even on a city-by-city basis, can sway rates significantly. As a result of its proximity, training and demand, the cost for North American resources are among the highest in the world of outsourcing. Comparatively, Latin America – particularly Mexico, with its close proximity to the U.S. – competes most favorably among nearshore options, and the cultural, educational and geographical alignment all promote a favorable rate structure. Eastern Europe and Asia still offer top talent, but travel factors and time differential can add to the cost and convenience facts.
- Experience: Certainly, the level of technical expertise impacts rates, but in many cases, nearshore providers can offer more senior developers for the same rate or less than you would pay for a more junior developer locally. You will also find that specialization can impact the pool of available resources – for example, if you need a resource that has deep experience in PCI compliance, or a platform-specific development, you may pay a premium for that level of expertise.
- Length of Engagement/Team Size: You’ll often find that you will get greater long-term value by engaging a greater number of team members for a longer term. That’s simply a function of economics – the outsource provider benefits financially from long-term financial stability, and can pass the savings along to you.
Once you’ve made the decision to jump into an outsourcing engagement, the choice to access resources from within the U.S.; from a bordering country; or from a distant region; is among the most critical.
At iTexico, we have long held that there are myriad benefits to our “nearshore plus” approach to outsourcing. Mexico – where our delivery center is located – enjoys many advantages over more distant regions, including ease of travel and a greater alignment of culture (both of which leads to more trust and greater camaraderie when embedding with American teams); legal and IP protection that is afforded by the North American Free Trade Agreement (NAFTA); and an ever-growing pool of competitive talent, fostered by a favorable government and educational environment south of the border.
Most notably, nearshoring in Latin America offers, by far, the lowest TCE – when accounting for wages, travel and technology costs.
The chart, below, indicates global outsourcing rates for North America and the three biggest nearshore/offshore markets.
Want to learn more about nearshoring in Mexico?