It’s been almost a year since the pandemic started and it has affected the way business is done around the globe. Organizations have been on digital transformation mode since March 2020 and this has increased the demand for software engineering solutions in almost all industries. A large amount of companies do not have the in-house talent, resources, and expertise required to develop high-quality software and rely on outsourcing partners for their software needs. Nearshore outsourcing has been trending in Europe lately owing to the flexibility and the productivity it brings to the table despite a global crisis. Offshoring has come under scrutiny during this pandemic due to problems such as time zone incompatibility and cultural differences. A lot of companies are considering nearshoring to deal with the impact of the pandemic. Restrictions in business travel and availability of less expensive labor markets nearby has made market leaders to question the feasibility of offshore partnerships.  US companies have set their eyes on Mexico and other Latin American countries and Western Europe has been showing interest in Eastern European countries like Poland and Ukraine. But what exactly makes organizations to seek out nearshoring destinations amidst the pandemic? Let us examine three possible reasons.

De-globalization

Economically speaking, Gobalization means the interdependence of world’s economy by cross border trade in goods and services. However, the pandemic has disrupted the cross-border trade between all the countries in varying degrees. This has put a strain on offshore partnerships and software development in farshore locations were suspended during the initial phase of the pandemic. Companies began setting up remote agile software development teams that are closer to each other to improve engagement and productivity. This meant that the team members need to be in the same time zone to achieve their goals efficiently. To its credit, agile teams were able to support the business continuity plans of organizations and they have become the norm. This has been one of the main reasons organizations are considering nearshore locations for their software development. As companies are trying to solve the issues of a hyper-globalized production chain, their area of doing business has shrunk considerably.  The pandemic has accelerated deglobalization by compelling European and American companies to diversify their software development to nearby locations.

Proximity of the teams

The crucial element that distinguishes nearshoring from nearshoring is “proximity”. In the wake of the pandemic, the proximity of software development partners helped a lot of companies to stay afloat and revive their businesses quickly. This was because nearshore outsourcing solves the following offshoring problems:

  • Working hours
  • Alignment meetings
  • Longer business trips

By being in the same or nearby timezone, teams can communicate and engage with each other easily than with a partner in a faraway location. If different teams share similar working hours, the response time decreases which in turn prevents communication gaps.

Alignment of meetings is a major problem in offshore partnerships. Employees have to schedule meetings to accommodate everyone and even then the meetings may prove to be unproductive due to technical difficulties. Sometimes, face-to-face engagement might become inevitable and nearshore outsourcing will cut costs and travel times.

Frequent flight trips to a country on the other side of the planet are expensive and unhealthy. This has been a main argument against offshore outsourcing. Business leaders prefer short flight trips to make sure they return back to base on the same day. Spending too much time up in the air can also affect their productivity. Nearshore partners on the other hand are accessible easily and are usually a couple of hours away from the outsourcer.

COVID-19 has shrunken the operational area for companies and nearhoring has emerged as a savior to businesses. With similar working hours and the lack of need for alignment meetings and long business trips, it is no wonder countries like Mexico, Poland and Ukraine are being sought after for software development during this pandemic.

Cultural similarity

It is common knowledge that two friendly countries with similar educational systems, business practices and work-life customs are bound to have strong commercial ties. A good example of this phenomenon is the relationship between USA and Canada. They both are each other’s largest export market. This strong relationship is entirely due to cultural and geographical proximity. Organizations too have similar relationships when they have cultural similarities. Teams relate to each other easily as they have the same/similar languages, laws, and customs. The deglobalization process accelerated by the pandemic has thrown light to this fact and organizations are realizing the benefits of cultural affinities. It makes more sense for a company in the UK to outsource business processes to Eastern European countries like Poland rather than India or The Philippines. Eastern Europe after all is nearby and the people relate much better to Western brands than Asians or South Americans.

Sriram Sundaresan

Sriram Sundaresan

Sriram is a biotechnologist-turned content writer who writes about emerging trends in software engineering. When he’s not writing, he’s researching history, or learning to cook up tasty treats. He is passionate about cinema with his favorite director being Quentin Tarantino. He loves to keep fit by playing football in his spare time.
Sriram Sundaresan