Near-shoring has plenty of advantages, both as an alternative to offshoring and as a complement to existing offshoring operations. The cost savings for technical personnel are similar, but you’ve got better time zone alignment, low travel times, and some highly-educated labor pools to pull from. The result is that the benefits of offshoring are often amplified (total cost of ownership, e.g.), while many of the downsides begin to shrink (slow response times, etc.).
That said, not all near-shoring operations are created equal. Since this choice will inevitably involve a sizable investment in the growth and success of your business, it’s important to sit down with a clear set of criteria when choosing whom to partner with. What criteria should you use? We’re glad you asked…
How Near-shoring Amplifies the Value of Offshoring
Before we get into the exact criteria, let’s take a second to discuss the ways that near-shoring and offshoring relate. Depending on who you ask, you might hear it suggested that you should prioritize expertise, reputation, and communication—and that you should strive to implement some Agile methodologies in order to offshore effectively. As we’ll get into, most of these things can actually be easier to accomplish closer to home (i.e. in Latin America, if you’re a North American business). But it doesn’t necessarily have to be an either/or choice. If you’re already working with offshore teams in India, ramping up a nearshore team in the Caribbean might help you to improve time zone coverage for service tickets. Once you’ve established a system for performing daily handovers from the offshore team to the nearshore team, you’d be in a position to operate more flexibly and with fewer potential delays or disruptions. In this way, near-shoring can be an important complement to offshoring, not just a (frequently more attractive) alternative.
1. Location, Location, Location
Okay, let’s get started on what you should actually be looking for in a near-shoring company. The first, and perhaps most obvious, consideration is location: not all locations are created equal. There are fairly wide disparities even across Latin American countries when it comes to things like reliability of infrastructure and the size of the technical talent pool. Some countries, like Costa Rica, boast stable political systems, reliable high speed internet and telecommunications networks, and robust public education systems that ensure a steady stream of bilingual developers coming onto the talent market every year. Not every country can claim these infrastructure advantages, which results in a gap in terms of reliability of service from one country to another. By the same token, some countries (again, Costa Rica is an example) have strong existing IT services markets, ensuring that things like industrial parks are already in place and ready for use when you’re getting ready to ramp up a team—others might require you to do more upfront work in that department. On top of that, there’s location qua location, i.e. how long is the total travel time from your office to your near-shoring team. Most Latin American countries already have a huge advantage over India and China here, but there’s a pretty wide spread between San Jose (5 hours from New York) and Sao Paolo (9 hours from New York).
2. Flexible Delivery Models
Once you’ve narrowed down the right locations for your needs, it’s time to think about delivery models. Here, you would do well to figure out your own operational requirements, e.g.:
- What is the scope of the project or projects you’re looking for nearshore help with? What software environments and product development methodologies do you plan on employing?
- How do these projects fit in with your longer term operational goals? What are the milestones and KPIs you’ll be tracking and how will they relate to larger corporate milestones?
- What timeline are you targeting, and what are your expectations for your own internal resources working to meet that timeline?
- Do you expect ongoing support, maintenance, or aftercare from your near-shoring partner? Or do you expect a one-and-done project? Or, are you unsure at this point?
It’s normal for some of these answers to be fuzzy—but the fuzzier they are, the more important it is to look for flexibility in your services provider. You certainly don't want to wind up in a position where your SLA doesn’t cover a part of the development lifecycle that proves to be essential—you’d be stuck renegotiating terms in the middle of the project, which could easily cause delays and other issues, putting your time-to-market and your project ROI in jeopardy.
3. Product Development Methodology
We mentioned in the list above that you should ask yourself about what product development methodologies (e.g. Agile, Waterfall, etc.) you envision employing on your end—but it’s also worthwhile to inquire about the methodologies that your potential vendors are most adept in. If you’re envisioning an iterative model, while your potential partner is committed to utilize a Big Bang approach (i.e. a rapid expansion of the code base), you might not be well-suited to one another. On the other hand, you might look for someone who can demonstrate strong expertise in methodologies that are specifically designed around near-shoring. You’re the expert on your own operational goals and needs, but if you’re outsourcing for the first time there’s a real benefit to be had in working with someone who’s able to bring some new insight as to the best way of doing things. Managing projects remotely and across country lines can be a real challenge no matter who you are, and you want to work with someone who—while flexible—has an extremely clear vision of how to operate to maximize your chances of ROI. Otherwise, the effort you expend managing them might begin to exceed what you’ve budgeted for.
4. Technical Expertise and Experience
This criterion relates pretty closely to the one above: if you work with an agency that’s got a lot of experience managing the kinds of projects you’re working on within a near-shoring context, it’s likely that they’ll also have the project management chops (and maybe even their own unique methodology) to make working with them as seamless as possible. Of course, when someone says they have valuable experience, you shouldn’t automatically take them at their word. After all, if you were hiring new developers internally instead of working with a near-shoring company, you’d expect them to present examples of their work, talk through previous projects, and possibly pass a technical interview. You should absolutely hold any potential vendors to the same standards. Why? Because claiming experiencing is one thing, and proving it is something else entirely. If your potential partner can’t show off and walk you through the work they’ve done on similar projects or for similar clients in the past, that’s a big red flag. This is particularly true if you’re in a relatively specialized field.
Imagine, for instance, that you’re an insurance provider. How much time are you willing to devote to explaining regulatory requirements to your near-shoring partner and walking them through the technical implications of those requirements? Some, probably—but not so much that it begins to bog down the project and derail your planned time-to-market. If, on the other hand, you’re considering a vendor with an actual portfolio to demonstrate, you’re much more likely to finish your project on time and on budget.
So, what should you actually ask for?
- Multiple references from companies that are either in a similar domain or working on similar projects.
- A conversation with the prospective project lead in which he or she demonstrates the level of technical expertise that the project requires.
- Information about past project performance relative to expected budgets and timelines.
In this way, you can make sure that your potential partner has the skills necessary to get the job done and the acumen to do so on your timeline, using the right resources at the right time to support your project.
5. Strong Communication Skills
Last but not least, we get to communication skills. Often, when people talk about communication skills in the context of outsourcing or near-shoring, they’re talking about whether the resources are really bilingual. To be sure, this is important: you need to be able to set expectations with your team, troubleshoot when things go wrong, and keep open lines of communication going between local and remote teams. But literally speaking the same language isn’t the end-all-be-all of communication. On the contrary, we’re talking about things that are a little bit more mundane:
- When you call or email your vendor, how long does it take them to return your call or shoot you a message back? Are they responsive within a short period of time, or do you find yourself wondering if they’re going to get back to you soon enough?
- How open is your point of contact about things like SLAs, about the company’s relevant experience, about the staffing process, etc.? Do you feel like they’ve really answered your questions and dealt with your concerns, or do they seem to be brushing you off?
- If you want to meet with someone higher up in the organization before making your choice, how feasible is it? How receptive are they to the prospect?
Most of these aren’t special criteria—they’re just data you can collect as you move through your selection process. Still, they can potentially tell you a lot. If you go with a near-shoring partner whose not terribly responsive during the initial stages of negotiation, what makes you think that their teams will actually be consistent about attending daily scrum meetings? If your sales point of contact can’t or won’t share work samples with you, why would you expect more consistent delivery on your own IT project? At the end of the day, the little things like this can tell you a lot about a near-shoring company—and they can help you land on a business that will provide smart, flexible support for your project.
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