Nearshore, Offshore or Noshore?

 Nearshore, Offshore or Noshore?


By Tony Streeter

Outsourcing IT development can be a powerful business tool for companies that learn its best applications. Think of it this way: opening a can of soup with an electric drill would be a bad experience. But that doesn’t mean that electric drill is useless — we just need to know what jobs that particular tool is best suited for.

Businesses are learning the same lesson about outsourcing. One major manufacturer decided to outsource all Internet development efforts to India. They terminated all onsite IT development consultants and pushed development offshore. Their experience was disastrous. Within a year, they’d terminated their CIO, yanked all development back into the U.S., rehired everyone and licked their wounds. Furthermore, they now view any vendor’s mention of offshore development with contempt.

Many companies have learned the same lesson the hard way. Organizations can’t just throw their IT development projects across the sea and get back a flawless package, quickly, at low cost, with a big red bow on top. That’s not how it works. In fact, learning how to leverage offshore/nearshore development for their benefit has been quite an education for many companies.

So how does it work? Many organizations have seen success by dividing large projects into multiple parts: a part that stays within the U.S., a part for nearshore development and a part for offshore development. The challenge is knowing who should get each part.

Below are some of the benefits of, and best cases for, offshore and nearshore development. But, first, it’s important to note that a company can’t outsource internal problems. Outsourcing development only works if internal development processes are sound.

Offshore Development

Here are some of the best cases for considering offshore development:

  • Simple projects that are well defined and have a fixed price
  • Projects that don’t require creative solutions
  • Development of inexpensive prototypes — bringing an idea to life
  • Larger pools of standard development talent (SAP, .Net, Java)
  • Pockets of talent well-versed in older technologies (i.e. AS400)
  • Various companies with Centers of Excellence (CoE) and partnerships with leading technology providers (IBM, SAP, Oracle, etc.)

Nearshore Development

Nearshore development has been quickly gaining momentum over the last few years. Some of the benefits of nearshoring include:

  • Similar time zones: This makes it easier for conference calls and less expensive for in-person meetings.
    • India is 11-12 hours ahead of the U.S. Beijing, Shanghai and Hong Kong can be 25 hours ahead of the U.S. Managing complex IT projects across an 18-24 hour time difference can be extremely difficult and frequently results in delays and setbacks.
  • Similar cultures: Nearshore business cultures are similar to the U.S., and these developers are quick to share creative development and efficiency ideas. On the other hand, employees in in India, China and Hong Kong strictly follow their employers’ project requirements.
  • Language proficiency: Most nearshore providers (Brazil, Mexico, Costa Rica, etc.) are proficient at English as a second language.
  • Cost savings: The cost of labor in India is not as cheap as it used to be, and continues to rise as individuals from India travel back and forth to the U.S. and demand higher wages.
  • Pools of talent: Sao Paulo, Brazil has the second-largest community of Java programmers outside of the U.S.

Proceed with Caution

In considering offshore or nearshore development, proceed with caution. Keep these recommendations in mind:

  • Manage all projects from within the U.S.
    • Have a U.S. project development lead tied to the outsourced development lead.
    • Conduct knowledge sharing between the U.S. and outsourced development teams.
    • Have a business analyst or technical writer capture all development issues, resolutions, scope creep, change orders, etc.
    • Conduct a post-mortem on each project to determine areas for improvement.
  • Avoid interpretation issues by providing clear direction and confirming everything in writing.
  • Keep the development of larger, more complicated projects onshore.
  • To begin, start outsourcing simple, end-to-end, component-type projects, or easily defined micro-projects that fit within a larger project.
  • Keep home-grown, company-proprietary technology development within the U.S.
  • Ensure U.S. team members are available to answer outsourced vendors’ questions, make conference calls, review and approve requirements. Also ensure they can help outsourced vendors adhere to requirements and recognize the difference between slight variations and those requiring a change order.
  • Hold your outsourced vendor accountable for milestones, timelines and scope. The number of resources put onto your project by them is immaterial if it’s a fixed-bid project. Don’t get caught-up in the weeds what individual vendors’ resumes look like, but manage them by the quality and timeliness of their deliverables.

One bad experience can cause a company to “throw the baby out with the bath water,” swearing never again to outsource development. This is a mistake the competitors won’t make. The savvy company will learn how, when and where to outsource IT development to capitalize on savings in cost and time.

Tony Streeter is the CMO/SVP of San Antonio-based Y&L Consulting, Inc. Y&L Consulting is a comprehensive IT services & solutions company specializing in Application Development, Information Management/BI and IT Help Desk Services.



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