All Nearshoring is Not Created Equal: Buyer Beware

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There’s been a lot of talk about outsourcing over the past few years, as companies realize the huge benefits of leveraging outside resources to help get products to market faster, more efficiently and sometimes more economically. And even more recently, all the talk about H-1B visa restrictions have made nearshoring, in particular, an appealing way to source solutions and services closer to home.

All the key nearshoring regions – from Puerto Rico and Mexico, to Chile and Costa Rica—are benefitting from robust, emerging tech services, as offshoring becomes more complicated, and difficult to manage. Companies have heard the siren call of labor cheaper than what can be found in major U.S. cities, and geographical proximity, and are gravitating toward nearshorers, mostly in Latin America; they provide all the benefits of offshoring with less of the hassles.
But despite all the claims of hassle-free and low-cost software development, there are still some issues companies need to consider when nearshoring in many non-U.S. Latin American countries.Some things to ask your nearshore provider, include:

What is the education level of your staff? There’s no question that the U.S. has some of the best engineering and technical universities in the world. Inquire what schools the staff has attended, how many degrees they hold and if they are able to remain current with new technologies, certifications and continuous learning that keeps pace with US education.

Additionally, since collaboration is going to be a critical for any successful project, the engineers and staff assigned to your project must be fluent in English.

What are your country’s labor laws? It’s important to understand different labor laws to find out how much their work schedules align with yours. For example, countries, such as Costa Rica, have clearly defined labor laws that state that workers cannot exceed 48 hours per week, or eight hours a day, and everything else is considered overtime. Especially when some time differences come into play, this restriction can impede the ability to move a project forward or even hit important milestones and deadlines.

What type of IP Protection will you have? The Intellectual Property (IP) interests of countries in Latin America may differ substantially from comparable interests in the United State. Typically, Latin America may have stronger IP protection for artists and authors and less for technical companies. If any issues arise regarding IP, litigation needs can be extremely challenging when addressing them from abroad. This is particularly true given that the laws in other countries do not necessarily provide the same IP protections as in the U.S.

Onshoring Becoming an Attractive Nearshoring Option

While there are clear benefits to nearshoring, onshoring is taking those benefits one step further and bringing outsourced software development services even closer to home. The diminishing gap in labor costs, proximity to customers and headquarters, and state tax incentives are among the reasons that firms are once again looking at U.S. onshore locations. In addition, some backlash against offshoring has made keeping jobs at home an attractive option for U.S. companies.

And by onshoring, we’re not just talking about U.S. states. As U.S. territories in Latin America, Puerto Rico and the U.S. Virgin Islands are bridging the gap between traditional nearshorers and onshorers. They provide the proximity, skill-set, language, geographic and cultural similarities of U.S. onshorers at costs closer in line to other Latin American nearshorers. Additionally, since they are U.S. territories, the same banking systems and federal laws apply, including all U.S. IP protection.

Puerto Rico has emerged as the nearshore resource of choice for IT because of three key factors: technical skills, economic advantage, and cultural alignment. Its engineering schools rival those of mainland U.S. and global institutions. For example, engineering-intensive companies like Honeywell, Raytheon, and HP recruit huge numbers of University of Puerto Rico graduates each year.

IT outsourcing will continue to grow in Puerto Rico as more companies recognize the economic and cultural advantages of working with service providers here.

As the costs of expert software engineers continues to rise, and companies are competing to deliver and implement innovative cloud-based IT solutions, smart tools and other technologies in a digital world, the growth of nearshoring in whatever form, will keep pace. It’s essential, however, to do your homework and choose a development partner that you are comfortable with, and which understands modern business problems and has the technical knowledge to tackle and solve them — closer to home.

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