The Definitive Guide to Nearshore Software Development

Everything you need to know if you are considering outsourcing IT.


Many companies choose to outsource their software development projects as a competitive strategy to grow and scale the business. Thanks to the proliferation of the internet and globalization, outsourcing business models allow companies to create digital products at lower costs and reduced internal resources. With its rise in the early 90s, India quickly became the most dominant offshore player in the market, and was closely followed by Ukraine, Poland, Romania, the Philippines, China and others.

The communication challenges that came along with working with remote teams located on the other side of the world began to take a toll and a new nearshore outsourcing model began to emerge. The global IT outsourcing market continues to grow every year, and many companies are turning to nearshore software development to fuel their business objectives.

Nearshore software development graphic


Offshoring is the practice of outsourcing work to vendors operating in a distant country, like India or China, where costs are usually significantly lower than in the U.S.

Nearshoring is the practice of outsourcing work to vendors close to home, including nearby countries, such as Mexico and Canada. The costs are generally very attractive, with the added benefit of being in the same time-zone for easier collaboration.

With the onshoring model, work is outsourced strictly to providers in the same country. Costs are often higher than offshorers or nearshorers. For example, costs for a software developer in the United States are on average five times higher than the costs of a software developer in Asia.


Using Nearshore Software Development Outsourcing as a Growth Strategy

In the early days, the benefits of outsourcing IT could be reduced to cost savings and sometimes resulted in sacrificing quality. Today that’s no longer the case. Businesses are creating an ecosystem of trustworthy partners that have the capabilities to support advanced technologies and digital transformation and understand your business challenges and how to work with you to solve them. Nearshore software development outsourcing can offer the following strategic benefits:

  • Diversified Skillset: Nearshore providers can complement the core capabilities of your organization with diversified and specialized technical capabilities. From micro services to computer vision, it is almost impossible to have in-house expertise in every single technical skill in the market. A nearshore provider can fill the gaps and reinforce your in-house capabilities.
  • Faster Time to Market: With added resources, internal teams can increase the velocity to release and rollout new product functionality. Even if your team has the technical skills, additional experienced resources can help develop and roll-out new features in a shorter timeframe.
  • Increased Capacity: Supporting current product lines, growing the business and putting out fires often consumes most of the time of internal resources. CxOs often turn to nearshore partners that can scale up to execute strategic projects when internal teams are stretched too thin. 

Nearshore Development Benefits

Nearshore development offers some key benefits over onshore and offshore development.

  • Better Communication: Having your development team in the same time zone facilitates the flow of communication. Whether you need a quick consultation or have a high priority issue, your team will be working when you are, so you can seamlessly communicate and collaborate as often as needed, just like you so with your internal teams.
  • Shorter Travel Time: It is always good practice to schedule in-person meetings and visits to hold brainstorming sessions and discuss important topics. Ensuring that you can hop on a plane and have a meeting the same day build stronger partnerships between nearshorers and businesses.
  • Competitive Price: While offshoring costs are generally lower than nearshoring costs, prices are still very competitive when compared to rated on the U.S. mainland.

Selecting a Country for Nearshore Software Development Outsourcing

Mexico, Costa Rica, Colombia and Puerto Rico are among the top countries with nearshore software development providers. When selecting a partner, it is important to determine if its location will provide the right conditions to nurture growth and innovation for your organization. There are four key factors that are often overlooked or undervalued when evaluating the outsourcing environment in a country:

Laws and Regulations

It’s important to understand different labor laws to find out how much their work schedules align with yours. Some countries have labor laws that limit work to 40 hours per week (or eight hours a day) and everything in excess is considered overtime. The strict laws may have a negative impact on important milestones or costs.

Additionally, the Intellectual Property (IP) interests of countries in Latin America are often substantially different from those in the United States. Countries often offer stronger IP protection for artists and authors and less for technical companies.


Highly educated engineers are critical for an organization to be able to drive transformation and growth through technology automation. Research the region’s university rankings, engineering programs and graduation rates. A good outsourcing partner will have access to talent with the technical skillset required to develop next generation applications.


Remote work is here to stay, and software developers need to have a robust network infrastructure both at home and at work to ensure business continuity through any unexpected events — from local power outages to natural disaster and global pandemics.

Entrepreneurial Ecosystem

Creative energy is contagious and country’s that provide incentives to promote entrepreneurship provide a great environment for a disruptive outsourcing partner. Start-ups are constantly challenging the status quo. Incubator and accelerator programs, business idea competitions, hackathons and conferences create positive energy and help nurture the entrepreneurial mindset of young professionals.

Location Perks

People in your organization will be required to travel to the outsourcing site for brainstorming sessions, meetings, or other activities. A fun and vibrant destination can be a travel perk, which greatly facilitates collaboration between remote teams. In an era when many offices in the tech space have football tables and a beer fridge, we should never underestimate the value any fun perks. 


Puerto Rico offers nearshore software development services to many companies in the United States. Adding to an educated pool of fully bilingual engineers, a vibrant entrepreneurial ecosystem and a convenient location, Puerto Rico offers a very unique competitive advantage: Puerto Rico is part of the United States. We are all US citizens and Federal law applies here as much as in New York.

U.S. Laws

By working with a nearshore company based in a U.S. territory you can be assured that all federal laws and Intellectual Property Protections that you are familiar with apply, 100% of the time. No exceptions.


Puerto Rico’s schools and universities are ranked the best in the Caribbean and accredited by the Middle States Commission of Higher Education. Engineers are trained and educated following the same standards and best practices required in the States.


By working with a company in Puerto Rico you know the staff assigned to your project has been trained following the same standards and best practices you know and expect.

Puerto Rico Nearshore Software Development


Puerto Rico does not observe Daylight Saving Time and is in the Atlantic Standard Time Zone all year around (AST) (EST +1; GMT-4). Puerto Rico is 2-4 hours away in a direct flight from the East Coast U.S.

 Puerto Rico Nearshore Software Development

Language & Culture

Both English and Spanish are official languages on the Island. This guarantees that you will be working with a truly bilingual team of experienced professionals. As part of the U.S., Puerto Rico shares a similar culture and business practices as American companies.

Puerto Rico Nearshore Software Development


Puerto Rico offers very competitive pricing compared to the U.S. mainland states. The increased efficiencies of hiring an experienced team combined with the lower price range will have a significant impact on the short-term project costs and long-term bottom line.

Puerto Rico Nearshore Software Development

Entrepreneurial Ecosystem

Puerto Rico has a vibrant entrepreneurial community with recognized startup programs and partnerships between academia, government and private industry to promote innovation and job creation.

“Puerto Rico offers a unique competitive advantage for US companies. Aside from sharing time zone, currency and laws & regulations, it has a vibrant entrepreneurial community, quality engineering schools and talent, and a very attractive location for travel.”


Nearshore Software Development Today

In the past, businesses have sacrificed quality for cost when outsourcing IT work. After learning from those mistakes, the nature of outsourcing has changed over the last few years in very meaningful ways:

The switch to a provider ecosystem

In the past, companies turned to big consulting firms or ERP systems to deliver the system’s capabilities that they needed in a one-stop-shop. As needs for specialization increases, companies hire different teams of providers to share their expertise and work collaboratively to fulfill the greater vision of a project.

The need for industry-specific expertise

Domain expertise is required to design an appropriate technology solution around a business outcome. This is particularly critical in AI and software custom development, where knowledge of specific business problems is paramount.

Growing compliance demands

With the complexity of advanced AI and other IT solutions, as well as the need to protect sensitive customer data, ensuring compliance to federal, industry-specific and corporate rules and regulations is critical. Nearshore providers need to be proficient in compliance with industry regulations.

You can read on recent IT outsourcing trends in the following post: Putting a New Face on Traditional Outsourcing


Selecting the Right Nearshore Development Partner

Selecting nearshoring partners should be done with the same rigor as when hiring new internal staff. After all, they should be seen as an extension of your team. When procuring services from nearshore providers, you should consider the following:

How does nearshore development fit into the overall business strategy? The real goal of nearshore software development engagement is to drive positive business outcomes. A good prospective partner should be able to understand your vision and share ideas and provide guidance and recommendations on how to best execute strategic IT projects in the first few conversations.

What is the quality of its talent pool? An important step in the due diligence process is understanding the skills and experience of individual team members. Building transformational applications with state-of-the-art technologies requires top-notch talent an individual level as well as the collective experiences of a company.

What skills are required to get the job done? A nearshoring partner that provides a multidisciplinary team for UI/UX design, DevOps, Quality Assurance, Software Development, and Artificial Intelligence will be invaluable in extending your organization’s capabilities. This proves to be a real competitive advantage when executing digital transformation projects.

Have they demonstrated success in similar engagements? As you do your research, you should not only ask for references, but also follow-up with each and every one. It is quite common for companies to skip this part of a due diligence process if they have established a good rapport with a vendor.

How well does the team fit into your corporate culture? A nearshore development firm providing a dedicated team is bound to become an extension of your organization. Aligning corporate culture and values, establishing a trustworthy relationship, and creating a good team dynamic will ve critical to the success of the engagement. Soft skills should be taken into consideration when selecting an IT sourcing vendor.

“No amount of documentation of requirements, SLAs, and test scenarios can guarantee success in an IT outsourcing project. Building world-class technology solutions requires bringing together the right talent and building a trusting relationship, based on open communication and a mutual commitment to excellence.”


Nearshore AI Outsourcing

AI option continues to increase every year, but it is still inaccessible to many midsize businesses. Aside from the benefits of tapping a specialized and experienced talent pool, nearshore Artificial Intelligence outsourcing can overcome the following challenges most businesses face:

Talent is Scarce

The shortage of data scientists and machine learning engineers makes it difficult for companies to hire and retain the right talent to do the job. The specializations needed to develop algorithms are also changing at a very fast pace and it is a challenge for an internal team to have all the right skillsets. Companies that have AI teams also turn to AI outsourcing providers to complement and augment their internal capabilities. AI providers can provide specific specializations and tackle strategic initiatives when internal teams are capped with project work.

Data Training Requirements

Building an AI model generally requires large amounts of data. Training models often requires manually identifying, classifying and tagging the data. Few midsize companies have the manpower and time to dedicate to this arduous task. Nearshore providers like Wovenware have private crowds that have been rigorously trained to efficiently and precisely tag data, even millions of images. Private crowds have the added benefit that they work in a secure environment to meet compliance requirements.

Infrastructure Requirements

Processing large amount of data also requires GPU servers with a lot of computing power. These can be very costly, even in Infrastructure as a Service (SaaS) contracts because of the bandwidth usage. Working with a partner will allow you to leverage its infrastructure assets without having to make hardware purchases or absorb steep maintenance costs.

Read more about Nearshoring and AI in the following posts: