Near- and offshoring are omnipresent in the IT world. Sometimes as a trend towards shoring, sometimes as a countertrend away from shoring. But they are never out of focus. The step towards nearshoring (or away from it) is often of enormous, sometimes even existential importance not only for individual projects, but for entire companies. Therefore, this step should be approached strategically. The following applies: Every nearshoring case is individual and needs a tailor-made solution. At diselva, we are the right people to contact when it comes to supporting near- and offshoring projects from start to finish. Our experts have not only selected, built and managed nearshoring locations, but have also worked in numerous projects in different setups with near- and offshore teams in day-to-day business and know exactly what is important.
For consultations on the topic of near- and offshoring, we have developed the diselva Nearshore Excellence Framework . It is based on four pillars that must be considered in any nearshoring project:
- Definition and sharpening of the business model
- Establishment and scaling of the nearshore business
- Definition of the collaboration model
- Integration and successful collaboration
In the first blog of this series, we take a look at the first pillar of the framework: “Defining and sharpening the business model”.
Pillar 1: Definition and sharpening of the business model
Before starting a nearshoring project, the motivation behind the decision must first be analyzed and precisely understood. The most important question is: Why nearshoring at all? What is it intended to achieve? Roughly speaking, in most cases two things are in the foreground:
- Cost reduction
- Access to talent
This fundamental decision is crucial, because it influences the entire further course of the shoring project. Years ago, the focus of nearshoring was often clearly on reducing costs. Companies relocated IT jobs to cheaper countries (extended workbench approach). But this approach is no longer the only true solution. The “war for talents” has now taken over the top priority. Competition for well-trained specialists is huge worldwide. Nearshoring locations give companies access to another talent pool. This is of paramount strategic importance for many companies, which is why cost reduction is being pushed further and further into the background.
Of course, in the case of a nearshoring location in Eastern Europe, you still benefit from lower costs. But the difference to the West is getting smaller. This is due to rising wages and an exported war for talents and further due to higher demands of local talents: Attractive office space is just as much a matter of course as, for example, the desire for full private health insurance for the whole family).
For many companies, it is no longer enough to simply find cheap labor. Rather, it is about attracting and retaining highly qualified talent – and that in an increasingly fierce competition. In a few years, the only relevant question will be whether or not to get access to specialized specialists.
Important questions when defining the business model
- Cost reduction or access to talent?
- What is the company’s priority? Are you primarily looking for cost reduction, or is access to talent the main focus?
- Should the location be inside or outside the EU?
- This question plays a major role, especially when dealing with customer data, especially with regard to GDPR and GDPR.
- This question also plays a role in terms of costs. As soon as a country is part of the EU, the costs increase.
- What skills are needed at the nearshore location?
- Is the site able to provide the necessary technical skills ? And what about the engineering culture on site?
- Which universities train talent?
- What legal and bureaucratic hurdles are there?
- Bureaucracy and investor-friendliness are key factors that influence the selection process for a nearshore location.
- What are the mandatory prerequisites for cooperation to work?
- Not only the accessibility of the location plays a role here, but also more complex factors such as internal service allocation, which are important (or not) for smooth cooperation.
- What setup are you aiming for?
- Setting up your own nearshore location is not the only option. There are many alternatives: working with freelancers (directly or through EOR companies), working with companies that already provide entire nearshoring teams, buying and integrating a nearshoring company , or building your own site.
- Which country specifics must be taken into account?
- It is not only about socio-cultural differences and challenges (which would be worth a separate blog post), but also about economic conditions, bureaucratic hurdles when setting up a company and how investor-friendly the climate in the country is.
This first pillar is therefore not only about setting the economic goals , but also about what concrete framework conditions the chosen location must offer. A well-defined business model lays the foundation for the entire nearshoring process – from location selection to team structure.
In the next blog, we will address the question of how to build and scale a nearshore business. What are the most important steps to successfully establish the location and how can the business be expanded sustainably? At the same time, we will take a look at the cooperation models and the successful integration of nearshore teams into the project structures.