What is near-shore software development?

Organizations today are trying their best to reduce average cost of production and increase their profit margin or in some case give price relief to their customers. With the increase in competition levels around the world firms are looking left and right to increase their productivity levels and generate more revenues. However this may sound easy but in truth it takes a lot of thinking and managerial input. One method adopted by organizations to reduce their budding cost levels is the concept of outsourcing software development. Outsourcing software development has three different layers; Onshore, Offshore and Near-shore.

The term near-shore was first introduced back in 1998 when an American software development company decided to set up business in the Caribbean island of Barbados. Near-shore software outsourcing is an easier alternative to offshoring since it enables the organization to take advantage of lower costs (but potentially not as low as offshore) but with a close physical location, easy communication and the same time zone. The use of near-shore software development method can help negate certain drawbacks of outsourcing. One of the potential drawbacks of outsourcing was the lack of communication between the firm and the hired client. To eradicate or minimize this risk, the methodology of near-shoring was adopted. This would allow the firm to employee a contractor that is in a relatively close proximity to the parent firm and operates in similar time zones. Therefore, by adopting the method of near-shoring the firm can build a better communication network and incorporate relevant and appropriate feedbacks.

However the issue with using the method of offshore outsourcing is that the firm can face language barrier problems, and due to the long distance the quality of communication gets hampered. With the increase in geographical distance, the time zone varies further handicapping the quality of communication between the firm and their outsourcing partner. In this regard, most of the companies adopting near-shore outsourcing methods try and work around the possible communication barrier by making changes to their organizational culture are adopting a more flexible organizational hierarchy where the outsourcing partner is incorporated. Hence, they try and look for new market segments or development source that is in closer proximity and allows for ease of access.

Near-shoring allows an organization to operate in an environment which they are completely familiar with. It is essential that an organization is aware of the macro and micro environment workings of the country where the organization is planning to near-shore. With similar time zones, language, work ethics and labor laws, the organization can ensure a smooth working environment.

Countries and companies that view themselves as near-shore position themselves as offering some of the benefits of offshoring (namely cost reduction), while mitigating other difficulties—especially those imposed by distance. Most firms today are using the concept of near-shoring to promote cultural integrity and to position themselves as a global firm operating in more than one country.

With the threat of intellectual theft becoming ever present as technology advances, organizations are trying to bring operational activities closer and making a more compact organizational culture. Therefore, near-shore software development and activities have gained wide, spread acclaim. Not only are organizations trying to reduce the threat of cybercrime, but by adopting near-shore outsourcing practices the parent organization is in close proximity to the clients and their customers. Therefore this increases the applicability of the customer responsiveness and decreasing the turnaround time. Thus this allows the firm to make necessary changes to the product based on the relevant feedback given by the consumer.

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