The Expense of Nearshore IT Services

April 29, 2022

Amidst the great resignation, nearshoring IT projects is rapidly proving itself to be the solution for businesses affected by the worker shortage. We recently published an article on the Future of Sourcing with four key considerations to reflect on when considering a partnership with a nearshore provider.

In the Wall Street Journal article, Tech Talent Shortage Is Helping Drive M&A Deals, Angus Loten cites an analysis by COMPTIA that states that in January 2022 employers posted close to 340,000 unfilled IT job openings, which was 11% higher than the 12-month average. These numbers could be the result of a rise in demand for software and AI expertise due to the pandemic, but also as a consequence of the tech talent shortage that has been going on for a while. 

Tech professionals are now in control when it comes to increased compensation. Still, it is difficult and expensive to find qualified candidates for internal IT positions. Factors, such as the pandemic, have helped companies change how they do their work and they’ve learned to distribute work and manage off-site teams. As a result of this new work model, companies are now redefining what constitutes a team. 

Productivity is still flowing as usual, regardless of where the team members are located. Enter nearshoring- companies are seeing that nearshore providers and partners already have the advantage of being able to work remotely and being part of a distributed team long before COVID-19 hit.

The Ideal Partnership

Even with other models of outsourcing available, nearshore is rapidly becoming the preferred model because it provides the best of both worlds. It offers a balance between being cost-effective and easier collaboration due to closer proximity.

What can companies expect to pay when collaborating with a nearshore partner? A general digital transformation development sprint, conducted over three to four weeks, could range from $25,000 to $30,000. The development of a basic chatbot to be used to automate customer service functions could average $15,000.

That is but one type of model. There are a variety of short-term and long–term partnership alternatives, partnerships where IT teams are built by on-site and nearshore teammates for more extensive digital transformation initiatives.

According to recent research, hourly rates for nearshore services vary widely depending on the role, but for a lead developer in Latin America, a company can expect to spend anywhere from $56 to $105 per hour on average. 

The Current Cost of a Nearshore Partnership

Companies should consider the costs associated with their needs, but to only focus on the cost would be a disadvantage to their projects and could even affect their reputation. When partnering with highly regulated industries, such as healthcare and government, privacy and compliance with regulations are a priority and the mistake of partnering with a less than stellar partner could mean the loss of brand reputation. 

Clients are now looking for a strategic partner with qualified team members to expand their team. Given this shift in the relationship, here are some things to consider when thinking about partnering with a nearshore IT services provider.

  • Experience in your specific project. When choosing a nearshore partner, you must take into account their extensive technology expertise and their experience in projects similar to yours. 
  • It’s not only expertise but compatibility that’s important. Experience and expertise are important attributes to consider, but it is equally important to consider their work ethic, work style and corporate culture in comparison to your own. 
  • Seamless integration with an existing team. Sometimes, a digital transformation project starts with an internal team and you find that you are lacking some required resources. By outsourcing, you are quick to resolve this issue, but you must consider how each new team member can blend into your internal team with minimal obstacles.
  • Quality digital transformation projects from design through development. The right nearshore partner should be able to provide a full lifecycle of services. This ranges from designing a solution to the deployment of the solution. This will save your company from having to switch from different firms for each stage, which would only lengthen the project duration. 

In the future, remote and internal staff and outsourcing partners will become a unified team working toward the same goal, to successfully meet business goals. Through this new team model and careful planning, businesses will reach success for their future digital transformation projects.

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