The Talent Gap. Is nearshoring the answer?

Increasing wage costs and timeframes required to find and compete for local talent is forcing companies to look beyond borders. However many discover that they're too late to really benefit from offshoring and some differences (like time) is too great. Is nearshoring the answer?

Digitalisation has created high competition for companies looking to hire people with certain skills. The increasingly higher wage costs and longer timeframes required to find talent is forcing companies to look beyond borders. In this article, we'll take a quick look at nearshoring and some of the benefits it has over other staffing models.

It's all technology's fault!

Technology has made the world a smaller place. The abundance of digital collaboration and communication tools are helping more businesses than ever before to benefit from the advantages of a global workforce. At the turn of the 21st century, I was part of a 30 strong company which suddenly found itself growing it's workforce tenfold overnight. Within two years this company had grown to being 1000 strong with 12 offices in cities across the globe stretching from San Francisco to Singapore. Although our headquarters were in London, the largest office by far in terms of staff numbers was in Mumbai and it was packed with software developers.

Enterprises over the last 20 years have made good use of Asian countries to take advantage of relatively low cost, but well skilled staff. Countries with good spoken English language skills such as India and the Philippines became central to the call-centre outsourcing phenomenon and these same countries have since also become established central hubs for technical development outsourcing and offshoring.

The cost of control

Whilst some businesses are happy to outsource certain functions to external companies, others prefer the greater control that comes with having your own team. Offshoring - where businesses take advantage of cheaper labour markets (such as those in Asia) to build their own teams in these locations - has become so commonplace that the financial benefits it once offered have significantly reduced, as competition for talent in these locations have increased.

For many businesses only now looking to these regions for solutions to their staffing challenges, the reality is often far removed from what they expected. The countries they might initially explore may already be saturated with business from other companies outsourcing or offshoring, and the demand for staff as well as costs will have subsequently increased. So in order to benefit from cheaper labour, recruiters have had to redirect their search farther afield to other countries where the grasp of English may traditionally not be as good and where there may be a bigger cultural difference. For some businesses, a perceived cultural divide, problems in comprehending each-others accent (especially if English is a second or even third language for both) and a time difference are factors too great for them to pursue this option further - leading them to start looking closer to home.

Nearshoring

Working with a team in the same time zone or just an hour ahead can make a huge difference. Although I've become very used to managing teams and working with partners in different geographies, it can be a challenge when the window of opportunity to speak with them in real-time gets smaller the further away they are. Since I'm usually in Germany or England, in order to speak with partners in Sydney or Auckland in particular, someone inevitably has to get up very early or stay up very late, and this only increases the importance of getting communication just right - whether through voicemails, emails or notes written within collaboration tools.

The lack of a huge time difference can allow teams to communicate more naturally and react much quicker as a group. And if you need to have frequent face-to-face meetings, the geographical proximity makes this more viable. However, whilst you can expect lower staffing costs than the UK or Germany, this won't be nearly be as cheap as other offshoring options.

Even so, there is more than enough of a benefit - our figures indicate between a 20 and 50 percent difference to rates in Germany - depending on the size, experience and make-up of the team you're looking to assemble, as well as the region you choose to build them in. Certain hubs in mainland Europe no-longer offer the cost benefits they once did as British businesses for example, have long since dominated certain labour markets.

Getting nearshoring right first time

Of course companies do try to build their nearshored teams by themselves, but it really does pay off to work with a partner to help you do this. Bringing together industry field expertise and current knowledge on specific markets and regions, will not only enable you to build your team exactly to your specifications, but also get it right first time with no surprises.

High performing technology organizations across industries meet or exceed business expectations. Optimize enterprise culture, processes and increase your delivery capacity with additional dedicated teams.

Nearshoring is an ideal solution for businesses looking for an effective way to build up dedicated resources for software development. It offers a more granular level of control than outsourcing and being in the same time zone allows for greater agility and ability to react. The other options of outsourcing, offshoring and freelance recruitment, however, still offer a great deal of benefits and maybe a better match for businesses with different demands or looking to help with functions other than development. For example, having a team on the other side of the planet greatly enhances follow-the-sun support strategies, whilst hiring freelance talent can give you access to huge amounts of experience and know-how for a fraction of their full-time market value. In the competition to land the best talent for your business, it is always good to stay alert because your perfect match maybe just around the corner.

A perfect match

FOCAI works closely with a Hamburg headquartered near-shoring company with an experienced talent pool of developers in Spain's silicon valley, that has helped significant businesses build near-shored teams efficiently and effectively. Whether you're looking to boost your engineering capacity or bring a new product idea to life, having a partner that's proven in building successful teams quickly and within budget is a big benefit, especially if it can do so within 4 to 6 weeks in one of Europe's most vibrant cities.