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What is Nearshoring?
Before we discuss examples of great nearshoring partnerships, let’s start at the beginning with what exactly nearshoring involves. Nearshoring is a closer-to-home type of outsourcing. Nearshoring is outsourcing in a similar time zone and with geographic and cultural proximity between nations doing business. For example, when a US-based company partners with a software development company in Costa Rica this is considered nearshoring due to the relatively short distance and the similar cultures. When a business in the US partners with a company in Indonesia, this is considered offshoring due to the geographical and time distances between the two countries. Both are a form of outsourcing.
Why Businesses Nearshore Software Development Projects
The main reasons for companies to outsource any type of business process are to reduce costs and increase efficiency. Adding external specialists allows companies to better focus on their main objectives and the strategy behind running the business without worrying about the development or completion of additional tasks. Nearshoring is another name for doing business with Latin America.
Nearshore outsourcing is particularly popular in the information technology sector. Product development and other IT work are becoming commonly outsourced (nearshored) to Latin America. Costa Rica stands out in particular within Latin America for many reasons. For more on why you might want to use a company located in Costa Rica, see our blog article.
Nearshoring Success Case Studies
Let’s examine a few examples of successful Nearshore outsourcing experiences.
Whirlpool is known the world over for its home appliances. In 1987 the company moved much of its operations in manufacturing and marketing to Mexico. Whirlpool’s Mexican facility exports (80%) of its machines to the US and Canada, including stoves, washing machines, and fridges. Other home appliance companies such as Samsung and L.G. have followed suit.
The appliance manufacturing industry in Mexico is renowned for its geographic proximity to the US markets, strong supply chain, and robust capabilities.
Partnering with a Nearshore company allows businesses such as Whirlpool to enjoy the efficiency, lower costs and high-quality products that are created outside of US borders. In fact, in 2021, Whirlpool reported a record performance year, and anticipates another strong performance in 2022.
The Law Firm of McDermott, Will & Emery
MWE hiredPixel506 a Costa Rica-based boutique software agency that not only understands software but also merges technologies like UX (user experience) with cohesive branding strategies and business acumen.
In 2018 MWE contacted Pixel506 to help them create a web platform that would incorporate the law firm’s new branding strategy. For over 9-months Pixel had a dedicated team of engineers, user experience and content experts, who worked closely with MWE building a website strategy and platform with a unique approach.
In 2020 MWE received the honor of the #1 Global Legal Website from AM Law Global Website Report, blowing the competition out of the water in over 70 individual categories.
MWE received a rating of “excellent,” scoring 86.8 out of 100 points.
Boeing is most renowned for being an aerospace company responsible for the design and manufacturing of airplanes. In addition to planes, they also make satellites, telecoms equipment, rockets and missiles.
Boeing first outsourced its wiring to French multinational company Safran, whose operations extend into Mexico, where they have had a presence for 25 years. Inaugurated in 1996, the plant was the first aerospace manufacturing plant in Mexico. Today, there are four production units and a wiring system design and engineering center. The site designs and produces 95% of the wiring used on the Boeing 787 Dreamliner and produces 75% of the wiring on the Airbus A380, the world’s biggest jetliner.
In 2020, Boeing announced the building of a new plant in Chihuahua that will manufacture the interior of Boeing passenger aircrafts.
While Parkdale Mills may not be a household name, the North Carolina-based manufacturer of spun yarn and cotton consumer products is one of many textile companies that has begun nearshoring production. During peak times of Covid, the strain on the supply chain forced many to reconsider and diversify where products are made and created. Moving closer to home made sense for Parkdale Mills which is investing $150 million dollars in building a new yarn spinning facility in Honduras. The move will shift 1 million pounds of yarn a week out of supply chains in Asia.
“Parkdale sees an enormous opportunity for brands and retailers to re-shore and nearshore production supply chains and double the size of U.S.-[Dominican Republic-Central America Free Trade Agreement] trade, because of the rules of origin in our trade agreement and a shift in sourcing by brands and retailers mitigating their supply chain sourcing risks,” Anderson Warlick, chairman and CEO of Parkdale Mills, said.
These are just a few examples of successful nearshoring partnerships that are bringing high-quality products to the US from Latin America. With similar time zones, strong supply chain sourcing, similar cultures and a well-educated workforce, nearshoring is building a strong reputation as an ideal way to outsource work in key sectors. This is particularly true in the case of software development. For more information on top software development destinations for US companies, see our article. At Pixel506, we know the benefits first hand and have seen our clients succeed in strong nearshoring relationships with increased profits, accolades and fewer risks.
How to Find the Best Nearshore Partner
Once you’ve made the decision to nearshore your next software development project, how do you find the right partner within Latina America? While this is by no means exhaustive, we have a quick four-point plan to find a great outsourcing partner:
- Make sure they have the skills to complete your project on time.
Make sure the nearshore business that you’re doing business with can complete your project on time and within budget. The individuals working on your project should be qualified developers or engineers. Also check in and see if they have done a similar project previously.
- Have workflow that eases communication.
Communication is one of the most important tools for a successful project and business relationship. Make sure that the company you’re working with has good communication skills and tools in place for quick and easy communication. They should tell you how they’ll be organizing your project and set up communication tools and expectations ahead of time.
- Demonstrate a commitment to cyber security.
You want to make sure that your assets are protected from cyber attacks, both while the project is under construction and once you’ve created a finished product. There is no room for error on this point— a poorly protected app can result in security breaches that end a business. Your nearshore partner should complete multiple testing phases with the project to ensure security is in place and there are no backdoors left open for cybercriminals.
- Have a strong reputation in the marketplace.
One of the best ways to ensure that the above three points are met is to check in with others who have worked with the nearshore business. Ask for references and follow up. Most businesses also show case studies and offer testimonials on their websites. This can give insights to past projects including scale, time frame and more.
Pixel506 is a boutique nearshoring agency with a unique skill set, impeccable reputation and history of large-scale success for our clients. We are based in Costa Rica with satellite offices in other Latin American countries and offer strategy, technology, creative and digital marketing solutions for clients in the U.S. and Canada. From app development services to digital strategy to marketing campaigns, Pixel506 can deliver top quality work at a lower cost than a U.S. or Canadian peer. Working with Pixel506 is a stress-free experience; our clients trust us to create high quality, competitive products— and we never fail to deliver.
Founded in 2009, we have over a decade of experience helping big, medium, and small companies succeed in the digital world. Contact us today to see how we can help―we look forward to getting to know you and your business over a digital cup of coffee.
- The main reasons for companies to outsource any type of business process is to reduce costs and increase efficiency. Nearshoring is a close-to-home type of outsourcing that has proven advantages.
- We cite four success stories of US and international businesses partnering with Latin American-based companies with outstanding results.
- With similar time zones, strong supply chain sourcing, similar cultures and a well-educated workforce, nearshoring is building a strong reputation as an ideal way to outsource work in key sectors.
- We detail four points to consider when selecting a nearshore partner.
- How to Hire a Great Nearshore Development Team
- Top 4 Benefits of Nearshore Outsourcing for SaaS Companies
- 8 Reasons to Consider Nearshore Software Outsourcing
- Top 5 Reasons to Choose Costa Rica for Nearshore Development
- “Find a Nearshore Partner with the Right Cultural Fit” Interview
- “Why the tech industry is addicted to Nearshoring?
- “What is nearshore development? The complete guide
- “What Is Nearshore Development, and What to Look For in a Partnership