Outsourcing software development services is a go-to strategy for enterprises that want to tap into global expertise, enhance operational efficiency, and ensure cost-effectiveness. However, what if your project requires setting up several large teams with different focus areas or you want to establish a presence in a foreign country? In such cases, an optimal solution is to set up a nearshore software development center. This approach combines the benefits of a dedicated development center with time zone overlap, cultural alignment, and greater control over the development process.

Many businesses still hesitate to establish software development centers in neighboring locations due to HR and legal pitfalls. By partnering with a trustworthy outsourcing provider, you receive comprehensive support, including local HR management, legal compliance, and administrative services, ensuring your development center operates smoothly. But how do you select a reliable tech vendor for this mission? And what are the key benefits of partnering with one? Let's find out.

Why should you set up a nearshore software development center?

Before exploring why businesses establish software development centers in a neighboring location, let's look closer at the term. Simply put, a nearshore development center is a representative unit of a tech company established in a country near the client's location. In other words, it functions as a development office housing a team or several teams of tech professionals. They often provide a range of IT services, from software development, testing, and maintenance to project management and support. The structure of a nearshore center depends on the client's specific requirements. It typically includes project managers, team leads, software developers, QA specialists, and UI/UX designers. Optionally, the team comprises additional non-delivery experts: recruiters, marketing specialists, and administrative roles.

Establishing a nearshore software development center allows enterprises to leverage the benefits of geographical proximity, cultural similarity, and time zone overlap, leading to more efficient and effective collaboration. In what business cases is a software development center in the neighboring country the best option?

  • You want to set up a large team. If you require a nearshoring team consisting of more than 20 experts with diverse expertise, it's better to have them under one roof.
  • Your project scope is extensive. Businesses often set up software development centers for large projects when implementing a comprehensive solution that requires updates and continuous maintenance.
  • You are implementing security-sensitive software. We recommend building a powerful cybersecurity team for projects that presuppose the processing of sensitive data, such as financial information. Setting up a nearshore development center ensures that cybersecurity experts dedicate their efforts solely to your project. 
  • You need several teams working on different products. By default, the nearshore development center is a highly scalable model that allows enterprises to quickly adjust their teams' number, size, and composition based on project needs and market demands.
  • You want to establish a presence in a nearshoring location. The easiest way for businesses to expand their global presence is to start with a development center in the neighboring country.

Why establish a nearshore software development center?

Establishing a nearshore software development center: 9 key steps

Setting up a nearshore software development center involves nine essential steps to ensure successful setup and smooth operations in a neighboring country:

  1. Selecting a location. Before establishing a nearshore development center, your outsourcing vendor will conduct thorough research on your neighboring countries, assessing factors such as talent pool availability, business environment, economic stability, legal requirements, and cultural compatibility.
  2. Getting legal support. Hiring a professional who is highly aware of national law is crucial for navigating the legal landscape in your country of choice. A legal consultant will help you with local compliance, contract negotiation, permits and licenses, and legal risk management.
  3. Registering as a legal entity. The next step is registering your business as a legal entity in the chosen country. This usually includes selecting the appropriate legal structure as well as preparing and submitting the required documents to the authorities.
  4. Finding and renting the office. When a legal entity is registered, it's time to select a suitable office location that meets your operational needs. 
  5. Registering with local tax authorities. Your outsourcing provider will ensure compliance with local tax laws by registering with the local tax authorities. At this step, the critical tasks are to obtain a tax ID number and fulfill tax obligations, such as corporate and employee taxes.
  6. Hiring recruiters and administrative staff. Next, your tech vendor will build a strong local team that will help with talent acquisition and on-site administrative tasks.
  7. Launching a brand-building campaign. Establish your presence in the local market by promoting your brand through several channels, such as social media, local events, and industry conferences.
  8. Recruiting developers. Your tech company will source skilled developers for your nearshoring team according to your requirements and then conduct thorough interviews and technical assessments.
  9. Setting up operational processes and scaling is the final stage of setting up a nearshore development center. Here's when your outsourcing vendor will establish operational workflows, communication channels, and project management tools.

Establishing a nearshore software development center: Process roadmap

4 reasons to partner with an IT outsourcing company to set up a nearshore software development center

Establishing a dedicated nearshore development center in another country requires significant time, effort, and financial investment. Another reason business leaders hesitate is the legal and HR challenges. Partnering with a reliable tech provider lifts all these risks off your shoulders and allows you to leverage additional benefits such as:

1. Faster recruitment 

Partnering with an IT outsourcing company accelerates the recruitment process in your nearshoring location. Most of these companies have large internal recruitment databases and networks in multiple countries and, as a result, can provide access to a vast talent pool. This, in turn, allows them to quickly source and onboard skilled professionals. For instance, at N-iX, it takes three to four weeks to fill the position, even if you are looking for experts with specialized domain knowledge or niche technical skills. In addition, our internal recruitment database comprises over 270,000 CVs, which makes it easier to match the right candidates to your project requirements swiftly and efficiently.

Related: Nearshore software development in Europe: Where and why

2. Enhanced scalability

Another reason to delegate setting up a nearshore development center to an outsourcing company is their ability to promptly scale your development team up or down based on project needs. This scalability is especially beneficial for businesses with fluctuating demands, such as ecommerce platforms. Such companies often experience significant changes in demand, especially during peak shopping seasons such as Black Friday and holiday periods. During these times, the need for additional development resources to handle increased traffic, implement new features, and ensure a smooth user experience becomes critical. Alternatively, this need decreases during low-demand periods. When partnering with an outsourcing vendor, you can delegate responsibility to your tech partner for all HR processes related to team composition changes.

3. Focus on your core business operations

It's in every business's interest to ease the burden of HR, legal, and operational processes and focus on strategic initiatives. By delegating these processes to an outsourcing vendor, you can ensure that your in-house resources are not stretched thin. This focus can increase productivity and innovation within your core business areas, driving overall growth and competitive advantage.

4. Security and legal risk mitigation

Collaborating with an IT outsourcing company can help you mitigate security and legal risks. Trustworthy outsourcing firms adhere to stringent security protocols and compliance standards to protect sensitive data. They are well-versed in the latest regulations and legal requirements, ensuring that your projects are compliant with laws in your country of choice. We also recommend using specific clauses when signing the contract to protect your data in the long run.

How do you select a vendor that can help you establish a nearshore software development center?

As of May 2024, Clutch lists more than 15K vendors that offer IT outsourcing services. For this reason, selecting a tech provider that can help you set up a development center in a neighboring country might be challenging. Following these steps will help you to make an informed decision:

1. Select a location with an extensive talent pool

The first step is to find an engineering provider with a presence in promising outsourcing locations. This will allow you to quickly tap into the large pool of tech experts and, as a result, ensure a prompt project launch. If your business is located in Europe, consider nearshoring your software development to Baltic countries, Western Europe, or Central and Eastern Europe (CEE). For instance, the latter region boasts a combined talent pool of around 5M tech experts and engineers, with most of the available workforce being concentrated in Poland, Ukraine, the Czech Republic, and Romania. For businesses from North America, the nearshoring destination of choice would be Latin America, which is home to over 2M ICT professionals.

2. Choose a midsize or large vendor

When selecting among the multitude of software development companies that can help you set up a nearshore development center, opt for vendors with more than 250 tech experts on board. Such firms usually have access to a larger number of internal workforce, which ensures quicker establishment of software development centers. On the other hand, small companies might lack the resources needed to scale your team within a short timeframe.

Read more: Nearshore outsourcing: Top 25 companies with strong tech portfolio

3. Ensure the vendor has a strong employer brand 

Another essential factor to consider is the employer brand of your potential tech partner. First of all, a vendor with a powerful employer brand can attract and retain top talent in the chosen location. In addition, due to a strong reputation in the industry, such enterprises are able to recruit experts for your nearshore development center much quicker.

4. Review the customer satisfaction

Before embarking on a partnership with an outsourcing vendor, browse through their website, as well as profiles on B2B ranking platforms such as Clutch and GoodFirms. Explore the success stories, client reviews, references, and video testimonials of your potential partner for setting up a nearshore development center. This way, you will be confident in their service quality and the ability to meet your specific business goals.

5. Assess the data protection policy

The disclosure of sensitive information can result in substantial damage to a company's reputation and financial losses. Therefore, one of the key stages of setting up your development center with the help of an outsourcing partner is reviewing their data protection policy. A trustworthy tech company must comply with international information security standards and regulations, such as ISO 27001 and PCI DSS. Furthermore, ensure that your potential partner has a Business Continuity and Disaster Recovery Plan to sustain operations in case of unexpected events.

Security-related compliances that distinguish a reliable vendor

Why should you partner with N-iX to help you set up a nearshore software development center?

Establishing a software development center with N-iX helps businesses focus on their core business operations while accelerating recruitment processes, ensuring scalability, and eliminating legal and security risks. Over 21 years of industry experience, N-iX has helped over 120 businesses, including Fortune 100 companies, build and extend their software development teams (up to 100 experts). What are the other reasons why N-iX is a perfect choice?

We have set up nine delivery centers across Europe and Latin America, expanding our sourcing capabilities and establishing a strong employer brand in the regions. N-iX's network of offices and R&D centers spans 11 locations, including the US, the UK, Malta, Colombia, Poland, and other countries, allowing clients to choose a legal framework that best fits their needs. We employ over 2,200 tech experts in 25 countries, which enables you to tap into top tech expertise around the globe.

N-iX experts have wide domain expertise gained through long-lasting partnerships with enterprises from finance, manufacturing, retail, healthcare, logistics and supply chain, and other industries. 

In addition, we emphasize a robust security framework, incorporating best practices and advanced security measures to protect your data and intellectual property. N-iX adheres to data protection standards and regulations, such as ISO 27001:2013, PCI DSS, ISO 9001:2015, GDPR, and other relevant protocols.

We can set up a nearshore development center, tailoring our services to meet your specific requirements. Reach out to our team to discuss how our experience can be of service!

Set up a nearshore software development center with N-iX

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