How to Prepare for IT Nearshoring Cooperation

Nearshoring has numerous benefits to offer. But businesses need to understand how to prepare for outsourcing to overcome potential challenges and ensure that expected results are achieved. 

More and more companies today are Outsourcing their IT needs to nearby countries. According to Statista, global IT outsourcing contract value in 2019 stood at $62 billion. Though this strategy has many attractive benefits, there are also a few unique risks you may experience in different stages of the outsourcing lifecycle.

Some of these challenges include non-alignment of nearshore objectives with your business approach, false outsourcing assumptions, poor Vendor selection, and inefficient transition. Here, you will learn what’s important before you outsource, how to seal the partnership, and what the right way to pick a vendor is. 

Things to Know Before Outsourcing IT Services

There’s a stage in the nearshore software development that many people tend to ignore. And that is preparation. It’s a crucial stage as it’s the initial formal interaction with the service provider that highlights the client's full requirements. This stage can be broken down into six steps as follows:

Procedure and scope

This phase deals with detailing the IT outsourcing process: It is the point where the transition from in-house to outsourcing vendor is detailed. For a seamless transition, collaboration is imperative.

Developing the deal structure

The purpose of this phase is to create the deal structure detailing the main principles plus goals of the partnership. It should break down the financial aspect and the expected results.

Vendor management

Here, you invite and select vendors who will be involved in the request for proposal procedure. Vendors are usually given the project requirements and allowed to ask questions at this stage.

Individuals

This stage is about collaborating with stakeholders to work out the expertise and skills for the vendor when transitioning. Everyone involved is prepared for the outsourcing partnership.

Defining the operation mode

Activities at this point revolve around designing the internal operation procedures during and post outsourcing. Begin with the current organization procedure.

Tax

The last phase of this process is about defining appropriate tax for delivering the outsourced services. It puts into consideration all legal requirements that will be involved in the outsourcing process.

Choosing a Service Provider

Picking the right vendor can be challenging. What should you look at? Here are several factors:

• Pricing options: do you want fixed or variable options?
• Expertise: are you looking for specialized developers or those with skills in a broad area?
• Savings vs. Speed: are you looking at how much of your savings will remain in the long run or at how fast you will bring down costs?

Remember, no provider will be perfect. So, know what you want when outsourcing and be prepared for some tradeoffs.

How to Formalize the Collaboration

Once you’ve identified the right vendor, it’s time to formalize the agreement by signing a contract. However, this process shouldn’t be exhaustingly long.

 Essentially, the contract should define the development approach, pricing (i.e., Fixed, T&M, or Hybrid), resources allocated, seniority level, developer alternatives, exchange rate index, the period within which rates remain unchanged, employee regulations, notice period, and any extra costs associated with the venture.

Summary

All in all, nearshoring is the best way to outsource IT because it’s easier to travel, organize workshops, and meet with the development team when you are in nearby countries. It allows for convenient communication, as there are no time zone differences, and the culture will be almost similar.

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