Nearshoring yields surprising benefits – Four advantages you may not have realized

Globalization is in a turmoil. This has forced many companies to think about international operations from a new perspective. An increasing number of organizations have good reasons to use overseas resources, but at the same time they have started to value geographical proximity more than ever.

The solution: outsource work to locations that are close to your main operations; for example, to other EU countries. This concept of nearshoring yields surprisingly many benefits.

"The traditional reason for outsourcing is cost savings. However, nearshoring brings along many other benefits which may be even greater. Many companies don’t fully grasp these benefits and therefore don’t know how to take advantage of them,” says Tomasz Badowski, Sales Director for Etteplan in Poland.

Finnish Etteplan operates in six countries and offers services for e.g. engineering, software development, and embedded software design. Poland is one of Europe’s most popular providers of nearshoring services. For example, Etteplan’s Polish branch provides services to Scandinavia, Germany, and Great Britain.

Badowski sees four essential benefits that are especially evident in nearshoring:

1. Nearshoring provides relief from the scarcity of experts

Many companies have a painful lack of expert workforce. More often than not, this is evident especially in areas which are critical to the company’s business.

"In many countries, it is extremely difficult to find skilled software developers and architects. The situation is much better in Poland in this regard,” Badowski says. A good example is Etteplan: more than two thirds of Etteplan’s operations in Poland relates to software development. The rest consists of e.g. product development in electronics, mechanical design, and documentation.

One surprising fact about nearshoring is that a company may find experts in areas where there are almost none available in the home country. "For example, in Poland we have experts in functional security. These professionals are essential in product development, and they are very hard to find even in countries like Germany,” Badowski says. In addition, Poland has an abundance of testing and production services for nearshoring customers.

2. Nearshoring brings agility and speeds growth

Would you have thought that nearshoring may also be the most agile option? One reason for this is the above-mentioned lack of experts in host countries. For example, in many countries it often takes months to recruit a capable software developer. If there are no experts available, the process simply cannot be sped up by trying to hire locally.

When nearshoring, you may be able to get a project up and going in just a few weeks. Being able to use this kind of flexible additional capacity can significantly speed up the company’s growth.

You can squeeze out even more benefits by choosing carefully which projects to outsource. “Some companies outsource design functions that are not essential to their core business. A nearshoring partner may, for example, take care of maintaining legacy systems," Badowski remarks.

3. Different points of view enhance innovation

Innovation is the main success factor in modern business. And it is a known fact that innovations are cultivated by combining different backgrounds and points of view. This is one reason why nearshoring can give a boost to host company’s innovation capabilities.

Badowski gives an example: a large Scandinavian company was used to doing many prototyping rounds in product development. The problem was that it often took months to develop a new prototype.

Etteplan Poland suggested a new kind of process where the product would be divided into smaller units and the ones that involved the highest risks would be tested first. "The client didn’t immediately see the benefits of this approach. But when we took it into use, we found out the product’s major stumbling blocks in just a couple of weeks." Consequently, the development process was significantly sped up.

4. Lower costs – plus growing opportunities

Lower costs are still the among the main reasons for outsourcing. Nearshoring brings predictability and control to cost savings.

"It is very practical that the outsourcing partner is geographically near and in the same or almost same time zone. Even more valuable is that the way of doing business is similar between the host company and outsourcing partner. In nearshoring, people very often have similar ideas about quality, communication habits, and the importance of honouring commitments,” Badowski states.

He also remarks that there are many ways of putting the cost-savings into use. With the same amount of investment, a company may be able to manufacture three prototypes in Poland, where in the home country the funds would have been enough for only one prototype. You should not just pocket the cost-savings but use them to speed up innovation and stay competitive.

Read more what companies need to take into account in nearshoring projects: Three most important things you need to know about outsourcing close to home