Nearshoring series part 1: Intro diselva Nearshore Excellence Framework

Nearshoring and offshoring are omnipresent in the IT world. Sometimes as a trend towards shoring, sometimes as a counter-trend away from shoring. But they are never out of focus. The step towards nearshoring (or away from it again) is often of enormous, sometimes even existential importance not only for individual projects, but for entire companies. This is why this step should be approached strategically. The following applies: every nearshoring case is individual and requires a tailor-made solution. At diselva, we are the right people to talk to when it comes to supporting nearshoring and offshoring projects from start to finish. Our experts have not only selected, set up and managed nearshoring locations, but have also worked on numerous projects in various setups with nearshoring and offshore teams in day-to-day business and know exactly what is important.

We have developed the diselva Nearshore Excellence Framework for nearshoring and offshoring consulting. It is based on four pillars that must be taken into account in every nearshoring project:

Für Beratungen rund um das Thema Near- und Offshoring haben wir das diselva Nearshore Excellence Framework entwickelt. Es basiert auf vier Säulen, die in jedem Nearshoring-Projekt berücksichtigt werden müssen:

1. Definition and sharpening of the business model
2. Development and scaling of the nearshore business
3. Definition of the collaboration model
4. Integration and successful collaboration

In the first blog in this series, we take a look at the first pillar of the framework: “Defining and sharpening the business model”. 

Pillar 1: Definition and sharpening of the business model

Before starting a nearshoring project, the motivation behind the decision must first be analyzed and precisely understood. The most important question is: Why nearshoring at all? What is it intended to achieve? Roughly speaking, in most cases, two things are at the forefront:

• Cost reduction
• Access to talent

This fundamental decision is crucial, as it influences the entire further course of the shoring project. Years ago, the focus of nearshoring was often clearly on reducing costs. Companies relocated IT jobs to cheaper countries (extended workbench approach). However, this approach is no longer the only real solution. The “war for talent” has now become the top priority. Competition for well-trained specialists is huge worldwide. Nearshoring locations give companies access to a wider talent pool. This is of paramount strategic importance for many companies, which is why cost reduction is being pushed further and further into the background.

Of course, in the case of a nearshoring location in Eastern Europe, you still benefit from lower costs. However, the difference to the West is becoming smaller. This is due to rising wages and an exported war for talent, as well as the higher demands of local talent: Attractive office space is just as much a matter of course as, for example, the desire for full private health insurance for the entire family).

For many companies, it is no longer enough to simply find cheap labor. Rather, it is a question of attracting and retaining highly qualified talent - in an increasingly competitive environment. In a few years' time, the only relevant question will be whether or not you have access to specialized professionals.

Important questions when defining the business model

• Cost reduction or access to talent?
  • What is the company's priority? Is it primarily looking to reduce costs or is access to talent the main priority?
• Should the location be inside or outside the EU?
  • This question plays a particularly important role when dealing with customer data, especially with regard to GDPR and DSGVO.
  • This question also plays a role in terms of costs. As soon as a country is part of the EU, the costs increase.
• What skills are required at the nearshore location?
  • Is the location in a position to provide the necessary technical skills? And what about the local engineering culture?
  • Which universities train talented people?
• What legal and bureaucratic hurdles are there?
  • Bureaucracy and investor friendliness are key factors that influence the selection process for a nearshore location.
• What are the mandatory requirements for collaboration to work?
  • Not only the accessibility of the location plays a role here, but also more complex factors such as internal cost allocation, which are important (or not) for smooth collaboration.
• Which setup are you aiming for?
  • Setting up your own nearshore location is not the only option. There are many alternatives: Working with freelancers (directly or via EOR companies), cooperating with companies that already provide entire nearshoring teams, buying and integrating a nearshoring company or simply setting up your own location.
• Which country specifics need to be taken into account?
  • It's not just about socio-cultural differences and challenges (which would be worth a blog post of their own), but also about economic conditions, bureaucratic hurdles when setting up a company and how investor-friendly the climate in the country is.

This first pillar is therefore not only about defining the economic goals, but also about thinking about the specific framework conditions that the chosen location must offer. A well-defined business model lays the foundation for the entire nearshoring process - from the choice of location to the team structure.

In the next blog, we will address the question of how to set up and scale a nearshore business. What are the most important steps for successfully establishing the location and how can the business be expanded sustainably? We will also take a look at collaboration models and the successful integration of nearshore teams into project structures.