The benefits of nearshoring and working with an external IT partner

Looking for an IT partner? After reading the headline, you probably thought: “Oh, an IT company writes about the benefits of hiring an IT company. They’re probably just trying to sell themselves.” We get it — that’s a fair point. But it’s not the only point to be taken from this text. 

The IT industry is growing at an increasing pace thanks to the fact that IT is becoming an integral part of almost every industry on the planet. Choosing the right IT partner for your software engineering needs is one of the most important business decisions modern companies face. That decision should not be made fast or taken lightly. That’s why we wrote about the risks of hiring an external IT partner and how to mitigate them. 

Now, we will analyze the other side of the coin — the benefits of working with an external software provider. Why is technology sourcing gaining more and more spotlight? Because it’s a trend that’s going to stick around for a while — and for good reason. 

Before we get to those reasons, let’s take a look at some key trends. Data gathered by Statista shows that over 35% of companies globally work with external IT partners. In financial terms, revenue generated from IT sourcing is projected to reach almost 400 billion dollars by the end of this year and to continue growing at the annual rate of 8.26%. DACH region makes up 29.12 billion dollars out of this number, and it's expected to reach 42.19 billion dollars by the end of 2027. 

As you can see, hybrid software teams (a combination of in-house and external software engineers) are a global trend that’s gaining more momentum as we speak.

As most of our clients are from the DACH region and we want to share our experience, this article will be mostly focused on trends and practices in Germany, Switzerland and Austria. However, most of the points are universal and you should consider them regardless of where your company is based. 

So why are all these companies investing so much money in outsourcing software development? 

We talked with the founder of Enlight IT, Ivan Rajković (who is also the CEO and Head of Business Development) and Nenad Pašćan, Sales Manager at Enlight IT about the key benefits of software partnerships in the current dynamic business setting.

More obvious benefits of nearshore IT partners

Let’s begin with benefits you are probably already aware of, but should be mentioned due to the importance they have in the decision to nearshore your IT. 

1. You will be saving money and time

It should come as no surprise that one of the top reasons companies decide to hire external IT partners is to save money. What's surprising is that in the recent past, many people in the industry have stated that cost reduction is a secondary benefit behind other objectives, such as increasing agility or improving the quality of service. But, due to the Covid-19 impact, Deloitte's 2020-21 Global Outsourcing survey shows a sharp increase in the number of organizations giving priority to cost reduction, and in the face of a likely pandemic-induced global recession, this number will get higher.

For instance, over a third of companies listed this exact benefit as their top reason for outsourcing. In Austria, lowering costs is the main advantage companies are looking to get when sourcing their IT work to an external partner. 

By hiring an external IT partner, you are hiring a team of educated and experienced people to take care of an aspect of your work they are specialized in, thereby saving you resources your company can use to focus on your core business. The costs of recruitment, training, research and development are also within the price tag. 

As we know, time is money, so it’s important to mention that hiring an external IT software partner will also save you time. In many growth industries, time-to-market is a critical success factor.

On average, we have cut time to market by 23% compared to what our clients had before. 

When you add the geographical aspect, the benefit of saving money becomes even more obvious. Outsourcing to countries outside the DACH region will save you even more money. 

We estimated that our clients from DACH have on average saved 40% on development costs and 50% on total costs compared to what they would have paid had they hired a local IT partner. 

2. You will work with scalable teams which allows for dynamic budget allocation

Finding the right employees is hard, but finding the right employees in IT is even harder since many countries suffer a shortage of qualified and experienced software engineers. This is why hiring them also comes with a substantial price tag. Maybe you don’t need IT experts in your company all the time – you just need a project to be done. If you hire and then try to fire your IT team once that project is finished, that will poorly reflect on your company’s reputation and will cost you many law-guaranteed severance packages.  

This is another problem you won’t have if you allocate the task to an IT company. We make sure that we have the best IT experts working with us and our goal is to keep them for a long period. As an IT company, we always have projects for them to make the most of their skills and knowledge – including the projects you entrust us with. This allows us to scale the team according to your dynamic needs.  

Research has shown that scalability is the number one reason that drives German and Swiss companies to outsource their IT tasks. They need their IT partners to be able to adapt to changes in their business dynamic – to speed up or slow down when they need them to.

Together, we will determine what kind of team you need for your project and how that can be achieved within your budget. As your need for external IT support increases or decreases, so will the number of people working on your external IT team. As your IT partner, we will follow your business growth every step of the way and adjust to your budget if you need to downsize or finish your project. 

3. You will have the best and the brightest talents working for you

Why is it easier for IT companies to hire IT engineers compared to non-IT companies? Because they usually offer more competitive salaries, constant workload and better opportunities for learning and development. This makes it much easier for them to attract qualified and talented IT professionals to work for them. By hiring an IT company, you get all this talent at your disposal without having to draw them with high salaries and expensive training. 

Moreover, many of our DACH clients have listed the shortage of local IT labour as one of the main reasons they decided to hire a foreign IT partner. This comes as no surprise when we take a look at the statistics. In 2020, 70% of companies in Germany stated they have a shortage of IT staff. Research by the Institute for Economic Studies Basel (IWSB) predicts that by 2028, there will be 120 000 vacancies for IT experts in Switzerland. Access to the global talent pool can be a solution to this problem.

Not so obvious benefits of nearshore IT partners

Besides the ones we have already mentioned, there are several benefits you receive by hiring external IT experts that you haven’t usually thought about beforehand. 

1. You will get insight and experience from various industries

As an IT company, we work with partners from many different sectors and industries. This allows us to get a scope of how things function in those industries and apply that knowledge to solving your problem. 

We are often surprised by how much our knowledge from previous experiences can help solve a problem in a completely different industry. By practicing a different way of thinking, we could approach the issue more efficiently than your in-house IT. This knowledge base distinguishes IT companies from in-house IT teams.  

2. We analyze trends in the market to support your vision of growth

If your company is not in the IT business, keeping up with progress in this ever-changing industry may be challenging. Hiring IT experts whose job is to do this for you can help you get the best out of new technologies without spending additional resources on research. 

We make sure to employ the latest and most suitable technologies for each project we work on and we closely follow the trends in the IT market so that we can advise you on the best way to continue your growth. One of our goals is to discover and implement the best technological solutions in favour of the vision you have for your business in the future. 

3. We’re asking the right questions to help you find the best solution

As your IT partner, we are not here to simply execute the idea you come to us with. We are here to understand what your problem is and what you need to do to solve it. Gaining a detailed insight into your business and your plans for the project is of crucial importance to the quality of the product we will deliver in the end. 

This is why we have the Project initiation checklist we go through with every potential client before we start working together. This list is our way of understanding how we can do the best job of helping you. Sometimes that includes challenging the ideas or perceptions you might have had when you came to us. The ultimate goal is to deliver what you need and sometimes, as a result of the information gap, what you need is not the same thing you asked for.

Things to keep in mind when looking for nearshore IT partners

To reap the most of the benefits that come with external IT partnerships, you should make sure the IT partner you chose is the right fit for your company. The obvious things to consider are technical knowledge, skills and expertise. However, for your cooperation to be as smooth and rewarding as possible, you should make sure your IT partner has clear processes and procedures in place. This will help create a mutual understanding, as well as good communication and ensure that the quality of the product is high. Moreover, these procedures help ensure that your IT partner’s team will integrate well with your company culture. 

Why is this important? Because as we see it, quality is not the end result, but the trait of an entire software development process that begins from our first meeting. Therefore, the best quality can be achieved through the right procedures and a structured way of work.

Another concern you might have when it comes to working with external IT partners is the fact that the laws, regulations and working culture in other countries can be different from your own. This is why it’s always recommendable to partner with companies from regions that are not only geographically, but also culturally close. 

The DACH region has that kind of relationship with the Western Balkans, which has been confirmed not only through our experience but through the experience of many different companies from various industries. Time zones and geographical proximity are of special importance in time-sensitive projects. 

However, if you’re still reluctant about doing business with an entity from another country, you can search for IT companies that have an office in the DACH region. That way, your cooperation, and legal contracts will be regulated by the law of that country and you’ll feel safer. 

Our company is among those — we are based in Switzerland, but our main software development office is in Novi Sad, Serbia. 

We hope this article helped you understand the outsourcing buzz, what drives it and why your company should consider joining it as well. In case you are in search of an IT partner and are interested in what we have to offer, we would love to hear from you and discuss a potential partnership.