Basic considerations for Outsourcing / Nearshoring

Basic considerations for Outsourcing / Nearshoring

There are usually three main reasons for interest in nearshoring:

  • Unsuccessful search for IT specialists in Germany/DACH
  • IT specialists in Germany are too expensive

The topic of outsourcing and nearshoring is quite comprehensive, and there are some basic terms and correlations that you need to be familiar with as a decision maker.

First, a distinction must be made between onshoring, nearshoring and offshoring .

  • One speaks of onshore when the work is done in Germany.
  • Offshore means a distance from Germany of more than 3 flying hours. This means we are talking about countries like India, Far East, South America etc.
  • On the contrary, we speak of nearshore when 1-2 flying hours are necessary to reach the place of performance. Thus, we are talking about Eastern Europe, Southern Europe, North Africa.

This distinction is important because different regions are associated with different time zones, cultural differences, costs and also language skills.

The time difference can have a massive impact on productivity , for example, when the team in Germany cannot exchange information on an ad hoc basis with the team in Southeast Asia. Also, if the cultural distinctions are too significant, this can easily lead to problems of understanding - even if the language skills on both sides are good, as it often depends on what is meant between the lines.

Another factor is duration. Is it a project of a few weeks or a few months, or do you need a team for an indefinite period?

If a project lasts only a few weeks or months, then it might be a good idea to look for a freelancer - for example, at Upwork.

If the project lasts longer and requires a team rather than an individual, then it is preferable to invest more time and effort in choosing the right outsourcing option.

Even if there is an entire pipeline of projects or a product to be developed, then you tend to prefer your own team or subsidiary abroad. Considerations regarding intellectual property also play a role here.

Another important issue is the contractual forms between the company and the outsourcing provider. In Germany we usually know:

  • Service contract, in which a service is owed
  • Contract for work and services, in which an output, a work, in our case a software, is owed.

These two forms are often not the ideal solution. Therefore, parts from both forms are combined to meet individual needs. These contractual forms are also linked to important questions in the area of social security and labour law.

As you can see, there are a number of major issues that have a strong influence on the success of this project. We have broken down the subject areas further.