Over the past few years, European nearshoring has increased dramatically. Nearshore software development Europe refers to the practice of outsourcing software development projects to countries that are geographically close to the client, often within the same time zone or a few hours apart. This model offers several benefits, such as reduced travel time, cultural similarities, and better communication, while still offering competitive pricing compared to onshore (domestic) development.

The Role of Nearshoring in Overcoming Workforce Gaps

Some key factors make nearshoring software development a unique option for businesses to survive. One of the most frequent reasons is the talent pool shortage in Western Europe. While the number of IT specialists increases, the requirement for IT experts becomes even higher. The rapid digital transformation creates an unprecedented need for skilled IT professionals. Thus, nearshoring is an essential solution to satisfy a company’s needs while staying competitive.

In particular, countries like the UK and Germany are experiencing one of the highest shortages of IT talent. There is a 70% shortage in these countries. Nordic countries are almost in the same position. The cause of such a workforce gap is natural. In Western Europe, many educational systems are focused on one general IT skill. It takes about 3-4 years to gain this skill and complete practical experience. While the competition for further job positions is high, the time taken to achieve these results is not proportional to the frequency of the new technologies emerging and widespread. In this highly variable environment of IT technologies, it is crucial to be flexible and foster new skills and programs in a short period. In addition, there is a generational gap that leads to the lack of talent in the West. As the older workforce retires, there are no individuals to replace them immediately.

Since the COVID-19 pandemic happened, the search for IT specialists has become a worldwide practice. The accelerated necessity for remote work caused a deficit in the talent market. Another problem lies in the lack of representation of any inclusion group. Women and minorities. This underrepresentation limits the number of qualified candidates.

Taking into consideration the hiring cycles in Western Europe makes it another explanation for the instability of the domestic IT labor market. The hiring process is lengthy with prolonged timelines that may cause some frustration among candidates. On the other hand, those who are highly qualified receive multiple job offers and may switch easily, creating the challenge for the CEO to replace them in a short time.

In addition, some Western European countries face challenges in domestic economic or political situations. For instance, the UK’s exit from the European Union (Brexit) has caused more trouble for IT professionals to work in the UK. This led to a significant shortage of international workers. Economic difficulties also affect the organization to look for the most affordable solutions and hire IT workers in countries with the lower living cost.

Benefits and challenges

While nearshoring their business to the nearest countries, companies get some opportunities; among them are:

• access to a larger talent pool;
• cost-effective solutions;
• faster time of connection with a team;
• cultural and language similarities;
• increased flexibility in the hiring process.

Although nearshoring offers many advantages, it may also conceal some challenges, such as:

• language barriers and cultural differences;
• legal and regulatory issues;
• quality control;
• integration of multicultural or international teams;
• logistical challenges.

Where do companies nearshore their businesses, and what drives their choices?

There are some most common choices for nearshoring business practices in Europe. Let’s take a look at them.

The nearshoring from the Nordic to the Baltic region

The Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) usually nearshore their businesses to the Baltic region (Estonia, Latvia, and Lithuania). The geographical proximity and cost advantages make this choice very obvious. A similar way of decision-making and cultural fit makes this collaboration even more efficient. Estonia, Latvia, and Lithuania are only one hour ahead of the Nordic countries, ensuring convenient working hours.

The fact that Estonia, Latvia, and Lithuania are extremely stable in economic and political spheres, makes the outsourcing choice even easier. The Baltic region is also known for its strong digital infrastructure and government-led initiatives such as e-Residency in Estonia. Thus, many international companies, like Google, IBM, and Microsoft open their Research and Development centers in the Baltic States.

At the same time, Estonia is struggling with an aging workforce, while Lithuanian IT specialists are looking for job opportunities in other countries with their relocation options. This causes more concerns and leads to finding new solutions to solve the talent shortage problem.

Nearshoring from the UK

With the average statistic of a 70% talent pool deficit in the UK, the IT sector is constantly looking for ways to fill the gaps in the labor market. The most common nearshoring destinations of UK companies are Western European, Central European, and Eastern European countries. While both Western Europe and CEE (Eastern Europe) offer the same high level of education and English proficiency, there are some main differences in cost-saving conditions and communication styles with attitudes that influence the choice between them. Countries like Poland, Romania, and Hungary offer a high level of technical expertise, while the salary rates and living costs are significantly lower. On the other hand, time zones of Western Europe usually ally with the UK, while CEE countries are mostly two hours ahead (Romania, Bulgaria, Ukraine).

One of the most threatening challenges while nearshoring one business to the Eastern European region might become political instability. In 2014, Russia occupied 3 Ukrainian regions and continued this aggressive invasion on February 24, 2022, causing thousands of deaths and damage all over the country. The closest countries are under the gun as the history represents and the geopolitical situation represents.

Having evaluated all pros and contras it is more reliable to find a trustworthy engineering vendor in this region to overcome all difficulties and risks while building a nearshore team. N-iX is the best choice for such requirements, as the company has a Europe-wide presence and is recognized on the international level.

Conclusion

To sum up, European nearshore software development has proven to be a strategic solution for businesses to overcome challenges of modern-age realities, such as the aging workforce and highly competitive, proficient environment. The nearby country may become the best choice for companies that are planning their growth and innovation development. There could be some obstacles as well. The wise planning and choosing experiences and trustworthy partners must help to facilitate the transition process.