Nearshoring as a strategic competitive factor for SME’s

Why Nearshoring can resolve Recruitment Problems

The German IT industry, and in particular small and medium-sized enterprises (SMEs), see themselves exposed to a latent shortage of skilled workers due to several factors (BMWi, 2012; Destatis, 2019). Problems arise, among other things, from inadequate training but also from legal uncertainty for self-employed IT experts who migrate from Germany as a result (GULP / VGSD, 2019). The effects of the COVID-19 pandemic made this clear as a catalyst and further exacerbated the issue, for example in the area of recruitment of software developers (Springer, 2021).

A division manager at the full-service provider, names four possible solutions in this context (ICT-Channel, 2019):

(1) Conventional recruitment,
(2) Internal training of employees,

(3) Outsourcing to specialized service providers or freelancers in Germany (onshoring),
(4) Outsourcing abroad, whereby a distinction is made between EU countries (nearshoring) and non-EU countries (offshoring).

From a statistical point of view, outsourcing to Europe and in particular nearshoring within the EU is the preferred option for the vast majority of German companies to attract skilled workers: 77% of the German companies that do nearshoring outsource their software development to Europe to other regions of the world (CBI, 2019). Surveys among German entrepreneurs show a very high level of satisfaction among IT companies with the outsourcing of projects (Whitelane Research, 2020). Each of the four approaches mentioned has certain advantages and disadvantages and is therefore suitable for specific requirements. This can be illustrated using the following criteria: Know-how / quality control Compliance Scalability costs compared to conventional approaches, nearshoring, in particular, offers a balanced balance of all five criteria and thus a “middle way to expand your own workforce” (IT-ZOOM, 2020): This means that there are significant efficiency advantages for the client from the high quality of the result, Transparent control of data and work results with at the same time high legal security to EU standards, high flexibility due to the quick adaptability of the workforce (team composition and resolution within one to two weeks) at relatively low costs (in terms of production and administration), especially in comparison to workers resident in Germany.

Furthermore, an optimization and better utilization of existing business processes and resources can result. Due to the comparatively high availability of skilled workers with relatively low labor costs, Poland is a particular focus in the EU (HackerRank, 2016; Tholon, 2020). Spain holds its own at the top when it comes to opportunities to fill positions in the IT sector quickly and adequately (Eurostat, 2017). These countries are therefore particularly attractive for nearshoring IT services.

Ultimately, it is crucial for an individual company to open up alternative approaches such as nearshoring in coordination with their own requirements, to recognize the competitive advantages for their own business and to implement suitable solutions in cooperation with competent service providers.

Source: bitmi – Bundesverband IT-Mittelstand e.v, A. Barke

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