Mitigating Risks in Nearshoring: Best Practices for Businesses in 2025
- Leanware Editorial Team
- 1 day ago
- 9 min read
Most businesses are embracing nearshoring as a core strategy for operational efficiency. The nearshore talent is highly skilled and works in a similar time zone, which makes it a smart decision to integrate talent into their workflows.
But with a large list of nearshoring benefits, there are risks associated with this model also, and it’s key to take proactive actions to avoid those pitfalls. In this article, we will explore the potential risks associated with nearshoring and what are the best practices to mitigate those key issues.
TL;DR
The Nearshoring model offers businesses access to a large pool of highly skilled talent, but businesses must prepare for the challenges associated with this model.
These potential challenges include communication gaps, data privacy concerns, and inconsistent quality if expectations aren’t clearly defined.
If proven strategies are not taken to avoid those risks, it can impact the timelines and overall success of the project.
Choosing the agile team, setting project milestones, and having a clear communication plan set the stage to mitigate the risks and, ultimately, ensure the project's success.
What Is Nearshoring?
Nearshoring is the outsourcing model where a business outsources work to a team based in a geographically closer country. For instance, U.S. companies working with LATAM-based teams are following a nearshoring approach.
Nearshoring vs. Offshoring: Key Differences
Both nearshoring and offshoring help businesses to reduce operational costs, but the difference lies in their work culture and time zone alignment. Here are some key differences between these models.
Factor | Nearshoring | Offshoring |
Location | Nearby countries (e.g., Latin America, Eastern Europe) | Distant countries (e.g., India, China, Philippines) |
Time Zone Overlap | High – enables real-time collaboration | Low – often 8–12 hour difference |
Cultural Alignment | Stronger cultural and business similarities | Greater cultural and communication gaps |
Travel Convenience | Easier, shorter, and more affordable | Long-distance travel; less frequent site visits |
Cost Efficiency | Competitive, with better communication value | Lower hourly rates and average quality work |
Why Companies Are Turning to Nearshoring in 2025
Nearshoring has become a top priority for businesses looking to hire competitive talent in closer proximity. According to the Bain & Company 2024 report, 80% of COOs plan to increase their nearshoring team by 2026.
Lower operational costs and supply continuity are the key reasons why companies are turning to nearshoring.
Companies also want more control and adaptability in their operations, and nearshore teams based in Colombia, Argentina, and other LATAM countries are providing that freedom to those businesses.
Due to time-zone overlap, companies can coordinate in real-time, and that results in a speedy product development lifecycle.
Advantages of Nearshoring
Nearshoring comes with more advantages than downsides; that’s why most businesses are integrating it into their operational strategy.
Proximity and Time Zone Compatibility
The major drawback when hiring offshore teams is the communication delays due to larger time zone differences (which may be 8–12 hours ahead or behind). But nearshore talent operates in a similar time zone, which makes real-time communication possible and feedback loops easier.
Moreover, the geographical proximity allows for in-person meetings and stronger relationship-building. All of these factors create a just-next-door neighbor that simplifies the coordination.
Cost-Effectiveness
Skilled talent from nearshore countries like Colombia, Argentina, and Poland is cost-effective when compared to hiring onshore talent. However, this cost-saving does not impact the quality of the services, as nearshore countries have a highly skilled talent pool.
Nearshore teams typically deliver high-quality work with fewer miscommunications or costly revisions. So, hiring nearshore talent offers a perfect balance between quality and price.
Access to Skilled Talent Pools
Regions like Latin America and Eastern Europe have some of the largest tech talent pools. Eastern Europe has been home to more than 1.5 million software developers, while Mexico and Brazil, both Latam countries, collectively produce more than 600,000 graduates every year.
Due to tech-friendly policies and large investments in tech infrastructure at the government level, these regions have become top destinations for global tech giants.
Improved Collaboration and Communication
Fluent English is one of the biggest advantages of working with a nearshore team.
According to the EF English Proficiency Index, the LATAM region has the highest English proficiency rate after Europe. This language proficiency allows them to integrate smoothly into the existing workflow and communicate with the team to resolve issues.
Common Risks Associated with Nearshoring
There are multiple upsides to hiring nearshore talent, but there come risks along with it also, and it is important to handle these issues promptly. Here are the most common risks that are associated with nearshore outsourcing.
Communication and Cultural Barriers
Although there is a geographical proximity, still, the language proficiency and work culture differ across borders, and these differences create misunderstandings between them.
Moreover, the cultural or regional holidays may differ in some regions, and that can cause unexpected project delays.
Security and Data Privacy Concerns
If the nearshore team does not comply with International data protection standards (like GDPR or SOC 2), your business is likely exposed to potential security leaks.
For instance, sectors like finance or healthcare have specific privacy regulations, and misalignment with them can further complicate compliance.
Quality Assurance Challenges
Even highly skilled nearshore teams can produce inconsistent results if project expectations and quality standards aren’t clearly defined.
For Instance, if there is a difference in engineering methodologies or clear workload prioritization, it can result in bugs in the final product.
Geopolitical Instability
Nearshoring minimizes many global risks, but it doesn’t eliminate them. Political unrest, economic volatility, or shifting regulatory policies in the nearshore country can impact timelines, costs, or even business continuity.
Choosing politically stable destinations and maintaining contingency plans can help businesses navigate these uncertainties.
Regulatory and Compliance Hurdles
Labor, tax, and data governance laws are different for each country, and unfamiliarity with the legal landscape of a nearshore partner’s country can result in a breach of compliance and unexpected liabilities.
For instance, local rules around employee classification or data residency may differ significantly. So, legal clarity through well-written contracts and guidance from local counsel is essential to avoid costly missteps.
Proven Strategies to Mitigate Nearshoring Risks
There are risks associated with nearshore outsourcing, but with the tested and proven technique, you can mitigate the potential risks associated with nearshoring.
To simplify these strategies, here’s a quick visual breakdown of the five essential steps every business should take to reduce nearshoring risks:
1. Vet Providers for Security Practices and Certifications
Make sure your nearshore partner follows industry standard practices and has certifications in place. Check for certifications like SOC 2, ISO 27001, as they ensure the credibility of a service provider.
2. Prioritize Language Proficiency and Cultural Fit
Consistent communication is key for building a tech product at a fast pace, but the language issue is one of the biggest hurdles to achieving it.
Luckily, the LATAM region has one of the highest English proficiency standards after the European region, and most of the developers in the region are very fluent in English.
3. Choose Agile Teams with Modern Tech Capabilities
Technology is ever evolving, and your nearshore team should have the agility to adapt to the changing demands.
Consistent quality product development comes off the back of having established processes in place and integrating modern technologies.
You should always look for companies that have proper processes to build tech and adopt modern technologies like AI.
4. Define Clear Communication Channels and Milestones
You need to establish clear communication channels and define key stakeholders before starting your project. It allows the nearshore team to understand who to meet for specific issues, which helps with ideas to float smoothly and make quick decisions.
Setting well-defined milestones from the start also makes it easier to measure progress, whether you’re working with a staff augmentation model or opting for managed services.
5. Establish Legal Clarity Through Contracts and SLAs
A legal contract is a safety net for both parties. The legal agreement should include well-defined deliverables, timelines, payment details, and dispute resolution mechanisms. This protects both sides and keeps everyone accountable.
For Instance, if you have a legal contract in place, your nearshore team can’t surprise you with some hidden charges.
6. Select Locations with Stable Geopolitical Environments
Political unrest in the country can disturb your project timeline massively. Always look for factors like a country's economic trends and political system.
Luckily, most countries in Latin America have shown unprecedented economic growth and development in the recent past due to their stable government policies.
7. Start with Pilot Projects to Evaluate Fit
If you went through the first 6 steps, then it’s time to start building the first project with your nearshore team. You should always start with a short-term project to test the nearshore team’s communication, quality, and responsiveness.
For instance, if you are satisfied with their performance in the short-term project, then consider scaling afterward.
Top Nearshoring Destinations
With a massive shift towards nearshoring due to a high demand for their highly skilled talent pool, most companies are targeting Latin America and Eastern European regions. Major tech giants have also expanded their teams in these regions.
Latin America
Latin America has emerged as one of the most sought-after destinations for nearshoring services. Several countries have become technical hubs in this region due to their growing tech ecosystem, government incentives, and large talent pools.
Below are some leading countries in this technology era.
Colombia
Colombia has become one of the largest tech hubs in the LATAM region, attracting global businesses and investors looking to hire software developers.
With government-level support and a rising number of tech professionals, the country has a big force ready to tackle the growing demand for nearshore services.
Colombia is home to more than 150,000 tech professionals and is ranked 2nd in LATAM for core programming skills
Medellin has attracted 300+ global companies and created 8,000+ tech jobs through Ruta N, a Colombian government program. Medellin is also considered the “Silicon Valley of LATAM".
The country is known for its affordable workforce, whose work culture is aligned with Western values.
Argentina
Due to its strong startup ecosystem and highly skilled developers, Argentina has been one of the prime destinations for nearshoring services.
The country is among the top 3 largest economies in the LATAM region and has attracted a lot of global investments in AI and blockchain.
The country has positioned itself as a Global leader in Web3, blockchain, and AI.
The Argentinian government has invested more than $280 million to develop its tech infrastructure.
Mexico
Mexico is a nearshoring giant, offering one of the largest IT workforces in the region. Its proximity to the U.S., English fluency, and agile-certified talent make it a top pick for North American companies.
Home to 700,000+ IT professionals, many with Scrum and Agile certifications.
Big tech giants like IBM, Microsoft, and Oracle have established their research and development centers in Mexico’s key cities.
One of the highest English proficiency rates in the entire LATAM region.
Eastern Europe
Eastern Europe is also one of the key regions that offer highly educated tech professionals, and they are culturally compatible with U.S business practices. However, the region is far away from the U.S. and has zero time zone overlap, which makes it difficult to have smooth communication.
The language barrier is also one of the key issues in this region, as software developers in Eastern Europe have very low proficiency in English.
Future of Nearshoring
Nearshoring is taking a big shift in the future from just a cost-driven tactic to a long-term strategic move.
Big tech giants have built their entire new teams in nearshore regions like LATAM and Eastern Europe, and a number of software development companies have emerged in these regions, delivering end-to-end product development.
Impact of AI and Automation
AI and automation have powered nearshore companies by making them more efficient and faster. AI-powered tools are being used to automate testing and accelerate code delivery, which makes it easy for them to deliver quality output at a faster pace.
In short, AI has helped service providers offer higher-value services and helped client companies tap into advanced technologies without major investment.
Environmental and Sustainability Considerations
With global warming concerns and the tightening of ESG regulations across the markets, sustainability is becoming a core part of the vendor selection process.
Many nearshore providers are already working in regions with strong environmental regulations that make it easier for businesses to achieve their sustainability targets.
Predictions for Global Supply Chains
Global supply chains are more inclined towards nearshoring, as businesses need cost-effective talent, more control, and lower risk during disruptions.
More than 80% of COOs have a plan to increase nearshoring by 2028. U.S. companies are building their teams across Latin America, while European firms are expanding in Eastern Europe and nearby markets.
As this trend accelerates, having the right nearshoring strategy and the right partner will make all the difference. Contact our experts to get more guidance.
Frequently Asked Questions
What are the advantages of nearshoring?
Nearshoring offers a balance between cost and quality. This model provides companies with access to highly skilled talent in nearby regions that have similar time zones and higher English proficiency. There is also a small difference in work culture across regions.