Nearshore has become an increasingly popular business practice for many companies worldwide. By transferring some of their operations to locations closer to their home country, businesses can lower costs, reduce risks, and enhance their competitiveness. Switzerland is no exception. The country has been exploring the potential of nearshore, particularly during the COVID-19 pandemic, with its high labor, rental, and operational costs. But is nearshore the solution that Switzerland needs? We will consider the pros and cons of nearshore in Switzerland to help you stay informed.
Custom Software Development Nearshoring for Switzerland
Europe’s most popular nearshore services include custom software development, IT consulting, and software integration. So more and more companies worldwide choose to nearshore IT experts in Hungary, Ukraine, Poland, Czech Republic, and Romania. According to the Statista report, the IT outsourcing market in Europe will keep showing growth in the coming years. The revenue in this market has an annual growth rate of 10.58% (CAGR 2023-2028), resulting in a market volume of $240.60bn by 2028.
*Source: The Swiss Job Market Monitor from the University of Zurich
Switzerland is considered to be one of the fastest-developing countries. The capital, Zurich, is a major center for finance and technology. Regarding software development services, Switzerland is among the most expensive countries in the world, with the US coming in second. That is probably the reason why business nearshore tendency has received a lot of attention in recent years.
It functions particularly effectively for businesses actively going into their digital transformation journey, developing custom software systems, updating their web pages, and implementing internal or customer-facing software. While some business owners find this tendency wise and beneficial, others have yet to understand and try it. Let’s discover all the benefits the nearshoring trend can bring to any company worldwide, particularly in Switzerland.
Pros of Nearshore Outsourcing Software Development in Switzerland
|Access to world-class talent in Europe
|One of the main challenges of nearshore in Switzerland is the limited talent pool. As a small country, Switzerland has a relatively small labor force, which is highly skilled but expensive. According to Glassdoor, the yearly average salary for IT specialists in Switzerland is €120,000.
|Access to the best skill scope, software development practices, and approaches
|developers speak fluent English;
most of those specialists are highly educated and highly qualified IT experts in Europe;
utilizing cutting-edge technologies;
follow the principle of lifelong learning;
follow EU legal norms.
|Proximity to the market
|Another advantage of nearshore is that it provides companies with easier access to their target markets. In most cases, the nearshore locations are within 1-3 hours of flight distance.
|While there is a shortage of talent in Switzerland and talent costs are high, companies tend to keep their IT departments as small as possible. It overloads local teams and reduces the capacity of possible innovation within the business.
Nearshore can reduce the risk of losing all your system-related knowledge to a key employee.
Nearshore can also reduce the risks associated with offshoring. By having operations closer to their home country, companies can mitigate political risks, currency risks, cultural clashes, and legal issues. This is especially relevant in today's global environment, where sudden changes in international relations, trade policies, or health crises can disrupt supply chains and operations.
|One of the main reasons companies nearshore their operations is to reduce operational costs. Companies can save significant money by outsourcing activities like software manufacturing, support, and system integrations to countries with lower labor costs. Switzerland, for instance, has some of the highest labor costs in the world. Recent statistics show hourly labor costs in Poland or Ukraine are still below the EU average.
|Similar schedules and cultures
|The cost of nearshore to Eastern Europe may be higher than that of offshore outsourcing locations, but their different schedules and cultures may hamper communication between the two regions.
Some Blockers to Nearshore and Outsource as a Solution
|The fear of failure
|Companies may worry about the quality of work delivered by remote teams. Obviously, you do not have to trust nearshore vendors by default, and good practice will be conducting due diligence, performing interviews with potential candidates, and doing a short-term test project before a long-term commitment.
|Language barriers and cultural differences
|Nearshore in countries with different languages and cultures can also pose communication and integration challenges. Switzerland has four official languages (German, French, Italian, and Romansh). It can make it more complicated for foreign companies to find bilingual or multilingual staff. Moreover, Swiss business culture is highly regulated, hierarchical, and formal, which can clash with nearby countries' more dynamic and informal cultures.
|Protective behavior of Swiss employees as resistance to change
|There may be internal resistance to adopting the nearshore model due to traditional business practices or concerns about job displacement.
Swiss IT Labor Market vs Polish and Ukrainian Markets
In today’s globalized world, companies constantly compete to acquire top talent to stay ahead of the curve. It has led many countries, including Switzerland, Poland, and Ukraine, to invest heavily in their IT labor market. They offered attractive salaries and benefits to attract the best and brightest minds.
IT labor markets in Switzerland, Poland, and Ukraine are currently in different states. Switzerland is known for its high standard of living and stable economy. It has a strong IT sector with a consistent demand for skilled professionals. The talent shortage is reported particularly in cybersecurity and software development areas.
Poland has established a solid reputation for providing top-notch services for software development. Polish businesses and individuals follow best practices in the field. As they have a proven track record of accurately completing projects. Software solutions created in Poland are guaranteed to meet client expectations. The nation’s standards are quality control, extensive testing procedures, and adherence to international standards.
On the other hand, despite the war, Ukraine’s IT industry is expanding due to a sizable pool of highly qualified and reasonably priced talents. Understanding the nuances of each market and potential employers’ demands is essential. It helps choose a nearshore team as outsourcing partner on certain attractive grounds for your business.
Why Do Swiss Businesses Choose Nearshore Software Teams From Ukraine and Poland?
It’s known for its precision and efficiency and extends its reputation to its IT industry. Switzerland has a vibrant startup ecosystem, with Zurich and Geneva being the primary hubs. These cities host a multitude of startups that focus on emerging technologies such as fintech, biotech, and AI.
However, over the past years, we have observed the growing tendency to lack IT experts all over Western Europe. Let’s examine the University of Bern study as to the situation in the IT market in Switzerland. We will get the insights that Swiss software companies choose mostly to outsource to external service providers. The top reasons include access to labor (78.2%) and compensating for labor shortages (64%).
Swiss Software Industry Survey 2022 also reports that 50% of software integrators source from external service providers, followed by technology and service providers (45.5%), consulting firms (36.8%), manufacturers of standard software (33.3%) and manufacturers of custom software (32.3%).
One of Europe’s most brilliant and well-educated developers populations is Poland. IT nearshore to Poland provides access to skilled developers who speak English professionally.
The top tech businesses in the world, including Google, Facebook, IBM, Accenture, Cisco, and others, are based in Poland. Often, they decide to establish operations in Central Europe or work with Polish vendors under the IT nearshore model. Poland has accessible, reasonably priced technical skills due to its location and relative abundance of highly skilled IT experts.
Poland also remains a reasonably priced nearshore location with lower software development expenses than the US. The savings are an average of 30%, and compared to Western Europe or the UK, the savings are between 20% and 25%.
Cities like Kyiv, Lviv, Odesa, Dnipro, and Kharkiv have established themselves as thriving tech hubs in Ukraine. They host numerous IT companies, startups, and incubators, fostering innovation and collaboration within the industry. Ukraine’s key selling points are its cost-effective solutions, highly skilled IT experts, English-speaking developers, and location.
Compared to Western European countries and the United States, the cost of software development and IT services in Ukraine is notably lower. This cost advantage has made Ukraine an attractive destination for nearshore, outsourcing, and offshoring IT projects.
Ukraine’s IT industry benefits significantly from its vast talent pool. The country produces about 20,000 IT graduates annually, a testament to its commitment to nurturing the tech workforce. With a strong emphasis on mathematics and engineering, Ukrainian professionals excel in software development, data science, and cybersecurity.
Overview of Average Rates for Software Engineers in Ukraine, Poland and Switzerland
Talent Pool for Software Development Industry Employees in Ukraine, Poland, and Switzerland
Due to the shortage of software engineers worldwide, it’s rather a challenge to find tech professionals in the field. According to HR managers from various companies, filling tech roles takes, on average, 50% longer than filling other positions. Poland is reported to have the most extensive talent pool in Europe. And taking into account forecasts like the one made by Korn Ferry there would be a lack of nearly 85 million developers worldwide by 2030. All in all, Poland and Ukraine are real tech hubs that allow finding a nearshore software developers team.
|Number of Software Employees, approx.
LaSoft Expertise as Your Nearshore Partner
In the long run, nearshore can be an excellent business model of outsourcing services with many benefits. Nonetheless, while nearshore software development, there are a few considerations to make. You can select the best vendor for your business by taking into account factors like price, location, time zone, and local language.
First and foremost, you should determine whether a technology company has the knowledge and abilities to meet your needs by carefully examining its portfolio and prior initiatives. Second, the success of the collaboration depends on establishing clear communication.
We want to introduce the LaSoft team as your reliable nearshore company with almost 10 years of experience and clients from the USA, Canada, Netherlands, Israel, and the UK. Our team has completed 85 large and small web projects since 2014, and we are still here to support them.
As of 2022, we have established an office and a sizable workforce in Poland (Łódz). Poland now hosts over 30% of the company’s operations, and this percentage is rising. We are aggressively expanding our business in new places and are prepared to reach new heights. LaSoft also has offices or representatives in the USA, Switzerland, and Ukraine. Our full-cycle services:
Product strategy, etc.
Nearshore is the best option for Swiss firms seeking an excellent, affordable solution for their IT projects. This strategy could help Swiss companies address the shortage of skilled IT workers. By giving them access to a large and knowledgeable talent pool in other countries, including Poland, Ukraine, Hungary, and Romania. In addition to being a cost-effective solution, this also helps increase profit and speed up growth. Due to extensive access to cutting-edge technology and fresh viewpoints on software development.
By weighing the benefits and challenges of nearshore software development company can make informed decisions that best fit their business needs and goals. Whether you are a startup, a small business, or a multinational corporation, nearshore can be a valuable tool in your global strategy.