Author: Iain Bishop, founder and CEO, Damilah
If you’ve been working with a near-shore software partner for a number of years, then it’s only natural to consider setting up your own centre to drive down costs further, gain more control and properly establish your company culture.
This can also potentially allow your business to near-shore non-software development activities such as customer support, IT support and other admin functions where face-to-face contact with customers is not required regularly.
There are, however, risks associated with making this successful – but it is definitely possible with a high level of commitment and awareness. So, having set up off-shore teams many times in my own career, I’d like to share some guidance on the main challenges you’re likely to face and the measures you can take to reduce those risks.
Choosing a location
This is the first thing you’ll need to think about – and there’s a lot to consider here. Most important are the level of technical skills in the market and the overall standard of English. For an initial understanding of these, it’s worth finding out what the technical universities teach in that region.
You should also have a good grasp of the local IT market – for example, is there a talent pool big enough for you to recruit from? And are there big, attractive tech firms in the region, such as Google or Meta, who’ll be competing with you for talent?
Within the country, there may be different cities with various pros and cons. For example, people are likely to demand higher salaries in capitals, but the supply will be better; whereas a smaller city might suit your needs if the costs are lower and supply is sufficient. There may also be more of certain types of skills in some cities than others due to other companies based there.
You’ll also need to think about local laws and regulations, such as how difficult it is to set up a business in that country, and the ease with which you can transfer capital. Plus there’s the local political situation to take into account, in terms of how stable the country is and whether it encourages IT companies to set up there with favourable tax regimes and other incentives.
Additionally, it’s prudent to consider the perception that having an office in some countries may give to your investors and customers.
Finally, you’ll need to consider the cultural differences between the UK and your potential location. Do people there tend to work in a way that is compatible with the culture you want to create? And is close collaboration between them and your UK employees likely to be successful?
Overall, when deciding on the right country, there’s no substitute for actually visiting the place – multiple times – to find the answers to these questions for yourself.
Understanding local cultural and working practices
Once you’ve decided on your location, even if you believe the local cultural and working practices are compatible with your own, you’ll need to build a good understanding of the differences, to ensure you don’t fall foul of any misunderstandings.
For example, in North Macedonia, where Damilah is based, salaries are based around net income, rather than gross payments as we’re used to in the UK. Therefore, if the government raises income taxes, you might find yourself having to increase salaries to maintain your employees’ level of income.
What’s more, in the emerging countries of Eastern Europe, there’s often strong competition for the best people, so it’s important to cover as many bases as possible to both attract and retain them. Therefore other benefits, as well as salaries, need to be competitive compared with what other companies are doing in the local market.
HR practices should be very good, too: in particular, ensuring all employees are given the training and support they need to help them reach their full potential. Training budgets are often the first to be cut back in mature western businesses. But for the enthusiastic, ambitious talent you want to hire, it’s crucial that you provide them with the tools to allow them to grow, or they will soon leave you to learn new skills elsewhere.
Overall, it’s vital to listen to your colleagues and be flexible if they make suggestions for activities, celebrations or training. For example, International Women’s Day is very important in North Macedonia and, with a 50-50 gender split at Damilah, colleagues expect the company to buy gifts for all the women and have a celebratory lunch.
In short, employees need to know they have a voice that is heard, and that you care about them.
Finally, if you’re comparing countries, it’s important to understand what on-costs there are in each location. This will give you an accurate picture of cost-to-company (CTC) and allow you to make a fair evaluation.
Hiring a team
This will, of course, be the most critical part of the project – and potentially the hardest.
You may well find yourself up against a tricky battle for talent. As a new player in the local market, you’ll be faced with the question of why anyone should choose to work for you – unless you’re prepared to pay salaries that are over the odds. This can be exacerbated in places where people are generally risk-averse when it comes to leaving their current employment – which tends to be prevalent in former communist countries where a culture of entrepreneurialism and risk-taking is less deeply embedded than the UK.
In such cases, it’s helpful to spend time building a brand for your company in the local market utilising social media. People are more likely to want to work for you if they know who you are and can see other people enjoying working for you.
You’ll also need to be sure that you’re hiring people who will fit into the kind of culture you want to create – and not employees who are simply in it for personal gain.
Therefore, the most important first hire you could make is a head of HR – someone you can really trust, who knows the local people and culture and can make sound judgements when it comes to recruiting the right team. A person like this can help to remove a large element of risk from the project, but they can also be hard to identify and attract to your business.
Choosing the right model
Rather than going it alone, and taking on the large risks highlighted above (and see our list of ‘gotchas’ below too), there is another way.
It’s always worth considering an alternative model. Closely partnering with a company that has in-depth local knowledge, plus a proven team with the right levels of experience, can allow you to maximise the undoubted benefits of near-shoring, while minimising the risks for your own organisation.
This is a model that we at Damilah like to call ‘partner-shoring’.
7 near-shoring ‘gotchas’
Here are some of the most common traps that, in my experience, organisations fall into when attempting to set up a near-shore team:
- Mistakenly hiring people who are only in it for themselves and their friends
This often occurs when there’s a lack of understanding of the local culture and customs.
- Failing to establish the right culture from the start
You might want a culture of transparency, honesty and close collaboration. The team you hire might have other ideas – and it may be hard to control that remotely.
- Overpaying your people
If you don’t have an existing brand presence in the country, talent may not choose to work for you unless you’re prepared to pay over the odds – thus negating one of the key benefits of near-shoring.
- Failing to comply with local laws and regulations
Without a deep local understanding, it’s easy to fall foul of, for example, different tax and accountancy practices. Things can get messy very quickly.
- Your team quitting en masse before you’re big enough to cope with the loss
This could happen, for example, if a big player like Google comes to town with a more attractive offering for talent than you are able to give.
- Failing to keep head office under control
For example, your HQ may want to enforce working practices, hiring practices or pay rises that are not appropriate for the location in which you’re operating.
- Not listening to your employees
Employees in a near-shore location are as important as any others employed in your business. You need to listen to them and have the flexibility to adapt to local cultural needs and expectations.
Setting up your own development centre nearshore is eminently doable. It does however require your commitment, an awareness of cultural nuances and a supportive company to make it successful. You need to think through many things and ideally get some experienced help.
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