The real ROI of advanced nearshoring in medium-sized businesses

Many medium-sized companies are currently investing heavily in:

• New digital products
• Modern platforms and interfaces
• Process automation
• AI and data projects

We call this approach the tech lift process: the company raises its technology and IT capabilities to a new level in order to remain competitive in the long term.

The 5 hidden obstacles to success in the tech lift process
In practice, we repeatedly encounter the same obstacles in medium-sized companies:

1. Overloaded core team
   The internal IT and specialist team has to juggle operations, support, minor changes and innovation projects at the same time. The result: constant firefighting instead of focus.
2. Time-consuming knowledge transfer
   New technologies first have to be laboriously learned. Training, PoCs, trial and error – everything takes time before any real added value is created.
3. Poor integration of new experts
   External developers are integrated ‘somehow’, processes are unclear, roles are not clearly defined. Friction losses are inevitable.
4. Short-sighted investment perspective
   Instead of strategic scaling, many decisions are made from a ‘project perspective’: The main thing is that project X gets finished somehow – instead of building up long-term capacity.
5. Lack of technological vision/roadmap
   There are projects, but no clear target vision: Which systems will be critical in 3–5 years? Where do we want to go technologically? What skills do we need in the core team?

The consequences: When the tech lift becomes a predetermined breaking point! The consequences of these blockers are already being felt in many SMEs:

• Technical debt & fragmented source code
• Slowed development cycles & quality problems
• Unclear product roadmaps & increasing innovation risk
• Longer time-to-market & loss of market share

In short: the tech lift process becomes a strategic bottleneck, even though it should actually be a growth driver.

Many medium-sized companies initially try to solve the problem in the traditional way:

• Hiring additional internal developers
• Training programmes and certifications
• Experimenting with new tools and technologies
• Selective support from freelancers

The problem: The pressure to digitise is growing faster than the available capacity.
Added to this are the typical conditions for medium-sized companies in Germany, Austria and Switzerland:

• IT talent is scarce and expensive
• Competitors (including corporations and start-ups) are fishing in the same talent pool
• Internal teams are tied up in day-to-day business
• Technologies such as cloud, AI, data and automation are uncharted territory for many teams

The result: projects are postponed, stretched out or implemented in a ‘minimalist’ manner – and the market moves on.

This is where software development in the advanced nearshore or offshore model comes into play. It is important to clearly distinguish between classic offshoring and advanced nearshoring and offshoring.

Classic offshoring:
‘We hire cheaper developers from abroad.’

Advanced nearshoring/offshoring:
‘We build scalable, integrated delivery teams that increase our innovation and project speed – controlled by professional onshore delivery management.’

The difference: It’s not just about reducing costs per developer hour, but about accelerating and stabilising the entire tech lift path.

The biggest pain points in competence building that advanced near-/offshoring addresses

Typical challenges in SMEs:

• Lack of technology experts: senior profiles are hardly available
• Budget pressure: classic in-house teams quickly reach their budget limits
• Know-how gaps: cloud, AI, automation, integration – lots of new things at once
• Dependence on individuals: key people become a risk
• Delays: internal teams are consumed by day-to-day business

This is exactly where advanced near/offshore outsourcing comes in:

• International talent pools for senior profiles
• Cost advantages per team and project
• Faster scaling of capacities
• Structured know-how transfer to the core team
• Relief for the internal team without loss of control

When it comes to nearshoring or offshoring, many people first think of hourly rates.
But the real leverage lies in the combination of cost savings, time-to-market and innovation effects.

Let’s look at a typical project example from a medium-sized company:

Comparison: In-house vs. nearshore project

Scenario: Development of a new digital platform (SME, DACH)

In-house project
– Total costs: £921k
– Go-live: after 12 months

Nearshore approach with advanced nearshoring
– Total costs: £620k
– Go-live: after 8 months

At a glance:
✅ 30% cost reduction
✅ 3–4 months earlier on the market
✅ Positive ROI after 3 years through nearshoring

The key point: It’s not just the absolute savings that count, but the earlier utilisation of:

• Efficiency potential (e.g. automated processes)
• Revenue potential (e.g. new digital services)
• Competitive advantages (e.g. better customer experience, shorter turnaround times)

Especially in innovation and tech lift projects, every month of delay means:
❌ lost revenue
❌ higher opportunity costs
❌ increasing frustration within the team
❌ growing gap to the competition

Conclusion:
Advanced nearshoring/offshoring is not a ‘cost-cutting programme’, but a growth and ROI accelerator.

Many companies have also had bad experiences with offshoring:
– Language barriers
– Time zone issues
– Misunderstandings in requirements
– Quality issues in the code
– High dependence on individuals or freelancers

The reason is almost always the same: a lack of governance and structure in the delivery model.

What SMEs really need: Better delivery models
SMEs don’t just need cheaper developers, they need a setup that neatly solves the following questions:

Who is responsible for communication and coordination?
How is quality measured and controlled (KPI, SLA)?
How do we ensure that knowledge remains within the company?
How do we integrate the external team into our processes and tools?

The answer is an advanced near/offshore setup with two central roles:

1) German onshore delivery manager
The onshore delivery manager is:

• the bridge between SMEs and the global development team
• responsible for communication, governance and quality
• on a par with management and specialist departments in terms of expertise and culture
• the person who translates, prioritises and controls requirements

2) Local partner as prime contractor

The local (near/offshore) partner acts as the prime contractor:

• a central contractual partner for all external teams
• responsible for capacity planning, team composition and skills
• guarantees quality, stability and availability
• manages the international delivery teams on site

This setup significantly reduces typical offshoring risks:
→ Misunderstandings & cultural conflicts: clear communication channel
→ Project delays & quality losses: defined KPIs, SLAs, standards
→ Dependence on individuals: structured teams instead of ‘hero developers’

The result for SMEs: control remains within the company, while speed and scaling are provided by international teams. Knowledge is systematically secured and transferred!

Let’s summarise the perspective from the CEO and CTO’s point of view.

The most expensive part of an IT project is NOT the developer – it’s lost time.

Part I – Growing pains in SMEs:
Tech initiatives get stuck, not because of a lack of ideas, but because of a lack of implementation capacity, gaps in expertise and overloaded core teams.

Part II – Quick ROI through advanced nearshoring:
Nearshoring/offshoring is worthwhile not because developers are cheaper, but because projects go live earlier, budgets are better utilised and investments pay off faster.

Part III – Tech global, responsibility local:
Without clearly defined governance, nearshoring/offshoring becomes chaotic. With onshore delivery management and a strong prime contractor, it becomes a scalable model for success.

Overall conclusion

Advanced nearshoring/offshoring is not a tool for reducing personnel costs, but rather the way to make tech lift feasible for SMEs in the first place. It enables SMEs to start faster, think more boldly and still maintain control. This is precisely what is crucial if SMEs in the DACH region do not want to fall behind when it comes to digitalisation.

A few simple indicators that it might be time for an advanced nearshoring model:

1. Your internal IT team is constantly working at full capacity.
2. Important digital projects are repeatedly postponed.
3. You cannot find suitable senior developers locally.
4. New topics such as AI, cloud computing and integrations remain ‘on the roadmap’ but are not being implemented.
5. You have already had bad experiences with traditional offshoring or freelancers

If you can relate to at least two of these points, it makes sense to consider a structured advanced nearshoring/offshoring setup – with a clear governance model and proven delivery structure.

ServiceFactum supports medium-sized companies in

• clearly defining their own techlift process
• setting up suitable advanced near/offshore models
• clearly establish onshore delivery management and prime contractor roles
• seamlessly integrate international development teams with existing structures

This approach turns innovation potential into actual market success – measurable in shorter development cycles, more stable software quality and earlier time-to-market …

… and a clear, robust ROI.

If you want to know what an advanced near/offshore model could look like for your company, you should start by answering three questions:

1. Which core systems and products are truly critical for our future?
2. What skills are we currently lacking in our team to develop or further develop these?
3. How much time do we currently lose each year due to delays in IT and digital projects?

With these answers, we can design an initial, robust setup for your tech lift – including a realistic ROI scenario.

Get IT done! Let’s work together to make your next IT project a success!