The shortage of tech talent makes it challenging to recruit and retain tech teams – can IT outsourcing in Portugal be the answer? Portugal’s lower living costs, highly skilled IT professionals, and cultural alignment make it the perfect nearshore solution for growing tech teams efficiently.

Editor’s Note: This article was originally published in [March, 2023] and has been updated for freshness, accuracy, and comprehensiveness.

Tech teams’ CTOs and managers must know how to optimize efficiency in order to stay competitive in a saturated market. As the industry develps, you will need to quickly increase your tech team’s capacities to move the business forward. However, retaining quality employees for the long term has proven to be more challenging than ever.

One way tech companies hang onto their capable IT staff is through outsourcing their needs. However, in most European countries, this can quickly become cost-prohibitive. The answer? Look a little further from your own nation! Consider setting up a nearshore development team in a country like Portugal, where the cost of living is lower, the culture is similar, and the IT professionals are very talented.

What Is Nearshore Outsourcing?

When businesses decide to outsource, they have several options depending on where their partners are located. These options—onshoring, offshoring, and nearshoring—offer varying levels of proximity between the client and the service provider.

Onshoring involves keeping operations within the same country, ensuring that both the client and the service provider share local standards and regulations. Offshoring takes outsourcing to a global scale, where companies work with service providers in distant regions, often in entirely different time zones.

Nearshore refers to outsourcing IT work to a neighboring country, usually within a few hours’ time zone difference. The practice is becoming increasingly common due to the benefits it provides in terms of cost savings, talent acquisition, and (depending on the country) cultural alignment.

Why Nearshore Outsourcing Is the Solution for Your Lack of Qualified IT Professionals

The technology industry is changing at a rapid pace. Companies need to be able to adapt quickly to stay ahead of the competition. Nearshore outsourcing provides a way for businesses to keep up with the industry’s pace.

It is also a cost-effective solution for companies. The cost of living in some countries can be significantly lower than in others, meaning that labor costs can also be lower. This makes it easier for businesses to keep their costs down while still accessing the best talent.

Another reason why nearshore technologies are becoming increasingly popular is that they allow companies to tap into a global talent pool. By outsourcing IT work to other countries, businesses can access a diverse range of skills and expertise that may not be available locally. This can help accelerate the development of new products, services, and solutions.

Top Countries to Outsource Vital IT Work

Several countries are popular for outsourcing IT work, including India, the Philippines, and China. These countries have large populations of skilled IT workers, and labor costs are generally lower than in Western countries.

However, there are also some drawbacks to outsourcing work to these countries. Language and cultural barriers can sometimes be an issue, and time zone differences can make communication difficult. There may also be concerns about data security, intellectual property rights, and regulatory compliance.

It is generally best to pick a country that is a little closer to home. Especially neighboring countries or those that share a time zone or working hours. Many American CTOs and managers find that developers in Europe stand out as the top nearshoring choice for their tech teams.

Countries like Romania and Poland offer strong nearshoring options, with skilled talent and competitive rates. However, Portugal remains the preferred destination for its ideal mix of proximity, time zone compatibility, and high-quality development expertise.

Why the Portugal Tech Industry?

Portugal is rapidly becoming a popular destination for outsourcing IT work. The country has a large pool of skilled IT workers, with a strong emphasis on software development. It also has a thriving startup ecosystem, with a number of successful tech startups emerging in recent years.

One of the main advantages of outsourcing IT work to Portugal is the cultural alignment with Western Europe and the United States. Portuguese workers are generally fluent in English and have a similar work culture to their Western counterparts. This can make communication and collaboration much easier, reducing the risk of misunderstandings and delays.

Portugal also has a strong focus on education and training, with several universities offering courses in technology and computer science. This has helped create a large pool of skilled IT workers, with a range of expertise in areas such as software development, cybersecurity, and data analytics.

Another advantage of outsourcing IT work to Portugal is its favorable business environment. Portugal is a member of the European Union, which provides a stable political and economic environment for businesses. The country also has a low cost of living compared to other Western European countries. This makes it an attractive destination for businesses looking to keep costs down. (For more reasons why Portugal is an ideal country to outsource IT work, check out these ten reasons why investing in Portugal nearshore efforts is the smart move for your business, or watch the video below).

Optimize Your Retention Strategy: Why It Works

Retention of IT workers is becoming increasingly important for businesses, as the competition for talent continues to intensify. One of the key benefits of outsourcing IT work to Portugal is that it can help to optimize retention strategies, by providing a more stable work environment for workers – as long as you choose the right outsourcing partner!

The country also has a strong emphasis on work-life balance, which contributes to increased productivity, retention, and job satisfaction. For instance, new parents can enjoy 22 days of paid holidays plus paid parental leave. 

Moreover, companies with a strong focus on retention go even provide extra company benefits, like a flexible work schedule, or the possibility of doing remote work.

Setting Up a Nearshore Development Team in Portugal with KWAN

Setting up a nearshore development team in Portugal can be a straightforward process, especially with the help of a recruitment or outsourcing partner. The first step is to define your requirements and identify the skills and expertise that you need from your development team. Next, you will need to choose one of two paths. 

You can opt to open a company in Portugal, which requires you to consult with certified accountants and lawyers, prepare documentation, choose a business name, obtain the necessary licenses and permits, find a suitable office space, register the company for tax purposes, and then begin hiring.

On the other hand, you can work with an outsourcing partner, such as KWAN. These companies take all of the major effort off your hands, assessing the needs of your project, presenting you with candidates according to those needs, taking care of all the bureaucracies, such as contracts and taxes, and even helping you find offices or coworking spaces in the country.

At KWAN, we place a strong emphasis on transparency throughout our recruitment journey. Our first step is to truly understand our candidates—their professional background, skill set, and career goals. Based on this, we match them with opportunities that suit their aspirations.

 However, our commitment doesn’t end once they receive an offer. We continue to support their development with the help of our People Experience Partners, offering ongoing guidance to foster their growth and success in the workplace.

Is Investing in a Retention Strategy for Your Tech Team Worth It? 

Retention strategies are an essential aspect of talent management that organizations need to consider seriously, particularly for their tech teams. Tech talent is in high demand, and companies must have a robust plan in place to retain their skilled employees.

This is crucial because the costs associated with replacing an employee can be significant. A few reasons why investing in a retention strategy is worth it include:

• Reducing the costs associated with employee turnover. Replacing a skilled tech employee can be costly and time-consuming. A well-crafted retention strategy can help prevent employee turnover, saving the company from unnecessary expenses, reduced productivity, and potential revenue losses.
• Building a positive work environment that drives satisfaction and loyalty. This can lead to higher levels of employee engagement and productivity, resulting in increased business growth and success. Additionally, a positive work environment can also improve employee morale and job satisfaction, which can contribute to a more cohesive and collaborative team culture.
• Building a strong employer brand. Employees are more likely to stay with an organization that has a positive reputation, both in terms of their work environment and their overall corporate culture. This can help organizations attract and retain top talent, which can contribute to their success and growth over the long term.

With a team of coaches specialized in supporting tech professionals, our People Managers, KWAN can contribute to the success of your retention strategy. By outsourcing with us, we’ll make sure your tech team gets the support needed to stay focused and fulfilled.

Why CTOs and Managers of Tech Companies Need to Consider Portugal for Nearshore Development

Portugal is becoming an increasingly popular destination for outsourcing IT work. This is due to its large pool of skilled IT workers, favorable business environment, and cultural alignment with Western countries. Setting up a nearshore development team in Portugal can help businesses optimize their retention strategies, reduce costs, and access a diverse range of skills and expertise. 

With the right outsourcing provider, nearshoring IT work to Portugal can provide an effective edge to your company, introduce new ways to innovate, and help expand your business. 

Talk to us, and we’ll help you set up your nearshore development team in Portugal. We’ll take care of all the necessary documentation and even help you with issues like renting office space. With our team of specialized coaches and our People Managers, we’ll make sure your team stays on your project, fulfilled and evolving.