Outsourcing software development has long been a strategic approach for organizations looking to cut costs, gain access to expertise and reduce risk. While going north of the border to hire a software development company may not have been the obvious choice for some US companies a few years ago, that’s changing rapidly today.
In this article, we’ll cover why outsourcing software development to Canada can be a huge win for US-based organizations. (And, if you are still weighing whether or not outsourcing software development is the right choice for you, this guide offers insights into the pros and cons of each.) But first, let’s get our definitions locked down.
Outsourcing, Offshoring and Nearshoring Defined
A quick primer on outsourcing. offshoring and nearshoring:
Outsourcing: The word “outsourcing” is often used as an umbrella term that encompasses both offshoring and nearshoring. It simply means that some part of your company’s in-house operations has been contracted to an outside third-party. The work could be done across town, across the country or on an entirely different continent.
Offshoring: When a company takes some process or service to a different country, in an entirely different geographic region than the one they’re in, that’s offshoring. It’s what a lot of people think of immediately when they hear the word “outsourcing.”
Nearshoring: Nearshoring refers to work that is outsourced and performed in a different country that is much closer to the company’s home country. Typically, these countries share a border, like Canada and the US.
The 10 Key Benefits of Outsourcing to Canada
Outsourcing software development to Canada is on the rise. Let’s look at 10 key reasons why this trend is on the rise:
1. Cost-Effectiveness
While Canadian companies might not always offer the lowest rates compared to other global outsourcing options, they provide competitive pricing considering the quality of work and lower operational costs. Typically, the US dollar has averaged 25%-34% higher over the last five years. With the strong US dollar, the exchange rate benefits organizations based in the US, allowing you to get more bang for your buck. Additionally, the cost-effectiveness of nearshoring to Canada is boosted even more when considering the balance of affordability and high standards of the software development work.
2. Proximity and Time Zones
One of the primary advantages of nearshoring software development to Canada is its geographical proximity to the United States. Most major Canadian cities are located within 100 miles of the Canada/US border. (Even a flight from Los Angeles to Toronto is under five hours.) This closeness, combined with similar time zones, significantly facilitates any required in-person meetings and better collaboration. Unlike working with companies in far-off countries where time zone differences can lead to delays, Canadian firms can align their working hours with their US counterparts. This synchronicity ensures real-time communication, prompt responses, and seamless project management.
3. Ease of Doing Business
Canada has an excellent business reputation, and the legal and business frameworks are remarkably like those in the US, making it easier to navigate contracts and other business concerns. These familiar frameworks reduce the complexity and potential legal hurdles that can arise when outsourcing to countries with vastly different legal systems. This ease of doing business fosters trust and confidence, allowing US companies to engage in outsourcing relationships with fewer risks and uncertainties. 
4. Quality of Work
Canada boasts a strong reputation for high-quality software development and IT innovation. In fact, Canada has approximately 1 million tech workers. The country’s robust educational system and thriving tech ecosystem support this reputation. Cities like Toronto — often referred to as Silicon Valley North — are technological hubs. Canadian developers are highly educated and know the latest programming languages and technologies like AI and machine learning, as well as best-practice methodologies, resulting in a superior end-product. The high standards can significantly benefit US companies looking for reliable and cutting-edge software solutions.
5. Skilled Workforce
Canada’s tech hubs, such as Toronto, Vancouver, and Montreal, are home to a well-educated and very skilled workforce. In 2020, Canada led the world in percentage of the adult population that had a tertiary education (a bachelor’s degree or higher) with around 66% of people aged 25 to 34 years with a tertiary education. And, according to a recent survey from The Brookfield Institute, Canada has one of the largest populations and highest concentrations of developer talent. (The report also notes that “Toronto has the country’s highest number of developers — representing over 32% of Canada’s developer pool — and ranks 13th globally for total developers.”)
6. Cultural Similarities
The work culture between Canada and the United States is very similar. We speak the same language, have similar holidays, and enjoy a little friendly rivalry when it comes to basketball, hockey and baseball. This cultural affinity plays a crucial role in smoother business interactions, resulting in better alignment in work ethics, business expectations, and communication styles. As well, shared cultural values and business practices mean fewer misunderstandings and more efficient cooperation.
7. Trade Agreements & Treaties
Trade agreements between the US and Canada, such as the United States-Mexico-Canada Agreement (USMCA), facilitate smoother business transactions and collaborations. These agreements simplify cross-border trade and provide clear guidelines on various aspects of business operations, from intellectual property rights to labour standards. In fact, as a signatory to five international IP treaties, Canada takes IP rights very seriously. The stability and predictability offered by these agreements make Canada an attractive outsourcing destination for US companies seeking reliable and compliant business partnerships. Canada also has similar laws to the US, making it a low risk, high benefit option.
8. Economic & Political Stability
Canada is a very stable and welcoming country, without any geo-political conflicts. The country’s economic strategy has made it #1 in the G20 for fiscal soundness. This stability is a cornerstone of successful, long-term outsourcing relationships and a key factor in the increasing trend of outsourcing/nearshoring software development to Canada.
9. Scalability and Flexibility
Outsourcing gives you the capacity to dial up your software development needs on demand, without having to hire and train an entire IT cohort. Canada is a nearshore partner who understands the US market, so you can quickly adapt to any business demands or new opportunities. Whether you need support for a short-term project or a long-term partnership, nearshoring to Canada offers the flexibility necessary to efficiently scale your IT operations.
10. Faster Time-to-Market
In today’s fiercely competitive business environment, the rapid delivery of products and services to market is a critical determinant of success. The ability to significantly shorten the time between ideation and the finished product has a direct impact on a company’s competitive advantage. (It goes without saying that outsourcing enables you to apply your internal resources towards your organization’s strategic initiatives and core competencies.) And, by nearshoring to Canada, you can leverage the advantages of aligned business hours and time zones with the ease of communication and collaboration to hit the ground running on your project.
Looking to Nearshore?
Outsourcing software development to Canada offers a multitude of benefits for US companies. From geographical proximity and cultural similarities to high-quality work and cost-effectiveness, Canada provides a compelling alternative to other global outsourcing destinations. The skilled workforce, ease of doing business, favourable trade agreements, and the strong reputation of Canadian companies further enhance the appeal of Canada as a top outsourcing choice. As the trend continues to grow, US companies can look forward to leveraging these advantages for successful and productive software development partnerships. If you are considering nearshoring software development to Canada, we can deliver a proven process that leads to outstanding results. Let’s chat.