Onshore vs Offshore vs Nearshore- Which Outsourcing Model Fits You Best?

When building a software product from day one or enhancing an existing one, Project Managers and CTOs often face the question: What resources do we have to make this product or update a reality? Who can we hire to code it? Well, in today’s globalized economy, the best talent from any location is more accessible than ever thanks to advances that let teams to work remotely. Companies have to make the tough decision: Do we hire someone in-house? Or does it make more sense to outsource? What are the different types of outsourcing? What is the difference between offshore and nearshore?

Where you hire your next software developer matters.

Instead of hiring an in-house FTE, here we will explain all of the different outsourcing options: onshore vs. offshore vs. nearshore. We’ll cover the main pros and cons of each, so you can make the decision about what’s right for you. All of these terms are relative and have to do with distance, so for the purpose of this post, we will assume that the person who is looking to hire dev talent is from North America and probably already leveraging nearshoring vs offshoring.

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What are the different types of outsourcing?

Onshore software development refers to outsourcing software development to a company or individual in the same country as your own instead of hiring your own full-time employee. It can even go a step further and include “on-site staffing” where the outsourced employee comes to your own office, working side by side with your own employees.

If being in the same country or location is critical for you, then this may be your best bet, but it will be the most expensive form of outsourcing. If you hire someone in the US, you will have to dish out for US rates. If this person is going to be on-site, then you will also have to pay the overhead associated with having them work in your office, from providing desk space to a machine, tech support, amenities, parking, etc.

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What is the difference between offshore and nearshore?

Offshoring software development generally refers to hiring developers overseas. In the case of North America, offshore developers are from countries located in Eastern Europe or Asia. A benefit of offshoring is that it costs significantly less (even up to 75% less) to hire a developer from these regions versus North America.

While the cost savings of offshoring versus onshoring are difficult to overlook, there are a few disadvantages to offshoring. First of all, the time differences between the US and Eastern Europe or Asia are so large that companies who offshore often find themselves having meetings very early in the morning or late at night. With up to 15 hour time differences, the company and the devs will hardly find themselves working together in real time, so communication can suffer. Another disadvantage associated with offshoring is the cultural disconnect. Sometimes the differences in culture ensure a steep learning curve at the beginning of the engagement, as it may take months to learn and adapt to each other’s cultural and professional norms.

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What is Nearshore Software Development?

Last but not least, for North America, nearshore software development refers to hiring talent from Central and South America. While they are located on a separate continent, these regions share much in regards to a common westernized culture and benefit from mostly overlapping time zones. Developers in South America work virtually the same hours as their counterparts in the United States, making real-time communication highly achievable. You can read more about the benefits of working with South American developers.

You can think of nearshore software development as the middle ground between onshoring and offshoring, as it costs significantly less than onshoring, but slightly more than offshoring. Yet, what you sacrifice in hourly savings, you gain in convenience, since the similar time zones and cultures spare you the confusion and headaches associated with offshoring.

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Nearshore vs. offshore outsourcing: which one is right for you?

Now that you have a better idea of the different outsourcing options that exist for software development (onshore vs. offshore vs. nearshore), we suggest that you first determine what are the most important qualities you are searching for in a developer. While price is always important, we suggest considering other aspects as well because what may initially seem like a cost-saving hourly rate can turn into a project that is behind schedule due to poor communication or simply poor quality.

As IBM’s General Manager of Application Management Services, Cameron Art, states about his experiences, “There are times when I see clients supremely focused on wage per hour, and I do think that can be a valid way to evaluate a provider or location, but it’s just a sliver of the outcome you’ll receive. What the client is really interested in is not ‘That hour cost me $45’ but ‘What did I get out of that hour?’

Make sure to vet the developer or the outsourcing company you decide to partner with. Ask questions whose answers reveal whether or not they have the work ethic, values, English proficiency, technical skills, etc. that they need to be able to work effectively with you.

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At Nearsure, we have several years of experience connecting companies in North America with South America’s dev talent.  So, it may come as no surprise that we highly encourage nearshore vs offshore! If you are interested in learning more about nearshoring vs offshoring, click here!

What do you think is the best option for you? Have you had experiences working with developers from multiple parts of the world? Leave a comment!