Offshore vs Nearshore Outsourcing: Which One To Choose?

What is Nearshore Outsourcing?

Nearshore Development is choosing a vendor in a nearby country. That means delegating tasks to a team that functions in a similar time zone and is geographically close to your country. 

Practicality for Business: nearshore outsourcing allows you to hire technical experts without employing an in-house team.

Advantages of Nearshore Outsourcing:

#1 Flawless Communication

First of all, you face no difficulties in the communication process. Once you need to get in touch with your vendor to clarify something or monitor the development process, you can have a go. Do you want to have an onsite visit to get acquainted with the company before signing a contract, or to know the developers’ team better? No problem! Your vendor is not far, so you can have a flying visit whenever you want. 

#2 Cultural Similarity

One more important thing is that there are no cultural differences between you and your partner. The study held by Accenture showed that 69% of outsourcing deals fail and the main reason for this is the deficiency of cultural compatibility between the partners. With nearshore outsourcing, the maximum you can face is the soft nation’s cultural differences that can be easily overcome through negotiations.

#3 Easier Audits

Hiring nearshore developers gives you better control over your intellectual property. Furthermore, it’s very likely that you and your vendor belong to similar data protection laws, which allows you to eliminate risks and misunderstandings at the stage of signing a contract.

Disadvantages of Nearshore Outsourcing

# Higher Costs

Of course, nearshoring is usually less expensive than conducting software development in-house or onshore, though in most cases it’s still much more expensive than offshoring. If we have a look at this from an American company’s perspective, the nearshore partners could be chosen between Mexico and Canada. In comparison with Silicon Valley, hiring developers from these countries is less expensive, for sure. But if you compare it with India, China, or Eastern Europe, there is still a very big difference.

# Limited Access to Tech Candidates

There might not be a sufficient number of service providers or engineers with enough expertise in neighboring countries. The task gets more complicated if you are searching for a particular tech stack and domain. Therefore, it can be difficult and time-consuming to mitigate the shortage of tech talent.

What is Offshore Outsourcing?

Offshore Outsourcing is hiring a vendor from a distant country, most frequently, from a different part of the world. 

Practicality for Business: offshore outsourcing allows you to partner with geographically distant ventures and saves big sums of money.

Advantages of Offshore Outsourcing:

#1 Cost-efficiency

One of the biggest advantages of One of the biggest advantages of partnering with an  offshore software development company is the price. While delegating to a nearshore partner slightly differs in price, hiring an offshore partner can save you a lot of money. Far offshore destinations offer skilled developers almost half of the hourly wages compared to developers located in the US, UK, Canada, etc.

#2 Access to a Large Talent Pool

According to the ICIMS report, in the US within the last three years, employers managed to hire only 60% of the tech talent required. Surprisingly, the number of applicants was twice as high as the number of open positions. Such a tendency has been dictated by a shortage of qualified tech candidates. While opting for offshore outsourcing you get access to tech expertise in any part of the world.

#3 Unique Expertise

You get access to experts who have experience working with various tech stacks and domains. Actually, within a short period of time, you can fulfill the needs of your project with any tech expertise. Furthermore, IT outsourcing destinations such as Eastern Europe, for example, regularly invest in STEM and CS education for engineers. So, there is no doubt you can hire the uppermost tech talent without spending abnormal sums of money.

Disadvantages of Offshore Outsourcing

#1 Cultural Incompatibility

Cultural differences are one of the major reasons why offshore outsourcing fails or causes a lot of problems. One of the simplest examples is the Indian “yes” syndrome. In Indian culture, people try to avoid giving negative answers, so if you wonder if it’s possible to have the bugs fixed by tomorrow morning, and you get a positive answer, most probably, it means “I’ll do my best”. 

#2 Time Zones Difference

Living in different time zones can cause a plethora of inconveniences such as missed deadlines or poorly executed work as a result of lack of control. Therefore, ensure setting clear requirements and a stable meeting schedule with your outsourcing partner to keep an eye on the development process.

Let’s Also Talk About Onshore Outsourcing - What is That One?

Outsourcing software development within the same country is called onshore outsourcing.

Practicality for Business: This model is the best match for companies with an already-established in-house team that is involved in the project. 

Advantages of Onshore Outsourcing:

Ability to Collaborate in Person

Onshoring software projects gives an ability to collaborate in person which means not only higher productivity but also gives better control over intellectual property. Both parties are subjects of the same data protection laws which immediately enforce confidentiality. 

Cultural and Language Compatibility

When software development is outsourced in the same country, it’s much easier for teams to blend with each other and cooperate, as they speak the same language and have the same culture. This significantly speeds up the development process and improves the quality of deliverables.

Disadvantages of Onshore Outsourcing:

Expensive

Onshore development in most cases is much more expensive than hiring an offshore team, or even nearshore developers. However, it largely depends on the country.

Smaller Talent Pool

When companies choose onshore outsourcing, they get access to the tech talent available only within their country so the range of tech stack and services might be quite narrow.

Nearshore vs Offshore - Key Differences

Usually, the main driver that makes companies outsource is the scarcity of tech talent in their location and this problem is spreading at a great speed. The justification is the Bureau of Labor Statistics that predicts more than 1,2 million open job positions by 2026. It means that onshore software development services are not a common choice and they have to choose between nearshore and offshore development. 

Offshore software development is a great choice for complex projects with a specific expertise required when a customer wants to start the development as soon as possible and save money. 

While nearshore development is less cost-effective though makes it easier to maintain communication with a team and control the development process.

Nearshore vs Offshore: What to Choose for your Business

Here are some tips that will help you make the right choice:

#1 Define the Needed Expertise

There are a huge number of countries where you can outsource software development nowadays. Ask yourself a question: what industry expertise and skills should your team have? This way, you will narrow the list of potential countries to partner with. You can also check the international rankings such as TopCodes, SkillValue, etc. to choose the country with the expertise and requirements you need. The most frequently chosen countries for outsourcing right now are:

#2 Explore Potential Companies

Once you’ve chosen a country or countries you would like to outsource to, make a list of vendors you feel positive about and study them in detail. Explore what industries they work with, their company’s culture, case studies, customers’ reviews on independent platforms, and finally, if their previous experience matches the scope of your project. Also, you can ask for the CV of developers who are going to work on your project after a call with a company’s representatives.

#3 Choose the Right Cooperation Model

There are several cooperation models that IT vendors offer. The model that works great for a small project with well-defined requirements won’t be an option for a long-term project with varying outputs. Therefore, customers should carefully evaluate the scope of their projects, budget, timeframes, level of their involvement, and requirements to make sure they choose the outsourcing option that is a perfect fit.

#4 Stay in Touch

Communication is a pillar of successful outsourcing and frequently it’s very underestimated by business leads. Studies show that 25% of the reasons for project failures is poor communication. If you choose to hire a nearshore development team, it’s easier to set up a schedule for regular meetings as time zone differences are minor. Communication with an offshore software development team requires thorough planning, as you must make sure that at least 1-2 of your working hours coincide. Visualize the difference in time with a World clock meeting planner, for example, and arrange communication channels and regular times for meetings.

#5 Learn the Culture

Offshore outsourcing sometimes means not only time differences but also language and cultural barriers. According to The National Outsourcing Association in the UK, 75% of survey respondents say that they “would take more account of culture next time”. Therefore you must carefully consider if there is any difference in organizational culture with your vendor and if you can literally speak the same language with your team.

None of the options is perfect. Both nearshoring and offshoring have some challenges that seem to be difficult to manage, and what is most important, they tailor projects to different needs.

Though we strongly believe that there are no issues that can’t be solved by careful planning and a responsible vendor by your side. 

Why Outsource with inVerita?

• Best ranked B2B Clutch.co company with 7 years of experience in logistics, retail, healthcare, fintech, real estate, and e-learning;

• More than 150 IT specialists with a 40% of employee growth rate in a year;

• Top 3 employer according to DOU 2021 among 1391 companies in Lviv;

• Our software dedicated teams are composed of experienced developers who have strong expertise in building web and mobile solutions, IoT software development, Cloud and DevOps services for various industries;

• InVerita always signs a non-disclosure agreement (NDA) with customers a document that lists the governing law, protects the information, agreement duration, and guarantees jail time, fines, and severe reputational damage in case of NDA breach.

• We know how to deal with time-zone differences. Our managers are responsible for giving customers daily insights into the scope of the project and keeping them updated about all the challenges.