Nearshore vs. Offshore vs. Onshore
October 29, 2020 / in Nearshore Outsourcing, / by number8

Summary: Nearshore, offshore, or onshore, what's the best choice when outsourcing software development? Learn about the pros and cons of each to help you decide.


Outsourcing is a key piece of doing business in today's global market. In fact, as an industry, outsourcing hit $92.5 billion in 2019 and continues to grow.

Whether to cut costs, improve focus on your core business, or keep up capacity, companies all over the world rely on it to make their businesses work.This is especially true in software development where U.S. tech leaders lament the inability to get enough good people to fill positions. Not because there aren’t any available; there just aren’t enough of them.

After taking a look around, many companies have started outsourcing software development to fill roles as best they can. Given that U.S. job growth for software developers should hit 22 percent by 2029, this isn’t a challenge that is going away anytime soon.

If you’ve begun to consider outsourcing to deal with your software development company’s needs, there are several routes you can take to do so. Which works best for you will be a compromise of factors such as skill, price, convenience, and security.

Why Companies Are Outsourcing Software Development

For years, the primary reason most companies choose to outsource was to cut costs. You avoid the expenses of workspace, equipment, and benefits by hiring outsourced workers.

However, tech leaders are less likely to name that as a primary goal due to the constant need for good software developers. Most embrace outsourcing as part of their overall hiring strategy or to fill sudden vacancies. These take priority over a way to slash expenses.

Outsourcing can improve efficiency, reduce application completion time, and deliver cost-savings. But these benefits only come when you choose wisely among your options. Let’s take a look at the three ways you can outsource your software development.

Your Outsourcing Options

If you've decided outsourcing is for you, there are three standard models you can follow. Each comes with their own pros and cons you'll want to weigh as you make your choice. Take time to understand what will fit best with your company culture and workflow. This will allow you to get the most value out of the relationship with your outsourcing partner.

Onshore

Onshore - sometimes called local outsourcing - means that you hire a company located in the same country or region as you. If you want a team of fellow Americans, this is your one choice.

On the plus side for this model are fewer communication and cultural barriers. These workers would be in the same or a similar time zone as you, making meetings and training much easier. They’ll be more likely to fit in with your company culture and be physically accessible if the need arrives.

The major downside to onshore is significantly higher hourly rates relative to the other models. Also, your chosen outsourcing company might not have the right talent to fill your need immediately. They not only have a smaller talent pool to recruit from, but since rates are higher in the U.S., they can't afford to have developers sitting around waiting for work.

Offshore

When we talk about outsourcing software development, the offshore model is what most people tend to think of. In this scenario, the work is being done for you by a company in a faraway country and time zone.

Offshoring often means working with teams in India, China, or Eastern Europe. These locations tend to provide huge numbers of developers at rock bottom rates.

If the lowest price is your main priority, this option typically offers the best hourly deals. And being willing to work with others anywhere in the world can sometimes give you a larger pool of talent to pull from.

However, the best deal on costs doesn’t always equal the best value. A time difference of up to 12 hours means most communication will be asynchronous. This can slow down your software development as you give feedback and changes get made.

Cultural differences in how work gets done can throw a kink in production as well. These might include attitudes toward authority and responsibility that are unfamiliar to you and can introduce conflict.

Nearshore

This model might be new to you, but combines some of the best benefits of the other two. Nearshoring takes the work outside your own country, but to one that is bordering or close to your own.

Nearshore development services have been growing in popularity in the United States as Latin American countries build expertise in software development. Companies in countries such as Costa Rica or Honduras provide a solid alternative to options on the other side of the world.

Taking the work to another country can still decrease your costs at lower hourly rates. But doing so in your own time zone gives you onshore benefits such as smoother communication during your regular business hours.

Hourly rates are likely to be slightly higher than offshore, but still significantly lower than onshore. At the same time, the risk of unexpected costs decreases thanks to more efficient communication that keeps work on track. Should you need in-person contact, closer proximity means lower travel costs.

Lastly, your nearshore company partner increases the pool of talent you can pull from. The workers in that pool are more likely to include fluent English speakers and to have a more closely aligned work culture to that of the U.S.

Choosing Your Best Software Development Outsourcing Option

Ensuring your company has the software developers it needs to execute on projects can mean the difference between success and failure. If you struggle to find the right people to hire as employees, outsourcing software development work might be a good choice for you.

Unless the cost isn’t an issue, your choices boil down to nearshore vs. offshore. Nearshore simply gives you the best of both the onshore and offshore models, making it an excellent compromise with great value.

Interested in learning how to complement your in-house development teams with highly skilled and versatile developers from Latin America?

number8 can help with that. Connect with us today or continue exploring all of our custom software development and remote staff augmentation services here.

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