Nearshoring vs Offshoring vs Onshoring – Three questions: What do these terms mean and what do these have to do with outsourcing? Most Important, what is the best solution for your project?
Outsourcing, a term that probably everyone has come across one or more times nowadays. Whether it’s about saving valuable capital or simply a lack of quality resources, outsourcing development activities is an excellent way to give new projects the right boost.
Unfortunately there is a lot of misunderstanding between the terms, but it is actually quite simple to explain. Simply put, software development outsourcing refers to the process of delegating software development tasks to a third-party freelancer or team. Outsourcing can be classified as nearshoring, on-shoring, or off-shoring. As a result, because the terms are all different types of software development outsourcing, it is now a case of describing the exact differences.
So, in this post, we will quickly go through the fine differences between the terms and list the pros and cons of each. After reading this article, you will be one step further in choosing the best possible strategy for your project.
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Nearshoring
Nearshoring is a software development outsourcing model that allows companies to delegate software development projects to teams or partners in nearby countries. What are nearby countries? Normally, these are directly neighboring countries. So we are talking about countries within 1-2 time zones. Let’s take Germany as the country of origin, in this example classic nearshore countries are Ukraine, Poland, Czech Republic or Albania. Typically, companies go to locations where a large pool of untapped talent is available.
PROs
- Limited cultural differences
- Face-to-face communication possible
- Little to no time difference
- Greater control of project management
CONs
- Higher costs than other forms of outsourcing
To sum it up: Nearshoring brings with it a number of advantages overall and is therefore a valid outsourcing option. Only the cost per developer can be higher in contrast to other forms of outsourcing. Of course, it depends on the location of the outsourcing company, in many cases costs can still be saved very well in this way.
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Offshoring
Offshoring is the relocation of a development process by a company to a more distant location. Further locations often have cheaper development costs that’s why they are usually chosen in order to significantly reduce overall development costs.
The main difference between nearshoring and offshoring is the proximity. Because offshoring refers to outsourcing to faraway countries, you have large time zone variations, with an average difference in time of about 2-4 hours. India is a good example for that. It is one of the most popular software development and IT offshore locations in the world.
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PROs
- Lower costs due to lower labor costs
- Vast pool of development resources
CONs
- Greater differences in culture and communication
- Distance makes it hard to meet face-to-face
- Big time zone differences
- Quality control is more difficult
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To sum it up: Offshoring has some disadvantages that should be taken into account. Different time zones, cultural differences, possible language barriers, geographical distances, and different habits can all affect the work process and the quality of the development.
Onshoring
In simple terms, onshore development is a cooperation model between a company and a customer or a development team in the same country usually without time difference.
PROs
- No cultural differences
- Real time communication in the local language
CONs
- Less cost efficiency
To sum it up: Onshoring is far more expensive than other outsourcing strategies, and it does not always solve the problem of a talent shortage. If there is a skill lack in the region, there may be a talent shortage in the country as well. Developers, designers, and engineers with advanced skills frequently prefer to work for multinational companies. As a result, the biggest talent in the country is unlikely to work for a software onshoring company.
|💡Find Out: Differences between Freelancers & Remote Developers On Demand
Now that you learnt something about the different forms of outsourcing, you might be interested in getting to know the price differences for the gradations of developers. Either directly hired or outsourced – in our February’ post you can dig a little deeper into the topic of Hiring In-House vs. Outsourcing.
Just click the following link and read on!
💡The True Cost of Hiring vs. Outsourcing in Software Development
Have you ever wondered what exactly are the key differences between
Junior / Middle / Senior & Lead Developers?
Say no more – We covered this topic in our last post.
💡The Key Differences between Junior/Middle/Senior & Lead Software Engineers
Key Takeaways
Whichever form of engagement you choose, it will always depend on your available financial resources and the demands of the given project. As you now know, each form has its advantages and disadvantages.
The main distinction between Near- Off- & Onshore Outsourcing lies in the differences between time zones. Offshoring has long been a valid option to satisfy the need for remote developers. However, the trend of the recent years is more and more towards nearshore outsourcing. The total package of available top IT talent and affordability + little to no time difference makes this option very attractive.
Now it is up to you to decide which option you are going for. If you do need help achieving your next objective – we at codecombinator have made it our mission to help grow our clients IT-resources big time.
Whether you’re part of an agency, a startup, a corporation or a VC – we specialized in providing nearshore development solutions. We deliver proven specialists or embedded teams while granting flexible terms.
Cheers,
Team codecombinator 🚀