December 9, 2021

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Nearshoring vs. Onshoring vs. Offshoring: What is the Best Option?

4 min read
hiring tech talent

Around the world, hiring tech talent is becoming increasingly popular. Outsourced teams are increasingly popular among businesses, whether they are working on web development or cloud computing. There are many reasons for this: less expensive labor, better-trained employees, and increased efficiency. When it comes to improving digital products or services, hiring an IT partner is often the best option.

In case you rub shoulders with software developers or are new to the industry – chances are you have heard the terms offshore, onshore, and nearshore development.

In software development, ‘shore’ implies outsourcing to a foreign company. Due to the availability of skilled and affordable talent, many venture capitalists, small businesses, and startups today opt to outsource their web development to a carefully selected overseas company.

Technology companies understand that the differences between offshoring, nearshoring, and onshoring are not only semantic. They are also critical to their competitive strategies, particularly in terms of engineering.

The answer is a vague “it depends”. After your company or organization decides the outsourcing of certain tasks or projects makes strategic or practical sense, the next decision to make is whether to hire nearshoring, offshoring, or onshoring.

This can be your checklist of things to consider when choosing.

NEARSHORING

Nearshore software development companies are located in countries with similar time zones or time zones with minimal differences. This elevates communication to a whole new level and saves major amounts of money too. On-site visits are also available, so nearshore software development is basically a win-win situation without drawbacks compared to onshore outsourcing.

PROS

Close time zone

Through continuous communication and proximity to hand, businesses can hold face-to-face meetings as needed and build effective working relationships.

Cultural compatibility

As a result of nearshoring, cultural and linguistic barriers can be minimized, and an environment for productive interaction is created.

CONS

Higher costs 

If you want access to the latest technology, nearshoring IT services can be more expensive than offshoring.

Poor selection 

Not every location is rich in tech talent. There is a growing consensus that Ukraine, India, and the Philippines are the best countries to find qualified, affordable developers, but other places can be limited in tech talent and thus undesirable for nearshoring.

ONSHORING

Onshoring is the practice of moving business processes within a country to a lower-cost location. This usually occurs near the location of the processes and functions. Proximity to the client is often a condition of working arrangements with big clients. Such arrangements allow organizations to cut costs drastically while increasing flexibility. Production can be coordinated more effectively and efficiently as a result as well.

PROS

Cultural familiarity

The onshore team will know what your business needs. With offshore collaboration, you are also able to synchronize your work and communicate in real-time.

Favorable legal environment

The signing process is faster and there are no bank commissions to pay. Furthermore, you are probably aware of the standards and regulations applicable to your industry.

CONS

Increased competition

Skills shortages may affect some countries. The limitation makes it more difficult for you to hire tech talent, as other businesses will likely compete for their services. Especially understaffed are high-paying jobs such as software architect, cybersecurity specialist, and data scientist.

High rates

Depending on the country, offshore development will be the most costly option.

OFFSHORING

Offshoring is known as the most budget-conscious form of outsourcing. Companies offshore their processes to offshore vendors in distant countries, usually India or the Philippines, where the labor pool is strong and the costs are relatively low. Timezone differences play a significant role in ensuring your business remains operational round the clock.

PROS

Low-cost labor 

Outsourcing tech experts can help companies reduce operating costs. Large and medium-sized businesses can save on labor expenses or augment their staff without increasing labor costs if they hire labor from distant markets.

Large talent pool

Offshore teams are no less educated than local tech talent. They can qualify upon graduation as well as through IT boot camps. Both can help them acquire valuable skills in specific technologies.

CONS

Communication problems 

Remote teams have different cultural backgrounds, which can make it more difficult to communicate effectively. You should therefore be fluent in their language and familiar with their customs, as well as find someone who is familiar with your cultural values.

Security risks

The process of outsourcing involves sharing confidential information and documents, which is risky, but necessary. Consider data security and how you can maintain transparency in your IT partnership.

Summing Up

At first glance, going offshore versus nearshoring versus onshoring may appear to be only a matter of distance. However, you should not rely on territorial proximity as a key factor when selecting your outsourcing approach in today’s digital age. To effectively add new members to your team, you must first figure out what your goals are. Where are you looking to go? What matters most to you: the lowest cost, the least fuss, or a balance of both?

You can determine which approach to take once you have a clear vision of the roles, responsibilities, and skills your future employees are expected to have. And if you still have questions related to software outsourcing, don’t hesitate to contact us for more info.

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