Differences: Nearshore, offshore and onshore software development

Software outsourcing is an option increasingly used by companies that want to cover the lack of technical skills of their businesses. When hiring a service with these characteristics, it is important to assess which of its modalities best adjust our needs.

Outsourcing is, for any company, a strategic decision that implies the incorporation of an external supplier to its value chain. The delegation of competencies allows organizations to improve their performance by focusing their efforts on the activities of their core business. In the specific case of software and application development, it means leaving the conceptualization, design, implementation, and maintenance of specific technological solutions in the hands of others.

A world with the need to outsource

The globalized world has turned the search for talent into a much simpler process. Thanks, in part, to technological advances that have increased accessibility and that facilitate remote and remote work. In this sense, there are different types of outsourcing depending on where the service provider is. While it is true that there is no more or less adequate option, it is important to take into account the advantages and disadvantages of each of them. Next, we define them to help you make the decision that best suits the needs of your project.

How large is the software outsourcing industry?

The software outsourcing industry has grown so much over the last few years that it has reached a market share of 85.6 billion U.S. dollars in 2018 alone. That impressive number comes to show an undeniable reality of the US IT talent market - software developers are in short supply and the only way companies can fill those roles in their staff is by hiring external talent.

But that’s not the only reason why offshore software outsourcing is growing with each passing year. Businesses know that software development outsourcing can bring several benefits to the table, including an improved project efficiency, a boost in internal productivity, more flexibility for in-house teams, and an end-product of higher quality.

Nearshore, offshore or onshore software development?

Companies may choose to meet operational needs by outsourcing their contact center operations to onshore, offshore, or nearshore locations. They base their decisions, in part, on cost comparisons, proximity to their business location, and language or cultural considerations. It would be helpful to begin by defining the terms “onshore software development”, “offshore” and “nearshore”.

Nearshore Outsourcing:

Outsourcing the operations of the company to an adjacent or nearby country having similar culture and language skills. Nearshore outsourcing offers some cost savings over onshore and has the added benefit of proximity for more frequent site visits, while retaining a highly skilled labor pool.

 Advantages

Access to highly experienced developers who possess the same in-demand skills and workflow efficiencies as onshore resources – at a better value.

The geographic proximity significantly reduces or eliminates time zone and travel issues. Time zone alignment also enables real-time, collaborative Agile development.

Certain Latin American countries foster technology communities similar to those found in Silicon Valley. They also boast higher rates of English fluency and cultural affinity.

Disadvantage

While hiring engineers nearshore is typically less expensive than onsite or onshore labor, yet it can still cost more than working with offshore teams.

You will encounter some time zone difference s (a few hours) when selecting the nearshore model. If every hour counts, especially when you’re on a tight delivery schedule, these differences can potentially lead to some marginal productivity losses.

Offshore Outsourcing

Outsourcing the operations of the company to other companies that are located in a foreign country, and most likely have a different language and culture. Offshore outsourcing offers benefits like higher cost savings and access to highly skilled labor.

Advantages

Offshoring is efficient for maintenance work on projects that are well-defined and don’t require strategic planning or ongoing communication.

Hourly rates for offshore developers tend to be lower, so delivery costs can be reduced (assuming equal levels of developer productivity). Offshoring offers a “follow the sun” approach to development. U.S. developers can produce deliverables during normal working hours, while testing and maintenance activities can be completed “off hours.”

Disadvantage

Cultural and language differences and even difficult-to-understand accents can at times cause some communication issues between team members working in different locations.

Contact can be limited when coordinating with offshore staff (due to time differences), which can sometimes slow down productivity during the workday, and frustrate expectations as far as output is concerned.

Onshore software development:

Outsourcing operations of the company to another company located in the home country or region. Companies can reduce labor costs somewhat and benefit from highly skilled labor with little or no language or cultur al barrier, but the cost of such operations is high compared to offshore or nearshore locations.

Advantages

On-site resources accommodate key stakeholders who have a preference for face-to-face communication. Onshoring allows for in-person meetings when the company culture isn’t experienced in engaging with remote employees. You are more likely to find developers with rare or in-demand expertise in the U.S. The size and tenure of the U.S. technology industry have created an exceptional depth and breadth of talent.

Disadvantage

While onshore staff will usually have more in common with your permanent staff than workers based in a foreign country, there still might be some time delays (imagine cooperating between the East and West Coasts), which can slow down your development schedule. Managers won't have direct, in-person oversight over the supplemental staff that works remotely. When selecting the onshore approach, integration with onsite employees can take longer, as distance and time — even with outstanding communication protocols and technology in place — can affect how people cooperate and interact with one other.

And which is better to use?

There are advantages and disadvantages to both offshore outsourcing and nearshore outsourcing. It is not possible to say that only a certain method is preferable over the others. It all depends on what a company wants and what it intends to achieve. If culture and time zone are more important than anything else, nearshore outsourcing is a better idea.

However, if infrastructure, language ability, skills, and other aspects are important as well, offshore outsourcing across the world can be considered. Offshore outsourcing provides more opportunities and freedom for companies that plan to outsource.

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