Offshore, Nearshore, Onshore. What’s the difference?

If you’re rubbing shoulders with software developers or even if you’re fresh in the industry, there’s a good chance you’ve heard the terms offshore, onshore, and nearshore software development thrown around. But what exactly does it mean and what’s the difference?

Although the word “shore” may conjure up images of beaches, it actually refers to outsourcing software developers from different countries - including your own.

Many business owners know that there are markets with skilled and affordable talent, thus offshore, onshore, and nearshore outsourcing can all be great options.

So, let’s dive into the nitty-gritty of each choice so you can figure out which option best suits your software development needs!

Onshore Outsourcing

Onshore outsourcing means outsourcing software development work to another company that’s located in the same country as your business. The main advantage of onshore outsourcing is benefitting from highly skilled labour without any language or cultural barriers. It also means that you have the opportunity to visit your dev team onsite easily.

However, the main disadvantage to onshore outsourcing is that there’s usually no reduction in the cost of labour and onshore outsourcing is often not as cheap when compared to offshore or nearshore options.

Nevertheless, one great thing about onshore outsourcing for your software development needs is that you can hire a remote team. This means all the benefits of skilled labour without the hassle of needing to onboard, train and pay the benefits a full-time employee would require. It takes all the administration work away from your end.

Offshore Outsourcing

Offshore outsourcing is basically the opposite of onshore outsourcing. This is when companies offshore the operations of their business to a company located in a foreign country by hiring a team from abroad to do the work remotely and virtually.

Offshore outsourcing offers considerable advantages, such as access to highly skilled labour for high-cost savings. A senior software developer offshore may cost the same as a junior in your own country. Offshore outsourcing is an attractive option because you can find higher quality developers at a better price.

However, one disadvantage may be the cultural and language barriers of dealing with people in a different country than your own. Offshore outsourcing also means working in different time zones. This can either be an advantage because you can have a team working on your behalf even while you sleep or it can be a disadvantage if you have trouble organising your communications or need last minute changes done by a particular time.

Nearshore Outsourcing

Nearshore outsourcing sits right in the middle of onshore outsourcing and offshore outsourcing. When a company chooses to nearshore the operations of their software development needs it means outsourcing work to a location that has a similar time zone or has minimal differences in language and culture.

For example, a company based in Germany might nearshore their software development needs to a company based in Poland because Poland offers skilled labour in software development at a lower cost than what might be found in Germany.

The benefits of nearshore outsourcing are that it typically provides some cost savings over onshore and has the added advantage of being close enough for more frequent site visits, while still accessing the skills you need for your work.

Nearshoring can really make outsourcing software development a breeze because it makes communication easier while still offering a reduced price for the cost of the overall work.

Onshore, Offshore, and Nearshore Outsourcing Compared

Execution Speed

How fast will my project be completed? This is a pervasive question, but the speed of execution depends on which firm is in charge of the software development project and how complex the project is.

Two important factors to determine the execution speed are the availability of resources and the ability to clearly define the requirements of the individual project.

Offshore firms usually have more flexibility when it comes to piling on resources before a project begins, as well as beginning implementation more quickly than an onshore firm. This is a result of the lower direct labour costs offshore outsourcing provides.

Onshore firms cannot typically afford to maintain idle resources, so they need to hire and train agents for new project implementation. But onshore firms are usually more efficient in defining a new project and collecting the requirements for it due to a lack of language and cultural barriers. Of course, offshore firms can handle requirement communications. However, they must work to overcome these barriers.

Competence and Quality

With all three options, onshore, offshore, or nearshore, there is typically a plethora of high-quality professionals who have domain-specific expertise. Although language and cultural barriers can impact the quality of the given service, this can be overcome via specialisation and quality control.

The good news is that even if you make a mistake on your first try, outsourcing enables you to immediately change plans and make a new decision about your outsourcing requirements so you can eventually find the perfect solution for your software development and budget.

Execution Risks

Every project that is outsourced comes with execution risks. When software development is outsourced to nearshore or offshore locations the execution risk can increase. However, a risk management plan and an effective project management plan can help alleviate these risks and keep the project running smoothly.

The Bottom Line

Overall many startups and companies from around the world have found outsourcing software development to be very profitable. Thanks to more and more advanced technology and a connected world driven by the digital era the offshore, onshore, and nearshore trend is rising. It’s become easier and easier to reap the benefits of a devoted remote team.

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