Difference Between Nearshore and Offshore — What Is Best for Your Business?

inVerita
inVerita
Feb 9 · 4 min read

A person who at least once considered launching a product with a digital basis must have faced such terms as offshore software development and nearshore software development. Surprisingly, those phrases don’t have anything in common with the beautiful shores of the Pacific, Atlantic, or any other ocean. Offshore and nearshore software development means outsourcing software to companies that are located abroad. Frequently, companies can’t fulfill their needs in human resources or hiring experts in their city or country is simply too expensive. So they opt for outsourcing.

What is nearshore outsourcing?

Nearshore development is choosing a vendor in a nearby country. That means delegating tasks to a team that functions in a similar time zone and is geographically close to your country.

Practicality for business: nearshore outsourcing allows you to hire technical experts without employing an in-house team.

Advantages of nearshore outsourcing:

#1 Flawless communication

First of all, you face no difficulties in the communication process. Once you need to get in touch with your vendor to clarify something or monitor the development process, you can have a go. Do you want to have an onsite visit to get acquainted with the company before signing a contract, or to know the developers’ team better? No problem! Your vendor is not far, so you can have a flying visit whenever you want.

#2 Cultural similarity

One more important thing is that there are no cultural differences between you and your partner. The study held by Accenture showed that 69% of outsourcing deals fail and the main reason for this is the deficiency of culture compatibility between the partners. With nearshore outsourcing, the maximum you can face is the soft nation’s cultural differences that can be easily overcome through negotiations.

Disadvantages of nearshore outsourcing

Higher costs

Of course, nearshoring is usually less expensive than conducting software development in-house, though in most cases it’s still much more expensive than offshoring. If we have a look at this from an American company’s perspective, the nearshore partners could be chosen between Mexico and Canada. In comparison with Silicon Valley, hiring developers from these countries is less expensive, for sure. But if you compare with India, China, or Eastern Europe, there is still a very big difference.

Limited access to tech candidates

There might not be a sufficient number of service providers or engineers with enough expertise in neighboring countries. The task gets more complicated if you are searching for a particular tech stack and domain. Therefore, it can be difficult and time-consuming to mitigate the shortage of tech talent.

What is offshore outsourcing?

Offshore outsourcing is hiring a vendor from a distant country, most frequently, from a different part of the world.

Practicality for business: offshore outsourcing allows you to partner with geographically distant ventures and saves big sums of money.

Advantages of offshore outsourcing:

#1 Cost-efficiency

One of the biggest advantages of offshore outsourcing is the price. While delegating to a nearshore partner slightly differs in price, hiring an offshore partner can save you a lot of money. For instance, according to Payscale, the average salary of a software engineer in the US is $70K annually, or in neighboring Canada — $52K annually. While engineers with the same expertise and experience earn $25K annually in Ukraine and $26K in Poland.

#2 Access to a large talent pool

According to the ICIMS report, in the US within the last three years, employers managed to hire only 60% of tech talents required. Surprisingly, the number of applicants was twice higher than the number of open positions. Such a tendency has been dictated by a shortage of qualified tech candidates. While opting for offshore outsourcing you get access to tech expertise in any part of the world.

#3 Unique expertise

You get access to experts who have experience working with various tech stack and domains. Actually, within a short period of time, you can fulfill the needs of your project in any tech expertise. Furthermore, IT outsourcing destinations as Eastern Europe, for example, regularly invest in STEM and CS education of engineers. So, there is no doubt you can hire the uppermost tech talent without spending abnormal sums of money.

Disadvantages of offshore outsourcing

#1 Cultural incompatibility

Cultural differences are one of the major reasons why offshore outsourcing fails or causes a lot of problems. One of the simplest examples is the Indian “yes” syndrome. In Indian culture, people try to avoid giving negative answers, so if you wonder if it’s possible to have the bugs fixed by tomorrow morning, and you get a positive answer, most probably, it means “I’ll do my best”. Therefore it’s vital to establish flawless communication with your vendor and make sure you won’t have any difficulties caused by cultural differences between you.

#2 Time zones difference

Living in different time zones can cause a plethora of inconveniences such as missed deadlines or poorly executed work as a result of lack of control. Therefore, ensure setting clear requirements and a stable meeting schedule with your outsourcing partner to keep an eye on the development process.

Nearshore vs Offshore: What to Choose for your Business

None of the options is perfect. Both nearshoring and offshoring have some challenges that seem to be difficult to manage. Though we strongly believe that there are no issues that can’t be solved by careful planning and a responsible vendor by your side. With more than 5 years of hands-on experience, inVerita has been delivering well-tailored solutions to our partners from different parts of the world. Contact us to develop a product that makes a difference.

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inVerita

Written by

inVerita

inVerita is a software consulting company focusing on outsourcing and staff augmentation services based in Ukraine. https://inveritasoft.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +788K followers.

inVerita

Written by

inVerita

inVerita is a software consulting company focusing on outsourcing and staff augmentation services based in Ukraine. https://inveritasoft.com

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +788K followers.

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