An entrepreneur wants to hire the best talent for his company, enhance flexibility, spend minimum time on hiring, and speed up the growth of his business. All this seem pretty chaotic and difficult, right? Well, that’s how the life of a businessman is. However, outsourcing has made things manageable for them. With outsourcing, the businesses can delegate their non-core activities to other businesses and focus on their core ones.
There are three major types of outsourcing in the market, namely, onshore vs nearshore vs offshore outsourcing. Further, in software development, nearshore & offshore are quite popular and come with their own set of pros & cons. However, the real question comes – Which one is right for you?
We will present you with all the required data that will assist you make the right choice. This article will cover significant topics related to offshore vs nearshore outsourcing including their meaning, pros & cons, comparison, top differences, followed by a conclusion. Let’s get started with the basics first, i.e. some stats & numbers about the outsourcing industry!
Offshore software outsourcing is when a company hires another development company from a distant region to delegate its work. There can be a number of reasons for outsourcing your work to another company in a different region, including cost, expertise, and wider resource choice. The model is also popular as the “remote working model”.
Offshore Software Development Services Example – Your Company is located in the USA and you delegate your development work to a company in India.
Nearshore software outsourcing is a cooperation development model where a user delegates its software development work to another company located in nearby countries, i.e. one to three hour time difference. For instance, companies based in the USA outsource their work to another team in North America or Latin America.
Nearshore Software Development Services Example – Your Company is located in the USA and you delegate your development work to a company in Mexico.
For people wondering why people are switching to nearshore vs offshore outsourcing methods over traditional software development methodologies, a primary reason is the shortage of qualified talent in the local country. For reference, a total shortage of 40 million unfilled jobs was reported globally in 2020 and the number is expected to go over 85.2 million workers by 2030.
Furthermore, this shortage of qualified workers and skill gap will cost over 8.4 trillion US dollars in loss in revenue to the companies globally. Obviously, there are several other reasons for choosing outsourcing over conventional development methods; reduction in overall cost without compromising the quality is one of them. Thus, the nearshore model has come as a good to go option for many companies and users.
Both offshore outsourcing and nearshore software outsourcing come with their own set of advantages and disadvantages. Some people prefer nearshore while some are inclined towards offshore. Till now offshore is leading the market due to a number of reasons. However we leave it to you with the following pros & cons to decide –
IT employees get one of the most lucrative salaries in the world and this creates a financial burden on companies, especially in developed nations like the USA. In comparison, offshore outsourcing is a much more affordable option without compromising the quality of the work. For reference, some of the most successful businesses in the USA, including Microsoft, Slack, Basecamp, and Skype, have outsourced their IT development to offshore software development companies.
In financial numbers, developers from developed nations like the USA and Western Europe charge between $60 and $200 per hour. In comparison, when you hire dedicated developers from developing nations like India and Vietnam charge between $10 and $50 per hour for the same work.
Offshore outsourcing facilitates talent to apply from any part of the world at better prices. The companies benefit by getting a large pool of highly skilled talent at better rates. Further, employees from different cultures and markets adapt to new conditions easily and are usually more creative. The shortage of IT experts in the USA has created a gap in the market and offshore is a great option to tackle it.
Plus, employees from developing nations work harder and adapt to new tech & tools faster. For reference, India is a top destination to hire dedicated developers for trending technologies such as AI/ML, Big Data, data science, DevOps, Cloud Computing, and Blockchain.
When a company hires an offshore software development company for their work, they can better focus on their core services. Further, the amount saved by hiring an offshore outsourcing can be invested in other resources and activities to yield better profits. In addition, hiring a reliable partner, like Konstant, will assist you in managing projects effectively and implementing strategies.
Many companies in the USA follow this model, i.e. outsourcing their business process to other companies and working on their core operations to deliver better results to customers. This is a win-win for them; they save time & effort by delegating work to the experts, save cost by hiring a distant partner, and can focus on their core activities.
It is a big challenge for companies to scale from small/medium-sized development teams to large teams. The cost, time, and effort required to hire a new qualified IT employee is high and comes with several risks. The best solution to the issue is hire outsourcing Development Company that already has an established skilled team. This further saves a lot of hiring and managing costs for the company.
In case you want to scale your offshore dedicated team further, then such offshore development companies already have access to a large pool of skilled talent in their country.
Perhaps the most prominent challenge is the time zone difference when hiring an offshore software development company. For instance, the time difference between New York and India is more than 10.5 hours, creating an obstacle to smooth communication. When you enter your office, the offshore team experts are leaving their offices. This creates a communication gap and results in miscommunication that could further result in untimely delivery, delayed decisions, and increased costs.
However, with various tech advancements, the issue has become a thing of the past. Most of the top offshore software development companies in India offer round the clock service to clients globally and even have offices in different parts of the world.
Many companies also report cultural differences issues when they hire offshore developers. A team that shares identical values and culture yields better results by coordinating easily. Difference in culture also instills discomfort among many companies and that’s why they prefer to work with a culturally common team.
Further, offshore software development companies also have different public holidays and festivals that require them to take unnecessary days off. However, in modern times, people have surpassed the orthodox mindset and respect each other’s culture really well.
Although English is the most common spoken language in the world, it is still difficult for people living in non-English speaking countries, such as Vietnam. Some of the most popular methods of communication in IT are video calls, virtual meetings, emails, and instant messaging. Smooth communication is the key to effective and timely results and miscommunication can create chaos in the work.
Further, if your team fails to understand your exact requirements due to this communication gap, then the result can be diverted from your expectations. Thus, it is recommended to hire from English-speaking countries. India is a preferred choice here with the world’s second-largest English speaking popular globally.
Cost effectiveness is one of the primary reasons for people to choose IT outsourcing Development Company. A company doesn’t have to rent a space, pay wages, hire dedicated developers, and bear other expenses that eventually cut a major portion of expenses. Although, nearshore software outsourcing is more expensive than offshore, it is still a better option than onshore outsourcing.
Another major advantage nearshore software outsourcing has over traditional development methods is minor or no time zone difference. The companies that require speed-to-market delivery choose nearshore even though it is quite expensive than off-shore options.
Big time zone difference causes a gap in the communication between the team members and you. The case is a little different in nearshore. For instance, if you are living in Mexico and hire a company from Washington DC, then the time difference will be 2 hours, not causing any communication gap.
According to research by Deloitte, a total shortage of 40 million unfilled jobs was reported globally in 2020 and the number is expected to go over 85.2 million workers by 2030. The problem is a major concern in many countries and nearshore development offers access to skilled resources and tech experts.
In most cases, a nearshore software development company already has a team of skilled experts who are ready to work at better prices. The resource already has expertise as well as experience to handle and build different kinds of projects.
One of the major concerns with offshore outsourcing is the difference between legal obligations and regulations. A nearshore software development company is near your geographical location and thus usually no major policy or regulation change is witnessed.
For reference, all the companies that target the European market have to comply with the GDPR and a non-European development company might not understand the compliance requirements.
Development plays a major part in the overall cost of software and thus hiring an affordable development company is preferred by everyone. In contrast, a nearshore software development company is quite expensive when compared to offshore developers. The difference between per hour rate of offshore vs nearshore developers is significant. Thus, if you are someone who is on a budget, then offshore is an ideal choice.
Another major disadvantage with nearshore software development companies is the lack of round the clock service. They have the same time zone as you and thus employees refuse to work at odd times. In comparison, offshore software development companies are more flexible and are ready to offer 24/7 support. Even if your nearshore developer agrees to work at odd hours, he’ll demand a much higher charge that eventually boosts the overall cost.
Nearshore outsourcing limits the number of development partner options for anyone. Nearshore only covers a limited region while offshore opens up the whole world for you. For instance, if you are looking in the USA and you chose nearshore, then you miss out on a major prominent IT hub, i.e. India, that produces the best tech experts at affordable rates.
Offshore software development companies are no doubt cost effective than nearshore software development companies. Some of the top places for offshore outsourcing, including India, the Philippines, Bangladesh, etc. have one of the most affordable per-word rates for developers with the same skill set. Here is a comparison table for offshore and nearshore software developers’ prices for your reference.
| Resource | Offshore Charge | Nearshore Charge |
|---|---|---|
| Senior DevOps | $25 – $50 | $35 – $60 |
| Middle DevOps | $15 – $35 | $30 – $45 |
| Junior DevOps | $15 – $20 | $20 – $25 |
| Business analyst | $20 – $50 | $20 – $40 |
| Architect | $35 – $100 | $40 – $80 |
| Project manager | $20 – $50 | $20 – $60 |
| Junior developer | $10 – $25 | $20 – $30 |
| Middle developer | $20 – $50 | $25 – $45 |
| Senior developer | $25 – $60 | $35 – $60 |
| Lead developer | $30 – $70 | $50 – $70 |
| Junior QA | $15 – $70 | $15 – $25 |
| Middle QA | $20 – $80 | $20 – $35 |
| Senior QA | $20 – $80 | $30 – $55 |
| Junior UX/UI designer | $20 – $50 | $15 – $25 |
| Middle UX/UI designer | $20 – $65 | $20 – $35 |
| Senior UX/UI designer | $25 – $80 | $30 – $55 |
| Graphic designer | $10 – $35 | $15 – $40 |
The companies that require speed-to-market delivery choose nearshore even though it is quite expensive than offshore options. The time zone difference between offshore software development companies is more when compared to nearshore companies. However, many offshore software development companies like Konstant has offices all over the world and offer round the clock 24/7 service for better customer service.
According to research by Deloitte, a total shortage of 40 million unfilled jobs was reported globally in 2020 and the number is expected to go over 85.2 million workers by 2030. The problem is a major concern in many countries, and offshore outsourcing offers access to skilled resources and tech experts all over the world.
In most cases, nearshore software development companies have a team with similar skills as onshore companies because of the nearby geographical proximity. In comparison, offshore outsourcing opens access to global talent at better prices.
If you are someone who requires your development company to understand your culture, then nearshore outsourcing is better for you. However, if cultural difference has nothing to do with your product, then offshore is a better option. Overall, offshore software development companies might face a little difficulty in understanding different cultures but since nearshore companies are nearby regions, then such outsourcing agencies better understand your values and culture.
So, these were the top differences between offshore and nearshore software development outsourcing model. When comparing both of them, offshore outsourcing model is a definite winner here. The model is cost friendly, flexible, and delivers the best result. The rest is up to you…!
It takes good research & analysis to choose the right software development outsourcing company. However, there are some important points you can consider that can help you determine a reliable outsourcing partner. Below are the following things to consider before hiring a company:
Software development is a complex task and every project requires a different set of skills, i.e. it is not a one-size-fits-all solution. Thus, it is essential for you to hire a nearshore software development company that carries the expertise in your industry, target market, and technical expertise required. Hiring a company based solely on cost and not considering their expertise can eventually lead to higher costs, in terms of more effort and time required.
Budget is a major point to consider when choosing an agile software development company for your project. Different companies will offer you varied packages for the same requirement but you need to choose the one that suits your budget and requirements. Understand the market rates for your project and choose the one that offers the best value in exchange.
It is essential to check past client feedback and past reviews to authenticate the credibility of a software development company. You can check past client reviews on different review websites such as Clutch, ITFirms, Business of Apps, DesignRush, etc. Make sure to read the whole review and understand what people are saying about the service, delivery, timing, quality of work, and cost of the project. Similarly, you can also ask the past reviews from the company itself.
A good software development company has a strong portfolio and vast clientele. You can assess the work quality by analyzing the design, UI/UX, and functionality. Make sure to check a similar project as your requirement to better understand the work quality. An established software development company is better able to deliver a better and versatile solution.
Different software requires different sets of technologies, tools, and resources. Thus, it is essential to choose a company that has the required set of tools, resources, and experts in the team to build a reliable product at the best cost and time. Some of the most popular technologies in the market are React, PHP, Ruby on Rails, WordPress, and many more. Take interviews of the development team working on your project if required to analyze their expertise and knowledge in the field.
The most common issue that is witnessed among nearshore and offshore development companies is the communication gap between team and client. Poor customer support and lack of communication skills among the team result in an inefficient product and delayed delivery, eventually affecting the cost. Make sure to analyze the company’s communication responsiveness and transparency. Enquire from the company itself about its post-development support and project management system to facilitate smooth communication.
Hiring a manager is essential to fill the communication gap between you and the software development company. The hired supervisor acts as a trusted intermediary who facilitates issue resolution and understands the working environment. They also make sure that the project is at the right pace.
It is essential to determine the tasks that you are delegating to the outsourcing company. This helps in minimizing the risk and will help you choose the most cost-efficient model. In addition, you can write your probable issues and the app complexity before hiring your nearshore development company.
One of the most important tips to avoid any arguments with your nearshore software development company is to communicate your preferences and expectations with them. Understand their approach, i.e. SDLC (Software Development Life Cycle), and the workflow before beginning the work process. For instance, if you want updates about your project every week then communicate this to the team and ask them about the report delivery process.
A right software development partner is the key to a successful project. Thus, it is important to choose one wisely. You can refer to the guide above on how to choose the right outsourcing development agency for you.
Konstant Infosolutions is the IT powerhouse in the outsourcing industry that has empowered its varied clientele. We have worked with enterprises, SMBs, and startups globally to deliver our services successfully to over 1000+ clients.
We have our presence in 4 locations across the world, namely, India, USA, UK, and UAE. You can hire us as your offshore, onshore, or nearshore outsourcing development partner. Note that if you need help in understanding a project or have any doubts, feel free to contact us!
So, this was the detailed comparison between nearshore vs offshore outsourcing models. When comparing both of them, offshore outsourcing model is a definite winner here. The model is cost friendly, flexible, and delivers the best result. However, a major part also depends upon the development company you have chosen for your work. Hiring a reliable outsourcing development company is required to get the desired results timely. You can refer to this guide anytime while looking for an outsourcing agency. It shall help you choose the best partner for you.
Nearshore software development is delegating the work to a team working in the neighboring country to save cost and time.
Offshore software development is delegating the work to a team working in a distant region, generally far from your country. Offshore development is affordable and attracts a large pool of talent from across the globe.
India produces top quality IT experts at the best prices with no language barrier making it an attractive option. Thus, India is considered an affordable IT hub by developed nations and is a preferred choice for companies.
No, nearshore development is not better than offshore software development outsourcing. In comparison, offshore is much more cost efficient and offers access to the pool of IT talent.
Vipin Jain is the Co-Founder and CEO at Konstant Infosolutions and is in charge of marketing, project management, administration and R&D at the company. With his marketing background, Vipin Jain has developed and honed the company’s vision, corporate structure & initiatives and its goals, and brought the company into the current era of success.
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