Types of outsourcing: Nearshore, offshore or onshore

The market currently offers such a great variety of outsourcing options and different spheres of software development. Conducting in-depth research is absolutely necessary before making a final decision, and this takes time. We decided to provide some assistance with this lengthy endeavor and do the research for you, keeping in mind that every detail matters when choosing the correct type of outsourcing company that best suits your project.

Why do people outsource software development?

In order to find a perfect outsourcing company that is right for you, we need to concentrate on the main reasons for outsourcingSo why do people outsource software development in the first place? Of course, the list can easily be long-winded, but the following are the most probable answers you will get if you ask anyone with outsourcing experience:

  • A highly skilled staff is needed, but the cost of hiring one may be too great,
  • A highly skilled staff is needed, but the cost of hiring one may be too great,
  • A highly skilled staff is needed, but the cost of hiring one may be too great,
  • A highly skilled staff is needed, but the cost of hiring one may be too great,

Types of outsourcing

The most logical classification of outsourcing companies is based on location. Why is that so? You will find out a little bit later in this article. For now we would like to clarify the three main types of outsourcing:

  • Onshore outsourcing (choosing a company in your own country);
  • Offshore outsourcing (finding a team somewhere in Asia, for example, in India);
  • Nearshore outsourcing (a company in a country that is not far from yours, like in Eastern Europe, if you are located in Western Europe).

Onshore outsourcing

Domestic software outsourcing has many advantages over other types of outsourcing: local teams are easily accessible, they speak the same language, they live in the same time zone, they have the same mentality as you do, you can control what they are doing and how they are doing it, plus they are not too far away should any problems arise. This is all very promising and reassuring. You quickly put together a list of local outsourcing companies that can help you, then you check their prices, and… suddenly, disappointment sets in.

In countries like the USA or any country in Western Europe, the cost of living is quite high, which corresponds to high hourly rates for developers (100-250$ which represents an average range). If you decide to take the risk and invest in this option, then you should keep in mind that high rates cannot always serve as a guarantee for high-quality results. The chance that something may go wrong is the same as anywhere else.

+ face to face communications with your team

+ personal meetings with your team

+ more likely to find developers with rare or in-demand expertise

– more in common with your permanent staff

– time delays – can slow down your development schedule

– managers won’t have in-person oversight over the supplemental staff

Offshore outsourcing

An offshore team, on the other hand, is located in a foreign country, and most often one with a completely different cultural code and language. Offshore outsourcing usually offers the lowest prices because the cost of living is much lower in the country where the developers are located, so they can accomplish the same work for far less money. For example, a single developer’s hourly rate in the United States can be $150 or more, but in Southeast Asia, a developer of the same caliber would charge only around $25 per hour.

With the lower price tag, however, come higher risks as, between the time differences and the language barriers, it’s often difficult to guarantee that work a client has paid for will be done on time or according to the specified plan. While there are certainly high-quality offshore developers who are ready and able to solve any organization’s system issues, you never know what you’re going to get. In the end, the project management responsibilities and efforts required to reduce risk may outweigh the cost savings.

+ it is cost-effective and saves time

+ you can scale your team up

+ chance to take advantage of someone’s experience

– complitated communication

time zone gap

cultural differences

Nearshore outsourcing

A trade-off or compromise between these two models is the nearshore outsourcing model. In fact, this model is just like offshore outsourcing, with the key difference being that the development team is located in a country that is close by and that upholds the same or similar cultural codes, traditions, and values. For example, a German plant in Dortmund is unlikely to experience any problems when working with a Polish development team. Even a hospital in the United States hiring a team from Europe should have a relatively smooth experience.

A special variation of nearshore outsourcing provides an even happier compromise: the development team is abroad, but the vendor has a representative office in the same country as the client. In this case, all financial and legal transactions take place onshore, according to the rules and regulations of that country, giving the customer much more legal protection than if he worked with an office on the other side of the world. But because the developers, themselves, are offshore, the client can still take advantage of significantly lower prices than onshore vendors can offer.

+ same time zones and easier integratiion

+ higher lever of engagement by related culture

+ quicker response time

– offshore can still be a cheaper option

– cultural differences

– less communication

It may be a real challenge to choose the right model and find the right provider for software development, software testing outsourcing, or quality assurance outsourcing that meets your expectations. Therefore, to make the right choice, you should first focus on your priorities.

How to find the best option?

When it comes to quality, in most cases, it depends solely on the company you hire. The outsourcing industry has improved its competitive edge in recent years and has proven to be very reliable in growing profits for various startups and companies worldwide.

If maximizing the budget is your priority, then outsourcing to countries with lower production costs may help you reduce expenses.

Another important thing to check after the right skillset and affordable costs is communication. If your joint communication and coordination skills allow the in-house and outsourcing teams to synergize and perform well despite the distant time zones, then offshoring is a great option for you.

If you feel more comfortable without having any language barriers or different work habits with your outsourcing team, then consider your onshore/homeshore options. After all, having good English and the right mindset are quite important points in building a productive relationship.

Whether it’s onshore, nearshore, or offshore outsourcing allows you to be more flexible. You no longer need to burden yourself with looking for and training new in-house employees when you can have a devoted outsourcing team working to their full potential remotely.

Source: Easternpeak.com, syberry.com, qarea.com