Offshore vs. Nearshore Outsourcing: Which One to Choose?
Traditionally, companies might have recruited more exclusive employees to cater to their development requirements. However, there are options these days that allow for more flexible upscaling while maintaining your in-house team's focus on the business. Nearshore and offshore outsourcing are the two options that offer immense flexibility when compared to in-house or onshore development.
As per Statista, the IT outsourcing industry is expected to reach USD 425bn by 2026. That is why it is important to know offshore vs. nearshore outsourcing to leverage productivity, and cost-efficiency, and access a vast talent pool when you select the right outsourcing model.
This article will explore these two outsourcing models in detail and help you choose the one that can truly add value to your business.
Offshore Outsourcing
As per a YouGov report, around 48% of companies outsource offshore.
Offshoring refers to outsourcing a project or service to a vendor in a distant nation. Most frequently in one that's geographically far from your country. It could also be from a different region of the globe. Resultantly, the offshore team is often called 'overseas workers.'
Offshore outsourcing lets a business collaborate with a geographically distant vendor and save a huge sum of money. Let's examine the pros and cons of offshore outsourcing to understand which model suits your company better.
Pros of Offshoring
- Access to a global talent pool
You can select your offshore outsourcing vendor depending on your tech talent requirement. Offshore locations have been focused on training tech experts and imparting professional tech courses. That offers you access to a global talent pool than the in-house team with a briefer market time.
- Cost-efficiency
A major benefit of outsourcing your development to an offshore vendor is the cost. Far offshore locations like India offer talented developers at nearly half the hourly rates of developers working in other parts of the work like the UK, US, Canada, etc.
- Expertise
With offshoring, you have access to professionals with experience working with different domains and tech stacks. Moreover, IT outsourcing locations like India, invest in CS and STEM education regularly for engineers. Thus, you can recruit the best tech experts without spending a lot of money.
Cons of Offshoring:
- The difference in the time zone
In the case of offshoring, the difference in the time zone for the clients is generally about 10-14 hours. That isn't easy to deal with sometimes. It overlaps the working hours. Ultimately, this may affect the quality and frequency of meetings and the project deliverables.
- Traveling
Traveling in the offshore outsourcing model means 10 or more flying hours. Misunderstandings and lengthy waiting times due to cultural differences and communication may increase costs again. That doesn't include the amount of stress you witness during the entire business process. But, if low hourly rates are your major concern, the offshore outsourcing model is likely your best bet.
Nearshore Outsourcing
As the name implies, nearshore outsourcing refers to delegating your development requirement to a vendor in a close-by country. This means hiring a Dedicated development team that operates in the same time zone as yours and is geographically near to your location.
Nearshore outsourcing allows a business to recruit tech experts with specific talent and resources sans engaging an in-house tech team. However, this doesn't need to be just why you opt for nearshore outsourcing. There are other pros and cons of this model that are as follows:
Pros of Nearshoring
- Better communication
In the case of nearshoring, you will witness no challenges in communication. After you have contacted your vendor and clarified your requirement, you are good to go. Do you wish to visit the vendor onsite to know the company or the developer team better before signing the contract? No problem at all! Your vendor isn't far off. So you could have a quick visit whenever you wish for.
- Simpler audits
Recruiting nearshore developers allows you to have better control over intellectual property. Moreover, it is likely that your vendor and you belong to the same data security laws which let you eliminate misunderstandings and risks when signing the contract.
- Cultural similarity
As per the International Journal of Multidisciplinary, cultural affinity is an important factor, which includes viewpoints and negotiation conduct. With nearshoring, you and your vendor have a broad cultural similarity. Hence, it's easier for the teams to collaborate and integrate with quicker communication and better productive interactions, enhancing the quality and efficiency of deliverables.
Cons of Nearshoring
- Limited access to tech experts
There may not be enough tech engineers or providers with sufficient knowledge in neighboring nations. The work gets more complex if you're looking for a specific domain and tech stack. Hence, it could be time-consuming and challenging to overcome the lack of sufficient tech candidates.
- Higher cost
In contrast to in-house or onshore development, nearshoring can be a little more expensive than offshoring in some cases. You should conduct additional research regarding vendor capabilities and work quality to ensure the final product's quality justifying the additional costs.
Offshore vs. Nearshore Outsourcing: Which one makes a better choice?
Offshore outsourcing is a good choice when the cost is a priority. And for development projects that don't require the entire team to always remain online or need little or no visual communication.
The offshore outsourcing model works great when:
- Real-time cooperation is easy
- Cost is an important concern
- Your expected output is simple
- Your internal working process is mature
On the other hand, nearshore outsourcing is an amazing alternative when you wish to monitor the development project closely with highly experienced and competent IT professionals. It even simplifies time management and communication while speeding up project completion.
If you are still confused with this selection between the offshore and nearshore outsourcing models. Let's go through a few tips to help you pick the right outsourcing model that matches your business needs.
Tips to Pick the Perfect Outsourcing Model
It's important to understand your priorities before hiring an outsourcing vendor. The geographic location of your chosen outsourcing vendor affects whether it will be able to meet your expectation.
Answer questions like
- What's your budget? If it's limited, then it's best to prefer countries having low hourly rates. If not, you can concentrate on the developer's professional competence.
- Is it significant for you to communicate with the outsourced team in real-time?
- How involved are you planning to remain in the development project?
- Is it important for your outsourcing vendor to reside in the same city or country as you?
- Are there specific local regulations that you are required to abide by?
- Do you already have a complete in-house development team or require more advanced professionals?
So, what should you ultimately choose? Should you opt for a nearshore or offshore outsourcing model?
The Final Verdict
Whether you wish to upscale resources for your project or fill a skill gap to back your in-house development team, outsourcing can help deliver a cost-efficient alternative with significant time savings.
Cultural affinity, physical closeness, time zone, and better communication are all major advantages of nearshore outsourcing. These allow companies to witness improved morale, productivity gains, and an increased ROI.
Meanwhile, offshoring gives companies access to a broader talent pool, provides flexible scaling, and enhanced efficiency, and can offer the most value in its cost savings.
However, all companies have varied goals. Some might benefit from integrating their in-house team and nearshore outsourcing models, while others might discover that offshoring better meets their requirements.
Ultimately, the choice is yours!