Onshore, Nearshore, Offshore Software Development: What’s the Difference?

Software outsourcing has seen a steady increase in demand over the last decade. This aligns with figures that confirm the global outsourcing industry is now worth $85.6 billion USD.

The high demand for software development means that talented developers are in short supply. Companies are finding it increasingly difficult to hire developer talent from within their local area. As a result, more businesses are turning to remote teams to bridge their skills gaps and stay ahead of the competition.

Businesses that outsource their software development benefit from project efficiency, internal productivity, improved workload flexibility, and an overall higher quality software product.

The first decision that companies need to make before outsourcing development is which method will best suit their business needs. There are three different approaches to software outsourcing: nearshore, offshore and onshore. 

Let’s take a look at the differences between each one in more detail:

Onshore, Nearshore, Offshore Software Development: What’s the Difference? 1

What is onshore software development?

Onshore software development is when a business outsources work to a company in the same country. For example, a business in New York may need a mobile app developer and decide to outsource the work to a provider in Boston that specializes in that specific industry.

Onshore outsourcing is the geographically closest option for businesses. Companies that find themselves under-resourced or over-stretched with work often outsource to onshore developers for convenience. It frees up company time to focus on the day-to-day running of the business and can help ensure that products are brought to market on time.

Onshore software development is well-suited to projects that require location-specific knowledge, for example, a marketplace app for U.S cities. It can also work well for last-minute or small projects that require a fast turnaround time. Similarly, projects that require a lot of face-to-face interaction are suited to onshore development.

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What is nearshore software development?

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Nearshore software development is when a company outsources work to a neighboring country that’s geographically close to their own. For example, many companies in the U.S outsource software development to Latin America, where countries like Colombia, Mexico and Argentina have compatible working hours with U.S timezones.

Nearshore development enables companies to scale their teams effectively by having immediate access to software engineers in the same timezone. Nearshore companies often share similar language and cultural similarities, which typically makes for a productive working relationship.

Although nearshore software development doesn’t require in-person communication, the proximity of the provider means that face-to-face meetings can be scheduled if required. Travel costs are generally low and, in some cases, businesses can travel to and from meetings with developers within the working day.

Nearshore software outsourcing is particularly well-suited to medium and large-scale projects where companies need to have immediate access to developers. Projects that may require the handling of sensitive information, or where security is a priority can be effectively managed by nearshore teams.

Cultural compatibility helps ensure that developers understand the underlying principles of the project, which mitigates the risk of miscommunication.

What is offshore software development?

Offshore software development involves outsourcing work to a third-party in a region that’s geographically far from the host country. For example, a business in the U.S might outsource to an offshore development team in India.

Traditionally, companies have outsourced offshore to take advantage of cost savings. However, recent trends are showing that companies are now more concerned with quality.

One of the main benefits of offshore software development is that it provides companies with access to an even larger talent pool of developers that normally wouldn’t be accessible by nearshore and onshore companies. Businesses aren’t restricted by the skills of their immediate team.

Offshore development can work well for projects with limited budgets, or those that require specialist expertise that is difficult to find.

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How to choose between onshore, nearshore and offshore software development?

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To determine which approach will be the most beneficial to a project, a thorough specification should be created, outlining the individual tasks that need to be completed.

Companies then need to evaluate the current skills they have at their disposal and identify those that need to be outsourced.

The level of expertise required will determine how large a talent pool a company will need to hire from, which can impact the outsourcing options.

Companies should then consider the complexity of their project and decide whether distance will be a factor in the project’s success.

They should also consider what type of workflow the project requires. For example, if the software needs to comply with strict regulations, then a robust workflow with a focus on adherence to guidelines will be necessary. If the project requires more creative input, then two-way communication and feedback will be particularly important.

Finally, businesses should check their shortlisted countries’ reputation for software development. Whether companies decide on an onshore, nearshore, or offshore approach, it’s important to be aware of the country’s particular software expertise.

How to outsource to a nearshore software team

To help you choose the best nearshore outsourcing team for your needs, we recommend following these steps:
  • What specific skills need to be outsourced?
  • How large a talent pool is required for hiring?
  • How complex is the project?
  • Will distance be a factor in the project’s success?
  • What type of workflow would suit the project?
  • What are the shortlisted countries’ reputations for software development?

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