Offshore vs. Nearshore Outsourcing: What to Choose for Your Team Scaling

The return on investment in team building is the key parameter by which the team is formed. The need for scaling may be required for various reasons, but the main problem that you will have to face is the choice of the cooperation model.

The most popular options for cooperation are offshore outsourcing and close remote staff. When considering them, it is crucial to take into account all the existing risks and the specifics of your case.

How to do it right, and what are the advantages and disadvantages of each format of cooperation? Find the answers in this article.

IT outsourcing models

An additional resource may be required to perform IT functions. If the load on such specialists is unstable, it would be most reasonable to use the services of an outsourcing company. There are three main types of such cooperation models: onshore, nearshore, and offshore. The first type of cooperation is not preferable: here, the contractor is located in the same country or even economic zone. In turn, nearshore and offshore increase the scope for cooperation and can have an unexpected impact on business.

Offshore software development

An offshore development company is always located in another country, where the price is lower, and the value for money is better. This approach can save up to 50% on service costs. Among such countries are Ukraine, India, and China.

Benefits of offshore outsourcing:

Big savings on the final cost of the product. It’s also a great solution if you need a development team for a long time but don’t want to incur additional operational costs.
Expanding expertise and changing traditional approaches to work, thanks to foreign experience.
Quality assurance of the final product, thanks to professionals in their field.
Global talent pool with a choice of hard and soft skills.
Adjustment to the customer in choosing working hours, reporting systems, and work methods.

Disadvantages of offshore outsourcing:

Cultural differences with the performer’s country, which may affect mutual understanding.
Big difference in time zones.

Nearshore software development

This cooperation model involves hiring a team from a neighboring country. Most often, the cost of hiring “neighbors” is somewhat lower than internal resources, but there are many pitfalls that lead to other costs.

It is also important to understand the practicality of nearshore based on the location. For example, Norway will turn to the countries of Eastern Europe since it has no neighbors in the field of information technology.

Benefits of nearshore outsourcing:

Opportunity to travel and meet the team on site.
As it is a neighboring country, there can be fewer cultural differences.

Disadvantages of nearshore outsourcing:

Higher cost for the US and Europe business compared to other outsourcing collaboration models.
High risks in terms of copyright and patents, as even neighboring countries can have very different legislative aspects.
Limited number of specialists due to a certain territory.
Great dependence on the conditions dictated by the performer, because the team is more interested in the customer.

Nearshore vs. Offshore: What is Better?

So, if you choose between nearshore and offshore, it is important to take into account all the nuances so as not to run into problems in the future. On the one hand, nearshore is an opportunity to control the development process due to the distances; on the other hand, it is still tied to the location and a limited pool of talents.

Offshore is the flexibility of cooperation and low cost of services. Thus, Eastern Europe has established itself as the optimal rate and product-level ratio. Most European countries, and even the USA, prefer offshore. It is also beneficial for contractors because they receive higher pay than they offer domestically and replenish their portfolio with interesting projects.

What is nearshore good for?

for projects where the budget is not important;
for projects of increased complexity, for example, embedded, where constant contact and communication are essential;
for increased requirements for control within the company;
for cases when BPO and KPO formats are used.

What is offshore suitable for?

for maximum savings;
for the possibility of complete autonomy of the development of the project;
for projects that need 24/7 support;
for the ability to select the best specialists with the expertise that suits you.

Final words

The offshore model will be an excellent add-on for a working business that clearly understands its desires. It’s also an ideal solution for basic applications and complete customer service. Most companies are limited by budgets, which is a critical factor in choosing a collaborative model. Also, many companies are now putting soft skills at the forefront. This can also affect the choice. For some business owners, it is important to get to know the team personally offline, because this is how synergy and the highest results can be achieved.

At the same time, nearshore can come in handy if you don’t want your product to be developed on the other side of the world or if you’re a control freak. It’s also a great solution for complex projects where there can be a lot of iteration and refinement.

In other words, when comparing nearshore and offshore, you need to proceed from the needs of your business and not a specific outsourcing model.

Crunch specialists provide top specialists via both models, offshoring and nearshoring. Working with us is a key to success as we have a favorable quality-price ratio for our clients. Contact us if you’re interested in adding skilled tech specialists to your team or if you want a full dedicated team for your project!

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