Offshore vs Nearshore Outsourcing

We all can observe that modern businesses are increasingly turning to delegating tech tasks to third parties. This statement can be confirmed by statistics: by the end of 2024, the global outsourcing IT services market will reach US$541.10bn and grow with 8.48% CAGR until 2029. Such intense demand was not always observed: for example, before the COVID-2019 pandemic, such services were less popular (often due to a biased attitude towards the quality of remote interaction).

However, when outsourcing became almost the only viable model for business development in the digital plane, its means, approaches, and tools began to be actively modernized. Thanks to this, companies providing this type of service managed to prove their competitiveness in relation to the standard software development model, which involves hiring IT specialists in the office.

Below, we will consider the main types of outsourcing and also explain which projects they are best suited for.

What Is Nearshore Outsourcing?

Nearshore outsourcing is a collaboration model that involves hiring IT specialists from neighboring countries in the same time zone or in zones that are close to the one where the client's business is located. Due to possible differences in average market rates for IT services, this outsourcing option can become a cost-effective alternative to local hiring, while not requiring the client to radically adapt to the cultural and time specifics of the contractor. 

Advantages of Nearshore Outsourcing

In addition to the convenient time zone of your digital partner, you can get additional benefits from nearshore outsourcing services:

• Increased availability of talent with different skills and experience. Quite often, the IT services market in nearby countries is more developed than in the region where the client's business is located, which makes it much easier to find specialists with the required set of skills and experience in a particular business niche.
• Geographical proximity. Due to the relatively small distance between the client and contractor countries, the latter can easily communicate and even visit the former. For some projects, such close interaction is a necessity – for example, when it is needed to set up the created software for a specific hardware or exchange experience with an internal team.
• Possibility of physical integration with your local team. As the project progresses, you may need to relocate individual members of your digital partner's team. For both parties, this will be much easier than in the case of, for example, offshore outsourcing, which will be discussed below.
• Cost-efficiency. Finally, it is worth noting that even in neighboring countries, economic situations can differ greatly. Due to this, you can benefit from the difference in rates for IT services and, thus, reduce the project budget without harming its final quality.

Ultimately, there may be more advantages – it all depends on how accurately your future nearshore outsourcing company will meet your individual requirements.

Disadvantages of Nearshore Outsourcing

The key disadvantage of nearshore outsourcing development is often a relatively small difference in rates for IT services. That is why if you are looking for the most affordable cooperation option, you should pay attention to offshore outsourcing.

Projects Best Suited for Nearshore Software Development

As we have already noted above, nearshore outsourcing is an excellent solution for businesses that require the periodic presence of specialists from the contractor's team in their office – for example, to perform specific technical tasks, exchange experience, make strategic decisions, interact with stakeholders, etc.

By the way, you can also view our portfolio to get acquainted with some of our projects closer.

What Is Offshore Outsourcing?

Offshore outsourcing involves the interaction of the contractor's team with the project owner from a geographically remote location. Usually, such cooperation is complicated by time zones and cultural differences. However, fortunately, modern approaches to providing IT services have all the necessary tools and knowledge to bypass these obstacles easily and without harming the quality of the solutions created.

Note that, as in the case of nearshore outsourcing software, this type of outsourcing allows for the delegation of both individual tasks within the project (for example, production, assembly, testing, etc.), and the entire project as a whole – it all depends on the amount of internal resources the client has.

Advantages of Offshore Outsourcing

By choosing offshore outsourcing, project owners receive a lot of advantages, including:

• Access to a huge number of talents with different skills and experience. Since some technologies are developing in a specific region, as was the case with blockchain, there may be a shortage of specialists with the necessary skills both in your country and in neighboring ones. In this case, offshore outsourcing will be the only way to start working on your project on time.
• Radical differences in the rates of local and remote specialists. We have already said that the difference in average market rates for IT specialists may not be significant enough to achieve outstanding savings in the project budget. Conversely, offshore outsourcing will allow you to find the most budget-friendly IT specialists – the main thing is that the quality of your software solution does not suffer from this.
• Global coverage for the project. Collaboration with a remote team can open up prospects for your project in terms of its global coverage. Once the product is ready, you can entrust your contractor with its promotion in accordance with local legislation and current digital standards.

In general, offshore outsourcing is most often used precisely because of the search for cheaper specialists, and in this context, it fully justifies itself. 

Disadvantages of Offshore Outsourcing

Due to the difference in time zones, you may have problems communicating with your remote team. However, this is rather an atypical situation that does not happen often. It is also worth noting that this type of outsourcing complicates relocation or temporary visits of specialists from your digital partner's team since flights can be resource-intensive for both parties of this cooperation.

Projects Best Suited for Offshore Software Development

This collaboration model is ideal for projects with very limited budgets, as well as those that do not require constant communication between remote parties. However, to be fair, some companies still manage to effectively overcome the second difficulty (we mean the inability to communicate during the whole working day), so this disadvantage cannot be applied to absolutely all outsourcing companies that are on different continents from you.

Let's Also Talk About Onshore Outsourcing – What Is That One?

Finally, let's talk about onshore outsourcing. In a nutshell, it is the hiring of a third-party IT company that is located in the same region (country) as the project owner. The main purpose of such outsourcing is the need for third-party expertise or human resources as a faster and cheaper alternative to hiring new specialists on staff or training existing ones.

Advantages of Onshore Outsourcing

The key advantage of this type of outsourcing, as you may have already understood, is quick access to talents with the necessary skills. Thus, project owners get the opportunity to start working on a project almost immediately after its concept is formed or continue working on it without downtime if to perform specific tasks, new skills or people are required.

Disadvantages of Onshore Outsourcing

If you want to achieve serious budget savings for your project, this option is unlikely to suit you. Perhaps you will still be able to save your budget due to the absence of some bureaucratic procedures and changes in the current taxation, but for a more significant budget reduction, you should still consider the two previous outsourcing models (nearshore vs offshore outsourcing). 

Projects Best Suited for Onshore  Software Development

We have many projects implemented according to the scheme of onshore outsourcing! You can get acquainted with one of the good examples in this case study:

Onshore vs Nearshore vs Offshore – Key Differences

Finally, let's compare all three outsourcing models described above: nearshore vs offshore vs onshore.

Why Outsource with Wezom Is a Good Idea for Your Business

We would like to note that the comparative analysis that we conducted above is a general impression from the previous experience of our clients. In the end, the quality of interaction with your remote IT team and its results will be largely determined by the individual qualities of the company that provides its services.

In particular, if you are looking for a reliable contractor who, regardless of the distance that separates you and possible differences in mentality, will provide comfortable and productive communication, and will also be able to offer an affordable and transparent pricing model, you can consider us.

To date, WEZOM, with almost 25 years of history, has managed to:

• Attract an international pool of 275+ top talents in the IT sphere;
• Open offices around the world (in the United States of America, Poland, Germany, and Ukraine);
• Successfully launch 3,500+ projects for clients from all over the world.

Having all the needed skills to develop competitive software solutions for various business sectors, from startups to large-scale projects, today, we can confidently say that we can solve any, even the most non-trivial task using the most modern digital technologies and tools without harming the client's budget. Would you like to check this for yourself? Then, consider our clients' reviews on Clutch.co.