IT Staff Outsourcing Comparison: Onshore vs Nearshore vs Offshore

Offshore software outsourcing is a popular way to save on operating expenses while reaching more talent faster. However, alongside the term “offshore”, you will likely find another two: nearshore and onshore.  

With three options available, it can be difficult to know which path to take. 

If you’re stuck trying to decide between onshore vs nearshore vs offshore software development, this article is for you. By the end, you’ll have a clear picture of what each software development model gets you, so you’ll be better placed to make the right choice for your company’s success.

Why Consider Onshore and Offshore Software Development Models

When you’re looking for ways to grow and compete in different markets, it makes sense to lower software development costs. Outsourcing is a common solution, especially as it gives you access to a broader talent market. This approach to the development process also adds to the completion of startups’ short and long-term goals. For early-stage companies, outsourced software development is a sound way to make the most out of limited resources and tight timelines. 

The numbers back up outsourcing’s popularity. In 2022, the IT Outsourcing Market Size report valued the IT outsourcing market at $ 31407.59 million. The growth trajectory suggested by this report indicates that the industry is on track to reach $ 43949.55 million by 2028.

Many well-known brands address their software development needs through offshore, onshore, or nearshore outsourcing teams. For example, Microsoft has partnered with onshore outsourcing companies, while Google and IBM work with offshore teams in countries like India and Ukraine. Apple, Cisco, and HP are also on the list of companies using outsourcing to lower costs and access a wider range of expertise without losing control of their software development projects.

What Are Onshore and Offshore in Software Development?

Onshore and offshore software development models are two popular methods of outsourcing software development projects. The main difference lies in the location. There are other differences, too, such as development costs, communication aspects, and access to talent. This table gives you a handy summary:

What Is Onshore Software Development?

Following this approach, a company hires a development team located in the same country as the client company to work on software development projects. 

Onshore meaning in software development

Onshore outsourcing is particularly useful if you need a high level of collaboration and frequent communication with your development team in your home country.

The benefits of onshore development 

Here are some of the onshore outsourcing benefits:

• Familiarity with the local market. As onshore development teams are closer to your local market, they better understand the labor, taxation, and intellectual property peculiarities of the markets you’re operating in.
• Smoother communication. With onshore outsourcing, communication is often easier as there are no language barriers or cultural and time zone differences.

With that said, onshore outsourcing has one major drawback: cost. 

Onshore rates

Let’s assume you’re in the US, and hiring an in-house team isn’t an option for you right now, so you’re considering domestic outsourcing options. In this case, your biggest goal might be getting the best talents but reducing the total engagement cost. If you’re hiring in-house, factors to consider are hourly rate, taxes, healthcare, bonuses, retirement plans, vacation, and more. 

When you outsource, many of those disappear. However, onshore outsourcing is never about pleasant rates. Your expenses will likely skyrocket because of considerable domestic labor costs and the high commissions of onshore companies or staffing agencies. 

So accept as a given that if you’re in the US, rates for onshore software developers are usually higher than those of offshore specialists. Let’s see the US figure now. 

All the data is captured by Expert Remote specialists thanks to the tight cooperation with our network of various outsourcing companies and individual freelancers. We also considered the Glassdoor and Payscale data to take into account the average salary expectations of software developers in the United States.

So how does this compare with offshore outsourcing benefits and rates?  

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What Is Offshore Software Development?

Offshore software development is an outsourcing model that involves hiring a team of developers in a different country than the client company to work on software development projects. Offshore outsourcing lets companies access lower-cost resources, often without compromising the quality of work.

Offshore meaning in software development

Although this software development cooperation model has been around for decades, it’s now entering a new era. Covid-19 and the rise of remote work brought a whole range of new management challenges, but they’ve also created opportunities to work more efficiently with cheaper offshore teams. 

Today, with soaring inflation rates and the recession, even more businesses are looking at offshoring as a strategy to get top talent and save money. IT staffing firms help to achieve that by offering a gateway to offshore talent markets and a reduced recruitment burden. 

The benefits of offshore development

Several benefits make offshore development an attractive option for businesses:

• Cost savings. As long as labor costs in offshore countries are lower compared to the US, for instance, it’s a great way to reduce your production costs. On top of that, by making use of offshore staffing companies, you also cut costs related to employment. 
• Access to a global talent pool. You can hire developers with rare skill sets and experience by tapping into a larger global talent pools.
• More flexibility. Companies can quickly scale their development teams up or down based on their business needs without worrying about hiring and training new staff.
• Strong development experience and expertise. Access to talent isn’t just about numbers. Experts in top offshoring destinations constantly enhance their education and communication skills as well as upgrade professional certifications. Industry research places specialists from Slovakia, Poland, Ukraine, and other European countries above Latin American countries and North America in terms of engineering expertise. 

Offshore software developer rates

With a deep talent pool of professional and innovation-oriented developers in Central and Eastern Europe, you’ll likely cover all your skill gaps in no time. As to the rates, they are considerably lower than those of onshore developers. See for yourself.

All the data is captured by ExpertRemote specialists thanks to the tight cooperation with our network of various outsourcing companies and individual entrepreneurs. We also considered the Glassdoor, Jinny, and Payscale data to take into account the average salary expectations of software developers in this region.

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What Is the Difference Between Offshore vs Onshore Software Development Models?

The main difference between offshore vs onshore software development models is cost, but there’re a few others as well.

Here’s a summary of the main differences between offshore and onshore software development:

• Location of the development team. Onshore software development involves hiring a team of developers located in the same country as you. Offshore outsourcing involves hiring a team of developers located in a different country.
• Level of control. With onshore outsourcing, you generally have more control over mission-critical activities, which can help you smooth over bumps and track progress more efficiently.
• Cost. Onshore development is generally pricier than offshore development due to higher labor costs. Offshore development offers cost savings due to lower overseas labor costs.

A comparison of onshore and offshore software development models

So, which is better if you have to decide between onshore and offshore outsourcing? Let’s compare them. 

Offshore development is typically less expensive due to lower labor costs in other countries, while onshoring comes at a higher cost which can be effectively avoided. The more so having today’s remote collaboration tools. Instead, when looking globally, you find not only multidisciplinary talent but keep costs to a minimum.

This picture sums up the most common onshore vs. offshore development benefits.

Factors to consider when choosing between onshore vs offshore software development

A few of the differences between onshore and offshore development stand out. They might keep small business owners undecided… but it doesn’t have to be like that.

Let’s look at the main considerations objectively.

• Project peculiarities. Many business owners believe that onshore developers have better expertise than offshore ones. Yet highly complex and successful projects can be perfectly delivered by offshore experts, especially if you have good project management resources on your side. What’s more, offshore software developers are extremely professional and focused on delivering excellence in exported services.

The rare cases when onshoring beats offshoring are government, military, or security projects requiring you to contract specialists in your own country. 

• Quality-price ratio. Cheaper development doesn’t have to mean cutting corners or compromising on quality. Professional offshore development actually offers great value. For instance, developers in Central and Eastern Europe cost several times less than an expert in the US but still offer US-level tech expertise 
• Communication. Having a common language and time zone naturally makes it easier to work together on a project. However, if you manage your offshore team effectively, you can organize work almost round the clock — for example, with UI/UX designers working in Taiwan, software engineers in Poland, and QA in Colombia. 

You can usually identify time zones overlap that suits the working schedule of everyone. In our experience, time zones overlap of four to five hours is enough to ensure effective communication. As for language, English is the industry standard. For sure, you might face slight misunderstandings, but these can still be managed with training and language courses. 

Now let’s look at another and final outsourcing model on our comparison list.

What Is Nearshore Software Development?

This outsourcing model involves working with a software development team located in a neighboring country or region. Nearshore development offers a compromise between the benefits of working with local developers and the cost savings associated with offshore development.

Onshore vs nearshore: Which is better?

Onshore development is generally pricier than nearshore development due to higher local labor costs. Nearshore development offers more favorable rates while still maintaining a high level of quality. 

Onshore outsourcing lets you access specific market knowledge that may be difficult to find in nearby countries. However, nearshore development can offer access to a larger talent pool with specialized skills that may not be available locally.

Let’s see now at the biggest picture that will help you choose the outsourcing option that is the most appropriate for you.

Nearshore vs Offshore and Onshore Outsourcing: Which is Better?

The choice between nearshore, offshore, and onshore outsourcing depends on your project requirements, resources available, the potential risks and benefits. Each model has advantages and disadvantages; the key is choosing the solution that best meets your needs.

However, we suggest you not only look at those models from a bare ‘positives and negatives’ perspective. Instead, try to find which locations worldwide do offer what you need — quality and the most cost-efficient specialists. Expert Remote has a few ideas about where to look, by the way.

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How Can We Help?

Expert Remote can help you weigh all nearshore, onshore, and offshore benefits as soon as you tell us a little about your needs. But one thing is guaranteed: whatever your chosen path, we’ll hire the best talent from our network quickly, easily, and cost-effectively. 

Our capacity allows us to source through a really extensive base of IT specialists in Central and Eastern Europe, Latin America, Southeast Asia, and worldwide. But it’s our vetting process that ensures you get only the skilled professionals. Our platform is the place where you can contact the top 1% of talented software developers, UI/UX designers, QAs, and product and project managers from around the globe. 

Ready to start your company’s outsourcing journey with top-notch developers and IT professionals? Contact us at Expert Remote today, and let us help you build your dream team in days.