If you work in the IT world, side to side with software developers, you must have heard of offshore or nearshore outsourcing. If these words bring you fishing or financial vibes, let us tell you, you are not too far because a part of it is definitely about fishing brilliant talent for an affordable price.

“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”, Lee Kuan Yew

Outsourcing has been around for a long time, but it was not formally considered a business strategy until 1989 (Mullin, 1996). Since then, different outsourcing models have found their way into the business heart in the Information Technology world. And why is that? Outsourcing allows the in-house team to focus on their product and goals, finding others to fill their skills gap. When you outsource, you can focus on what you and your team are good at and place other tasks in expert hands. It also allows you to source talent from a wider talent pool to offer your clients the very best in the market. Extra expertise comes in various forms, each offering different costs and benefits. In this article, we confront two of them: Nearshore vs. Offshore.

Let us cover some basics first.

What is Offshore Outsourcing?

Offshoring is a model where you outsource a service or project in a company placed in another country, typically one geographically far from your location. It could even be located on the other side of the globe. That is why, sometimes, offshore employees are known as “overseas workers.”

An offshore development center can bring a thriving business where high-quality technology comes at a far lower cost. Offshoring often means working with teams in far-away countries, with destinations like India, China, or Ukraine being some of the most famous ones.

The significant advantage of offshoring is that it is cheap. Due to the cost of living and the wages of the destination countries, these teams could practice lower hourly rates than in other parts of the globe. Another perk, due to different time zones, could be the possibility of having 24/7 operations (follow the sun approach), without having to work nighttime at the company headquarters.

However, working with a team based on the other side of the world and in a radically different time zone could be challenging, bringing a fair number of drawbacks that you should consider before deciding. A limitation could be finding an adequate time for setting meetings, conferences, and team-building exercises for team management. Communication is not always as accessible and fluid as desirable, sometimes causing delays and obstacles in getting high-quality, cost, and time-efficient software. Besides that, cultural differences can also lead to minor problems that could jeopardize the company spirit.

Longer waiting times and miscommunication due to language barriers and cultural differences can cost a company much time, energy, and money.

What is Nearshore Outsourcing?

Nearshore outsourcing is the middle ground between offshore and onshore, offering the best of both worlds. As the name suggests, the company you are going to partner with needs to be in a country near you and, ideally, share the same time zone (or at least, not having more than 3 hours difference between). Usually, this destination is more affordable than yours, primarily due to a lower cost of living. But that does not need to be the reason why you are choosing nearshore outsourcing. In some cases, these countries have a bigger talent pool available with the exact skills you need for your project.

Nearshore software development may not be as low-cost as offshore outsourcing. Still, sharing time, similar culture, and a common second language should make it up for that economic disparity. Another advantage of nearshoring is the possibility to visit your remote team and office quite regularly, allowing for a closer relationship and supervision of the project or task assigned.

Nearshore vs. Offshore: What should I choose?

It is impossible to deny that outsourcing software development is a profitable option for many companies worldwide, from startups to big multinationals. Location and money are two essential matters, but there is more to it. So, what should you choose? It really depends on what your needs and goals are.

When budget is your primary concern, offshoring is usually the most cost-effective solution to your recruiting needs. Offshoring is also suitable for projects that require little to no communication via video or for the entire team to be available or logged on simultaneously. As mentioned before, it can also be a perk if you need a follow the sun approach.

On the other hand, if you want to closely follow the project and benefit from the relationship with highly talented and experienced IT professionals, Nearshore might be your best option. Nearshore software development allows closer time zones and cultures to your reality. It also makes communication and time management more straightforward while fast-tracking your project to success. One way or another, do not forget to communicate with your team! Being weekly demos, daily reports, or a video chat here and there, make sure you do not skip this step for successful outsourcing.

If you decide to give it a try, Prime Nearshore could be your partner. We offer nearshore and offshore models in Portugal, both through team extension or managed services.