You can enjoy significant benefits by outsourcing software development projects to a third-party software development company. However, outsourcing technology projects does not guarantee that you will get your desired results. Many factors affect the results you can get when you hire an external engineering team.
For example, you’ll have to choose between nearshore vs. offshore outsourcing, onshore vs. offshore outsourcing, and other outsourcing models.
This article will help you understand the differences between nearshore and offshore outsourcing, addressing aspects like cultural differences, cost of living, and types of outsourcing.
Exploring the Different Types of Outsourcing Models
Outsourcing has become a popular business strategy for companies to optimise their resources and access global talent. There are various types of outsourcing models, each with its unique advantages and challenges. Here are some common types of outsourcing:
1. Onshore Outsourcing
Onshore outsourcing, also known as domestic outsourcing, involves delegating tasks or projects to a third-party service provider within the same country as the company. This type of outsourcing often benefits from a shared language, culture, and time zones, making communication and collaboration more seamless.
2. Nearshore Outsourcing
In nearshore outsourcing, companies delegate tasks or projects to third-party service providers located in neighbouring countries or countries within the same region. Nearshore outsourcing offers the advantage of similar time zones and often cultural similarities, enabling smoother collaboration between the company and the outsourcing partner.
3. Offshore Outsourcing
Offshore outsourcing refers to delegating tasks or projects to third-party service providers in distant countries, typically with significantly different time zones. Offshore outsourcing can provide access to a diverse talent pool and lower labour costs. However, it may also present challenges in communication and collaboration due to differences in time zones, culture, and language.
4. Multisourcing
Multisourcing is an outsourcing model where a company partners with multiple service providers, each specialising in specific areas or functions. This approach allows businesses to tap into the expertise of different providers and mitigate the risks associated with relying on a single outsourcing partner.
5. Business Process Outsourcing (BPO)
BPO involves outsourcing specific business processes or functions to a specialized third-party service provider, such as customer support, human resources, or finance. BPO can help companies reduce costs, streamline operations, and focus on their core competencies.
6. Knowledge Process Outsourcing (KPO)
KPO involves outsourcing high-level tasks requiring specialised knowledge and expertise, such as research and development, data analysis, or legal services. Companies may opt for KPO to access niche expertise and enhance their strategic capabilities.
7. IT Outsourcing
IT outsourcing refers to the delegation of information technology functions, such as software development, infrastructure management, or data centre operations, to external service providers. IT outsourcing can help companies access specialised technical expertise, reduce costs, and stay up-to-date with the latest technology trends.
8. Project-based Outsourcing
In project-based outsourcing, companies engage external service providers for specific, time-bound projects or tasks. This type of outsourcing is often used for one-time or short-term needs, such as software development projects, marketing campaigns, or event planning.
Each type of outsourcing offers distinct advantages and potential challenges. Companies should carefully assess their business goals, resource requirements, and risk tolerance to determine the most appropriate outsourcing model for their needs. By choosing the right outsourcing strategy, businesses can enjoy the benefits of outsourcing while mitigating potential risks and challenges.
What is Nearshore Outsourcing?
Nearshore software development outsourcing involves delegating your technology projects to an external remote engineering team. The engineering team, in this case, is located in a nearby country that shares the same (or closely-related) time zones with your company. Nearshore companies are often found in neighbouring countries, allowing for better communication and collaboration.
What are Nearshore Development Teams?
Nearshore development teams comprise remote software engineers, developers, and other engineering experts providing tech solutions to companies based in locations around them with similar time zones. The close geographical proximity and similar time zones allow nearshore teams to work seamlessly as part of an internal software development team.
What is Offshore Software Outsourcing?
The offshore software outsourcing model is similar to the nearshore outsourcing model. Both models delegate some or all of a company’s engineering demands to an external and remote engineering partner. But in offshore outsourcing, the location and time zones of the external engineering team are a less significant concern for the company. Usually, the client and the external software team are in different regions or continents with widely different time zones. Offshore countries often provide a diverse talent pool and lower costs, making them an attractive outsourcing option.
What are Offshore Development Teams?
Offshore development teams are remote software engineers, developers, IT experts, and other engineering experts providing solutions from regions (or countries) distant from the company that needs such services. Offshore locations can be found in various parts of the world, providing businesses with access to a wide range of talent and expertise.
Why Hire a Nearshore and Offshore Development Team?
Hiring nearshore software developers or offshore partners has many benefits, from accessing the best talent globally to cost-efficiency, saving time, and driving innovation. We’ll take a closer look at each advantage below
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Access a Global Talent Pool
Outsourcing allows you to tap into the expertise of foreign countries, expanding your options beyond onshore companies. According to Intersog, about 300,000 IT jobs are outsourced by US companies. Aside from cost-reduction and time-saving, a primary reason for outsourcing software development projects is the shortage of IT talent within the United States.
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Eliminate Distractions and Save Time
Business process optimization is crucial, and outsourcing can help streamline operations. Companies can outsource their software development projects to reliable engineering partners, allowing them to focus on core business goals and objectives.
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Use Experienced Hands
An experienced outsourcing partner has managed the complexities of multiple engineering projects for different companies, increasing the likelihood of success for your project.
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Build More Capacity
Using an external engineering team to help build and improve your IT infrastructure can help boost capacity and handle the mounting workload as your business grows.
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Drive Innovation
Every external software engineering team knows they are dispensable, which makes them strive hard to stay competitive in their industry. This is why these external software development companies always develop innovative techniques to manage your IT needs.
Nearshoring vs. Offshoring Outsourcing
Nearshoring and offshoring outsourcing is helpful for companies to save time, cut costs, eliminate distractions, and improve operational procedures. There are slight differences between the two, which are worth considering if you are contemplating the ideal option for your business.
1. Culture
Nearshore teams can quickly understand a company’s ideas, goals, and operational procedures because of their similar cultural backgrounds. In offshoring, the outsourcing company has to do a lot of briefing to get the external engineering team to fully understand the company’s environment and approach to building software.
An extra layer of complexity is added when you consider the fact that you only have a few hours a day to align on goals and plans due to bigger differences in the time zones.
2. Time Zones
Unlike nearshoring teams with time zones similar to the client company, offshoring teams work in different time zones. As mentioned above, real-time collaboration is challenging unless the external engineering team is willing to compromise on convenience for seamless collaboration.
It’s essential to note that some companies don’t consider time zone differences as a significant metric for collaboration. With proper planning and organisation, some companies can handle the complexities and still get tangible results from outsourced software projects.
3. Cost
Nearshoring may not necessarily always be cost-effective, although it can still be less expensive than running an in-house engineering team. On the other hand, offshoring focuses on regions with skilled developers that typically charge less than the average developer.
The most common regions companies find offshoring engineering teams are Asia, Eastern Europe, LATAM, and Africa.
4. Speed
Offshoring outsourcing tends to be faster than nearshoring because of the massive pool you can source developers. Besides, because of the relatively low cost per hour in the LATAM region, you can hire multiple talents for different development projects or offer really competitive salaries, which will make sure that you secure the hires you wish for.
Nearshoring Case Study
Zartis has partnered with top companies in the US, Europe, LATAM, South Africa, and Eastern Europe to offset the challenges involved in their IT deployments. A real-life example of the success stories we have created for our partners includes Fexco’s collaboration with Zartis.
Offshoring Case Study
Valant is a US-based top electronic health record solutions provider for behavioural mental health practitioners. Zartis partnered with Valant to provide helpful solutions, including:
- Helping access a larger pool of talented workers in Europe that charged much less than US developers.
- Organising a solid team structure, including local Team Leads to ensure easier collaboration across different time zones.
- Identifying weak spots in its current architecture.
- Migrating Valant’s core product from legacy software to a turnkey tech stack, plus a single-page application developed using Angular 8, Typescript, and WebComponents.
- Working with Valant’s Product Development team to determine the new software’s UX.
FAQs about Nearshoring and Offshoring
1. Are there alternatives to Nearshore or Offshore software development outsourcing?
The alternative to nearshore and offshore outsourcing is onshore outsourcing. Onshoring involves delegating projects to external software development teams within the outsourcing company’s country. Companies use this model if they need an extra hand to complete software development tasks urgently.
2. Nearshore vs. Offshore outsourcing: which is better?
Many factors determine whether nearshore or offshore outsourcing is ideal for your company. These factors are budget, time-zone overlap, level of collaboration, etc. Offshoring is cheaper and allows you to access a large talent pool. However, if communication and real-time collaboration are your priorities, nearshoring may be a better option.
3. Is my data safe with an offshoring team?
You have nothing to worry about if your offshoring team is reliable and well-recognized in their industry. For instance, Zartis is a “Security First” engineering partner with the ISO 27001 certification.
4. How long does it take to hire a Nearshore development team?
Hiring a nearshore software development team depends on your outsourcing provider and the nearshoring regulations within the area.
Zartis has a large pool of work-ready software developers. We can help you build a nearshore development team in as little as six weeks.
5. What pricing model are outsourcing partnerships based on?
Nearshore development partnerships are either fixed-price or hourly contracts. Fixed-pricing models are typical for well-defined projects with a definite scope and expectation. In the fixed price model, the payment for the project is defined ahead of time.
On the other hand, companies may hire on an hourly basis if it’s not clear how long the project may take or what the project scope is. At the end of a billing cycle, developers send their timesheets to their clients. This should also include the cost of materials used during the project.
6. How are Nearshore software developers onboarded?
Different outsourcing providers onboard developers uniquely. Zartis’ onboarding practices are in two stages:
- We onboard all new hires internally by introducing them to your company’s culture and values, corporate structure, staff members, etc.
Afterwards, a Zartis technical account lead (TAL) explains the project, tech stack, and development process. Also, at this stage, Zartis provides on-the-go training on data protection/security and client-specific training for new hires.
- The second stage involves onboarding the developers to your team. Zartis’ account managers and TALs help to tailor the process based on your unique needs and preferences.
7. Who owns the intellectual property of Products developed by Nearshore or Offshore teams?
Zartis or the onboarded developers don’t own and will not claim IP rights over the developed software or applications. The company has full intellectual rights to products developed during the collaboration.
8. How can I choose the right Nearshoring or Offshoring partner?
Before choosing a nearshoring or offshoring technology partner, familiarise yourself with the company by reading its websites, blogs, case studies, testimonials, and third-party reviews from trusted platforms like GlassDoor. These resources should show
- Technical and industry expertise
- Available software development models
- Client track record
- Company culture
- Pricing models and costs
9. Can an Offshoring team understand and speak English?
Because we understand that communication is crucial to successful technology projects, Zartis only works with developers with a minimum basic level of English language proficiency.
10. How can I hold an Offshoring team accountable?
Companies face accountability issues when they source offshore developers on their own. At Zartis, we help you find developers with reliable work ethics to join your offshoring technology team. Any developer who joins our team to work on client projects is also bound by strict confidentiality, intellectual property, and security measures.
Final Verdict
Choosing between nearshore and offshore outsourcing depends on your business goals, requirements, and preferences. Both options can provide valuable benefits, but understanding the differences in culture, time zones, costs, and speed will help you make a more informed decision.
Ultimately, the right choice for your company will depend on your specific needs and the viable option that best aligns with your business objectives. By carefully evaluating your options and selecting the right nearshore outsourcing partner or offshore partner, you can enjoy the benefits of outsourcing while minimising potential challenges.
How to find a trusted third-party company to help you find Onshoring and Offshoring teams?
Zartis is a technology and software engineering partner with over a decade of experience serving different industries, including healthcare, finance, logistics, renewable energy, media, and more.
We help you develop software that solves your current business challenges. In addition to helping you build great software products for your business, we can help you build a reliable software team for all your technology projects.
Want us to help you supercharge your technology deployments? Please contact us now!
