Hiring Developers - Offshore vs. Nearshore Software Development

Hiring an external software development team can be tricky. Before the age of remote developers, powerful online tools, and high-speed internet, the answer to where I should look for a development team was obvious - locally.

Constantly evolving technologies and a shortage of highly skilled devs combined with growing salary expectations in some geographical regions affected many companies and forced them to review and extend their hiring and outsourcing strategies.

We currently have three terms - Nearshoring, Offshoring, and Onshoring - with similar business strategies and processes, but each applies to a different situation or business requirements.

The terms are trendy and highly visible, especially when you google phrases like "dedicated software development team" or "hire developers".

To help you understand what type of software team perfectly matches your expectations and requirements, let me explain what the above terms mean.

What is Nearshoring?

Nearshoring is relocating a company's operations or production to a nearby foreign country, typically one that shares a border or is near the home country. The primary motivation for nearshoring is to take advantage of lower labor costs while maintaining proximity advantages, such as shared time zones, cultural similarities, and easier logistics.

Nearshoring can be particularly attractive for companies that require frequent collaboration or communication with their offshore teams and those that value intellectual property protection and the ability to monitor and manage their offshore operations closely. Nearshoring can also be a way to reduce the risks associated with offshore outsourcing, such as language barriers, cultural differences, and political instability.

In recent years, nearshoring has become increasingly popular in the IT, software development, and customer service industries. Companies can benefit from access to a large pool of skilled workers at a lower cost.

• Read more: What is Nearshore Software Development?

What is Onshoring?

Onshoring, also known as domestic sourcing, is bringing back or relocating a company's operations or manufacturing processes to its home country from overseas. This contrasts offshoring, which involves moving operations or production to a foreign country, typically to take advantage of lower labor costs.

Onshoring can be motivated by several factors, including rising offshore labor costs, logistical challenges, quality control issues, and the desire to increase proximity to customers or suppliers. Onshoring can also be seen as a way for companies to support their home country's economy and create jobs domestically.

Onshoring can be particularly attractive in industries where technology and automation have reduced the labor cost advantage of offshore locations or where supply chain disruptions or geopolitical tensions make offshore operations riskier or less reliable.

What is Offshoring?

Offshoring is relocating a company's operations to a foreign country with lower labor costs to maximize cost savings. This can involve outsourcing certain business functions or setting up a subsidiary offshore.

The primary motivation for offshoring is to reduce labor costs, which can be a significant expense for companies in developed countries. Offshoring can also provide access to a larger pool of skilled workers, particularly in manufacturing, customer service, and IT industries.

However, offshoring can also involve challenges and risks, such as cultural and language barriers, time zone differences, and difficulties monitoring and managing offshore operations. Political and social issues can also be associated with offshoring, such as concerns about job losses in the home country and labor conditions in the offshore location.

Despite these challenges, many companies continue offshoring certain business functions to countries such as India, China, and the Philippines, where labor costs are lower and a large pool of skilled workers is available.

• Read more: What is Offshore Software Development?

Best offshore software development countries

Following rankings of software, mobile app, and web developers on websites like Clutch.co, we may distinguish the following countries as top 3 places to find the best offshore software development companies:

• Poland - year after year, the number of IT professionals grows on the Polish market. Software development companies from Poland are a reliable choice. Excellent English literacy comes with extraordinary skills, knowledge, and openness to other cultures.

• Learn more about Why it is a great choice to outsource in Poland?

• Argentine - entire South America is experiencing growth in software development. Argentina is one of the countries with the highest number of tech talents.

• Bulgaria - with its modern IT infrastructure and many developers, Bulgaria year after year gets higher rankings of places where business owners outsource their projects.

It seems like the distance between you and a software company may still be a key factor. But it should not be crucial in the digital age of dedicated developers teams and high-speed internet.

TL;DR

Offshoring, nearshoring, and onshoring are all strategies for companies to relocate their operations or production to different locations.

Here are the essential points, similarities, and differences:

• Offshoring:

• Involves moving operations or production to a foreign country
• Typically motivated by lower labor costs
• Can create distance from customers or suppliers, as well as logistical and cultural challenges
• May involve outsourcing to a third-party vendor or setting up a subsidiary in the foreign location

• Nearshoring:

• Involves moving operations or production to a nearby foreign country
• Typically motivated by proximity to the home country, lower labor costs, and cultural similarities
• Can reduce some of the logistical and cultural challenges of offshoring

• Onshoring:

• Involves bringing back or relocating operations or production to the home country
• Typically motivated by rising offshore labor costs, quality control issues, and the desire to increase proximity to customers or suppliers
• Can be seen as a way to support the domestic economy and create jobs domestically
• May involve repatriating work from an offshore location or setting up new operations domestically

• Similarities:

• All involve relocating operations or production to different locations
• All can be motivated by cost savings, proximity to customers or suppliers, or other factors

• Differences:

• Offshoring involves moving operations or production to a foreign country, while nearshoring involves moving to a nearby foreign country and onshoring involves bringing operations back to the home country
• Offshoring is typically motivated by lower labor costs, while nearshoring may be motivated by cultural similarities and onshoring may be motivated by rising offshore labor costs and quality control issues
• Offshoring can create logistical and cultural challenges, while nearshoring can reduce some of these challenges and onshoring can increase proximity to customers or suppliers.

Contact us

Are you ready to start your offshoring or nearshoring journey? We are more than happy to help you with the walkthrough of the entire process. Find out more today and contact us.

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If you need additional information about hiring developers, check our other articles from the Hiring Developers series:

1. Hiring Developers – Software Companies vs. Freelancers
2. Hiring Developers – How to Find and Hire the Best Software Engineers
3. Python Outsourcing - A Short Guide for CTOs and Technical Managers