What Is the Difference Between Nearshore vs. Offshore vs. Onshore?
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Three popular options are available when companies need IT outsourcing today: nearshore, offshore, and onshore.
- Nearshore refers to an outsourcing relationship that occurs in a neighboring country. If an IT agency from Canada wanted to use this approach, they would likely work with someone in the United States.
- Offshore refers to a company hired in another country – and typically in a different time zone. Some exceptions apply to the latter definition since some countries in Africa or South America share time zones with Europe or the United States, respectively.
- Onshore software development is a popular choice today because it keeps a project close to home. It happens when a company outsources to a provider within its own country.
By comparing each option’s advantages and disadvantages, it is much easier to find where your agency falls in the nearshore vs. offshore vs. onshore debate.
Onshore vs. Offshore: What Are the Benefits?
Onshore development is often referred to as “local outsourcing.” Many agencies choose this option because it ensures similar values and hours while sharing several additional benefits.
- It is rare to have cultural barriers or language barriers present with an onshore relationship.
- The time zones for the onshore relationship should be relatively aligned.
- It’s easier to have access to the team for meetings, training, or face-to-face discussions.
The issue with onshore services is that the cost is often significantly high compared to offshore providers. There can also be issues with the talent pool in the IT industry, especially within the software development niche.
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Offshore software development typically provides a lower rate because the cost of living is less in the target country. Agencies receive equal or better services in this relationship for about 19% of the estimated onshore cost – and it can sometimes be lower than that.
Offshore development also connects agencies with a larger talent pool. Instead of being stuck using a limited choice within a confined geographic region, an entire world of opportunities awaits.
It is crucial to perform due diligence on the offshore agencies targeted for software development. You should review past performance metrics, portfolios, and references to ensure the selected agency can meet quality expectations.
Key Difference Between Offshore and Onshore
Although cost and location are often seen as the key differences in onshore vs. offshore comparison, one point stands taller than the rest.
When agencies require a specific skill set or niche experience for a project, it might be easier for some firms to explore onshore relationships. Although we live in a global economy, some needs are still hyper-local.
If you require software development assistance, today’s best offshore providers are as capable, if not more so, than onshore ones.
Nearshore vs. Offshore: What Is the Difference?
Nearshore and offshore services are essentially the same things. The only primary difference between the two from a basic definition is the geographic distance in the relationship.
- Nearshoring is the act of outsourcing to a neighboring country.
- Offshoring is the act of outsourcing to a different country.
- Both choices don’t require an in-house team unless one is desired.
In a strict definition of nearshoring, the United States only shares land borders with two other nations: Mexico and Canada. If maritime borders are included, the options will expand to Russia, the Dominican Republic, and the United Kingdom.
The continental United States also shares boundaries with Cuba and the Bahamas.
In Europe, nearshoring happens more often because of the compact nature of the continent. If an agency in Romania used that option, about a half-dozen options would be available.
Offshore adds distance to the relationship in exchange for specific benefits. Nearshoring can still have a limited talent pool and cost more than desired.
Depending on your agency’s location, there could be cultural differences, language barriers, or time zone complications in a nearshoring relationship. In those circumstances, it would likely be more practical to look at outsourcing possibilities.
When an offshore relationship has a 12-hour time difference, the geographic differences can complicate communication enormously. It’s possible to overcome this concern with proactive messaging and clock management, but someone will always be inconvenienced by the clock’s differences.
Onshore vs. Nearshore: How Do Firms Benefit?
When two neighboring countries are relatively equal in wealth, cost of living, national values, and other attributes, the onshore vs. nearshore debate becomes harder to define. An agency could find a partner in the region to meet their needs with similar standards.
When one country has a significantly lower standard of living than a neighbor, the nearshore option provides more benefits than the onshore one.
The disparity between one country and another allows for development work to take place while staying within the budget requirements of the firm.
Many people look at the differences between the United States and Mexico as a great example of nearshoring when it works well. Still, that relationship was only ranked 68th in disparity in 2017.
- The differences between Slovakia and Ukraine ranked 48th on that same list.
- Hungary and Poland were 55th and 56th, respectively.
- Russia was 63rd on the global list with its relationship with Ukraine.
That’s why it makes sense to look for nearshore options if you have that opportunity. If not, offshore might be the best solution if budget constraints place limits on the relationships a firm can form.
Is Onshore Outsourcing a Viable Option?
Although onshore outsourcing is a viable option, it isn’t always the best one for an agency. Nearshoring provides a reasonable compromise when both onshore and offshore don’t offer enough benefits.
When looking at the benefits and disadvantages of offshoring compared to onshoring and nearshoring, it’s clear to see that it is the general winner.
Although there are exceptions to every rule, most agencies find that they can receive the same high-quality services when comparing a global talent pool with a local one. Most agencies also find that offshore outsourcing is an effective way to save money. One of the best countries that offer this service today is Ukraine.
If you choose Chudovo Inc. services, you’ll work with a team that strives to maximize the benefits of your investment while minimizing the potential disadvantages of the offshoring relationship. Our experience serves as an asset for numerous clients.