Offshore vs. Nearshore outsourcing: what’s best for your business?

Although the relatively low costs of outsourced software development attract many product owners, they often find it hard to distinguish between the different types of outsourcing. What is the difference between the three outsourcing types, and which one is better for your business? Read on to find out!

Offshore vs. nearshore vs. onshore outsourcing

Let’s start by clarifying the definition of outsourcing. Outsourcing means hiring external talent for your business needs, such as freelancers, consultants, or augmented teams. Outsourcing software development is a proven, cost-effective approach for any organization trying to remain competitive.

Consider a corporation based in the United States. The cost of providing a ready-to-use software product requires not just the employment of skilled engineers but also the renting and setting up of workspaces. All of this requires a sizable budget, which the organization can hardly generate.

At first glance, onshore software development seems a viable option, but it comes at a price. Relatively high labor costs and a limited candidate pool are the two main disadvantages of hiring IT experts in the West. According to the US Bureau of Labor Statistics, demand for software engineers is about to rise by 26% by 2029, with 310,000 new jobs generated within the following decade. For the past years, companies in the United States and Western Europe have trouble filling their onsite vacancies.

Many companies are attracted to offshore development because it helps them to scale without sacrificing quality. Developers from Asia, Eastern Europe, and Latin America demonstrate competence, commitment, and enthusiasm about all things technical. Another benefit of recruiting remote development teams is their low wages: the average software developer from Ukraine receives ten times less than his peers in the United States.

Nearshore outsourcing is the middle ground between offshore and onshore development. Since the team is located in a neighboring country with a compatible time zone, you can get optimal communication and face-to-face meetings while saving development costs. Compared to hiring onshore or in-house developers, both offshore and nearshore outsourcing provide tangible benefits for business.

Ready to cut development costs by up to 60%?

Perfect outsourcing solution for your business.

Contact us

What is offshore outsourcing? 

Last but not least, an offshore outsourcing model refers to hiring development teams in distant countries, often several time zones away. Popular destinations include Poland, Ukraine, India, and Mexico. This model is known and valued for offering the greatest cost savings and access to massive global talent pools. 

Pros of offshore outsourcing: 

• Significant cost reduction: Companies can save 40% to 70% on development costs by hiring offshore, thanks to lower labor and operational expenses. 
• Vast talent pool: Offshore markets employ software developers with specialized skills from UI/UX design, .NET, and cloud to AI and cybersecurity. 
• Scalability: With offshore outsourcing services, you can scale your team up and down quickly, adjusting its size to your current needs. 
• Around-the-clock productivity: Offshore teams in different time zones can enable 24/7 development cycles, which significantly accelerates delivery and can be a key factor for startups entering the market or enterprises introducing major updates. 

Cons of offshore outsourcing: 

• Time zone differences: Large gaps may delay communication and decision-making if not appropriately managed. 
• Cultural and language barriers: Misalignments in communication style, expectations, or fluency can cause misunderstandings. 
• Regulatory and compliance risks: Laws regarding intellectual property, data security, and labor may differ, requiring careful contractual oversight. 
• Management overhead: Distributed, distant teams demand a more structured project management process. 

Benefits of offshore development

As your business grows, you may consider building your digital presence or refreshing existing digital products. Setting up an in-house software development team is a resource-consuming process, and lack of industry experience doesn’t make it any better. That’s when offshore software solutions come into play.

By partnering with remote development teams, you expand your business with skilled employees geographically distant from your company headquarters. And you get some profound benefits, too.

Access to a large talent pool

Offshore development offers an extensive pool of professionals in every category: any technology, any framework, and any experience. Free from all the headaches of the employee-hiring process, you can simply approve the candidates you prefer and concentrate on business.

Lower development costs

When you choose to develop your software offshore, you can reduce project spending by 60%. Too good to be true? Nope! Offshore teams don’t ask for health insurance benefits and do not need the client’s infrastructure, not mentioning the difference in salaries in your favor.

Faster product scaling

Well-established work processes allow offshore companies to cut down the time to market without affecting product quality. No onboarding needed: offshore teams immediately ramp up your project and start delivering within two or three weeks.

Focus on core expertise

Hiring offshore development experts will be your best shot If software development is not your company’s niche. Merging industry focus with end-to-end experience, external teams build solutions that perfectly fit the market and users’ needs.

What is nearshore outsourcing?

Nearshore software outsourcing means hiring a software development partner in a neighboring country or within the same or a close time zone. For example, U.S. businesses might outsource to Mexico, Costa Rica, or Argentina, while Western European companies often partner with teams in Poland, Ukraine, or Romania. Alternatives to nearshore software development outsourcing include onshore and offshore outsourcing.

Pros of nearshore outsourcing:

Time zone alignment: Nearshore teams often work during the same business hours. This makes communication smoother and more efficient and accelerates feedback cycles.

• Cultural compatibility: Teams in neighboring regions often share cultural similarities and business approach, which reduces the chances of misunderstandings.
• Easier travel and oversight: Geographic proximity is more convenient for face-to-face meetings, on-site visits, workshops, and teambuilding activities.
• Price-value balance: Nearshore outsourcing services are typically more affordable than onshore hiring while still offering strong quality standards.

Cons of nearshore outsourcing:

• Higher costs compared to offshore: While cheaper than local hiring, nearshore teams often charge more than offshore ones in Eastern Europe or Asia.
• Limited talent pool: Large offshore hubs such as Ukraine, Mexico, or India usually provide a broader and more specialized pool of developers than those located nearshore.
• Regulatory differences: Proximity doesn’t automatically mean equality in a context of legal and compliance frameworks. They may still vary between countries, requiring additional due diligence.

Is nearshore outsourcing better for your business?

The benefits of nearshore outsourcing outweigh other approaches: nearshore outsourcing adds more value through the geographic proximity of your remote development team. With a dedicated team within arm’s reach, you ensure smooth communication with your on-site experts.

Nearshore software development eliminates cultural differences that can affect communication: remote teams adopt the customer’s cultural approach and seamlessly integrate with internal resources. To sum up, nearshore outsourcing enables effective cross-team collaboration and better control over the development process.

Ukraine is one of the top nearshore development destinations for customers from Western Europe. It was named the most successful outsourcing destination in 2017 by the Global Sourcing Association in the UK. Time zone overlaps, English fluency, and similar working culture of dedicated development teams in Ukraine ensure fruitful collaboration and fast project delivery.

Hiring developers in Ukraine is right for you if you’re looking for:

• Highly skilled professionals with appropriate university education.
• Developers with experience of working on international projects.
• Fully dedicated and strongly motivated team members.
• Low labor costs combined with a high code quality.
• Experts that follow the industry standards and latest tech advancements.
• Relatively low taxes and support from the government.
• European values and cultural awareness.

Ready to build your dream team?

Let’s discuss your software development needs and find the perfect collaboration model.

Contact us

What is onshore outsourcing? 

Onshore software outsourcing involves hiring providers from different companies within your own country. For example, when a U.S.-based business works with a U.S. software development agency or a Polish company outsources to another Polish provider. This outsourcing model is usually the most convenient but also the most expensive. 

Pros of onshore outsourcing: 

• Seamless communication: The same language, culture, and work approach nearly eliminate the barriers and possibilities of conflicts. 
• Same time zone: Identical work hours make communication, project management, and issue resolution easier and faster. 
• Stronger compliance and IP protection: Legal systems and data protection standards are the same, which means no risks for sensitive information. 

Cons of onshore outsourcing: 

• High costs: Onshore outsourcing services are often the most expensive option. Hourly rates can be 2-4 times higher than nearshore or offshore alternatives. 
• Limited access to talent: In regions like the U.S. or Western Europe, demand for developers far exceeds supply. Demand for software engineers in the U.S. is projected to grow 26% by 2031, adding more than 370,000 new jobs and straining the market. 
• Slower scaling: Finding and hiring qualified developers locally can take months and is rarely an option for urgent tasks. 

Nearshore vs offshore: Which one to choose and what factors to consider 

To decide which outsourcing model to choose, you need to assess your business needs and specifics first. If your project requires ongoing collaboration, frequent meetings, and understanding of cultural nuances, you will benefit from outsourcing nearshore or onshore. The decision between these two depends mainly on the resources your budget can support.  

However, if your main driver is budget optimization, access to a broader pool of technical experts, finding non-trivial solutions, and entering markets worldwide, offshore software outsourcing would offer greater scalability and a cost-value balance. 

When comparing offshore vs nearshore, consider the following factors: 

• Project complexity: Does your project require niche technical skills more likely found offshore? 
• Time zone requirements: How important is real-time communication with your development team? 
• Compliance and security: Do regulations in your industry limit where development work can be done? 
• Scalability needs: Do you anticipate ramping resources up or down quickly? 
• Budget: How much are you willing to invest in development costs? 

Wrapping up

The first step to thriving outsourcing partnerships is narrowing down your talent hunt. It’s essential to partner with someone who offers the best value for your company, regardless of which country you select for outsourcing software development services. Sometimes it’s less about the cost or geographical proximity and more about determination and efficient work processes.

Dedicated development teams in Ukraine offer consistent communication and streamlined management regardless of your geographical proximity. Read more about the benefits of hiring dedicated development teams here. And if you’re eager to know more about software outsourcing, check out this article.

Blackthorn Vision provides full-range .NET outsourcing for your business, including hiring the best IT talent, managing development teams, and supporting effective work communication. Kick-start your project with us now and get ready to level up your business!