A Closer Look at Outsourcing vs Offshore vs Nearshore Development

by The Scalers Offshore Development Teams In India

Businesses are in a rapid race to transform, with digitalisation high on the agenda of CTOs and CIOs in markets like Western Europe, Australisia, and North America. However, they face an acute challenge: skills shortages. These crippling talent gaps are slowing the pace of change within organisations and hiring locally is no longer an option, as the tech giants have a monopoly on the best development talent, with engineers operating in a seller's market. This makes obtaining and retaining top talent a significant barrier to transformation.

With everyone from banks to retailers, automotive companies to fashion brands becoming more and more software centric, they need the best engineering talent to make it work. So, to tackle the talent gap, IT decision makers are looking at global hiring as a solution. But, when it comes to offshore vs nearshore, or offshore vs outsourcing — there's often confusion on what these differences are in real-world terms.

Let’s Look at Outsourcing

Outsourcing is a good choice when it comes to project-based development projects. For example, if an business wants to create a single-standing application that doesn't require continual iterative updates or only seldom requires new features, then outsourcing remains a good option. However, the developers don't belong to the business, and they aren't aligned with the company in terms of the wider organisation and it's values and strategic vision. Essentially, outsourced teams are ideally placed to function as external support to help with one-off projects, and to temporarily ease a bulging pipeline when a business needs more hands on deck to develop a piece of software quickly.

Let’s Look at Offshoring

An offshore team is a team of developers that are physically based overseas, but are totally integrated and dedicated to one company. They work only for that business, and culturally and operationally aligned with the wider organisation. When going offshore, a business often opts to parter with an offshoring company based in the new location who help to hire the new engineers and run the team in terms of day-to-day administration and operations. However, assigning tasks, control over projects, and team management are handled in the exact same way as with their developers at home. It's ultimately an augmentation of their existing setup. Essentially, an organisation gets very high-level developers with the expert, specific skills it needs, on a permanent basis. And, with favourable arbitrage — not to mention savings on the prohibitive premises costs they would expect to find in pricey metro areas like London or New York.

We'll look at the difference between offshore vs nearshore in the section below. There is one primary difference between the two solutions and it all comes down to location when proximity in terms of time zones is an important factor in a company's operations within their wider development team. With offshoring, the team tends to be based a continent or two away, with quite a few time zones difference between the offshore engineering centre and HQ. This can be leveraged positively, as engineers in one development location may begin earlier or later than the other, meaning more overall development hours per day.

And Now Nearshoring

When it comes to offshore vs nearshore, then a nearshore team is essentially the same as offshoring but just a little closer to home. The nearshore team is usually only an hour or two away in time zone to the HQ. For example, a business in London might have a team in Warsaw. The engineers are similarly integrated into the organisation, and completely culturally aligned — especially when you have an expert team builder to partner with on the ground in the nearshore location.

Both offshore and nearshore teams are a strategic advantage for businesses to have over their competitors, with the only actual difference being the proximity to the headquarters or primary development location. In fact, the offshore or nearshore location often becomes the primary location for development when organisations see first hand how high the level of talent is.

Outsourcing vs Offshore vs Nearshore: Wrap Up

This acute shortage of developers in the right disciplines, like cloud-native applications, AI and ML, data and analytics — combined with a fierce seller’s market, has prompted more and more companies to assess their options. All three are suitable choices to make, dependent on an organisation's strategy when it comes to its development goals.