Offshoring, Outsourcing, Nearshoring, Onshoring: What's the Difference?by The Scalers Offshore Development Teams In India
When companies want to scale up their development team, the most obvious solution is to hire locally. Put out a job advert, maybe enlist a recruiter, then interview the best candidates. However, this is easier said than done.
An acute shortage of developers, combined with a continuous increase in salary expectations, has prompted more and more companies to assess their options.
A quick Google search for terms like "how to hire good developers without huge costs" or "how to scale my development team affordably" throws up some interesting results. A lot of those results use terms like "offshoring", "nearshoring", and "outsourcing" interchangeably.
The problem with these results is that most of the information is vague and limited. So we've put the answers together for you. In this piece, we'll talk through the definitions, pros, and cons of these four headline models: outsourcing, onshoring, nearshoring, and offshoring.
Let's start with some definitions
Outsourcing means engaging third-party vendors on a contract basis to deliver a specific deliverable.
This either means working with freelancers, or vendors who work with freelancers. This is typically the cheapest way of getting work done. However, with no control over development, the results can be very hit-or-miss. It is not considered a sustainable or long-term strategy.
Simply put, onshoring is the transfer of your software development to non-metropolitan areas within your own country. Consider a city like London: rent, bills, and wages are all much higher than the rest of the country. By building a development team in a nearby town instead, you can keep expenses a bit lower.
As the name suggests, nearshoring means 'near' to home, but not quite. To give an example, developers in Los Angeles are very expensive, and there's no easy "onshoring" alternative. Good Mexican developers, however, work in a similar time zone and would with much lower costs.
Nearshoring is useful for companies who want constant, real-time collaboration with their in-house staff. For a company based in Paris, nearshoring might be done with Ukraine, who are only a couple of hours ahead.
Offshoring is nearshoring without the proximity restriction. You build an independently-functioning development team, anywhere in the world, and everyone on that team is a full-time employee of your company.
This adds a potentially awkward time difference, but eliminates the risks of engaging short-term contractors. It also allows companies to hand-pick their developers, with no geographical limits. They collaborate with your in-house team, work on projects, and build software consistently.
Those are the basic differences. Now let's dive into a bit more detail, looking at the merits and limits of all these methods.
We can broadly summarise the four different models as follows:
- Offshoring - A sustainable way to build a permanent software development team, or scale your existing one.
- Outsourcing - A very low-cost way to deliver short-term or temporary projects.
- Nearshoring - Effectively a subset of offshoring.
- Onshoring - A little-used practice, similar to offshoring without the financial benefit or flexibility.
To learn more about offshoring and its applications, check out our blog. If you're considering using one of these methods to grow your business, we encourage you to speak with a member of our team to get answers to any of your questions.
Created on Aug 16th 2019 00:21. Viewed 391 times.