Scaling development teams locally has challenges. The shortage of developers and rising salary expectations prompt companies to consider alternatives like offshoring, nearshoring, and outsourcing.

However, information on these models is often vague. This post defines and compares outsourcing, onshoring, nearshoring, and offshoring in terms of their pros and cons.

With clear explanations of each approach, companies can make informed decisions on resourcing models to scale engineering teams effectively. So, let’s get started!

Let's Begin By Defining Some Terms

Outsourcing means hiring third-party vendors on a contract basis to deliver software. This can be cheap but results are unpredictable since you have little control over development.

Onshoring transfers software development to non-metropolitan areas within your own country to reduce costs compared to big cities.

Nearshoring locates development teams in nearby countries to enable real-time collaboration with in-house staff. For example, a Paris company might nearshore to Ukraine.

Offshoring builds an independent development team anywhere in the world as full-time employees. This adds a time difference but eliminates contractor risks and geographical limitations.

Benefits and Boundaries

Outsourcing

This model involves hiring third-party vendors on a contract basis to deliver software, often at very low cost. This can provide short-term savings since you only pay for work done and have no idle employee costs. However, quality is often compromised as vendors juggle multiple clients globally and lack investment in your specific business. 

Outsourcing is best suited for one-off projects when you lack in-house capacity.

The main downsides of outsourcing are lack of control and sustainability. You don't manage the developers directly, communication can be difficult across time zones, and they may leave at any time. For key or long-term projects, this unpredictability poses risks.

Offshoring 

This model entails building a dedicated development team in another country as full-time employees of your company. While physically distant, they function much like an in-house team focused solely on your projects and goals. 

Offshoring provides more control, sustainability and scalability compared to outsourced contractors.

With modern communication tools, geographical separation is not a major obstacle for an offshored team. You can still directly manage them, align priorities, and develop a shared culture. Offshoring gives you dedicated talent without geographical restrictions or big city costs.

Offshoring vs. Outsourcing: The Biggest Differences 

The core difference between outsourcing and offshoring is employee status. Outsourced vendors juggle multiple clients and lack loyalty, while an offshored team works for you exclusively. This results in better quality, accountability and business alignment. For long-term growth, offshoring is a more sustainable solution.

Offshoring provides quality engineers at about half the cost of domestic hiring. With the right partner, you can scale up sustainably with specialised talent. Offshoring is ideal for growth and accessing niche skills.

Overall, offshoring provides the best balance of quality, cost savings and access to specialised skills. For sustainable growth and leveraging niche expertise, offshoring is a proven and powerful approach. The main downside of distance can be largely mitigated with modern communication tools.

Summing Up

Offshoring vs. outsourcing: which is best?

Offshoring involves setting up a dedicated team in a cost-effective location, ensuring long-term savings without compromising quality. Unlike outsourcing, where tasks are delegated to external vendors, offshoring allows for better communication and alignment with your goals. It also promotes a stable and committed workforce, leading to improved efficiency over time.

If you're considering these approaches to grow your team, get in touch with us and speak with a member of our team. We're happy to answer any questions and discuss if offshoring is the right fit for your needs.

With personalised advice from our team, you can make an informed decision to build your ideal engineering organisation leveraging global talent. Don't leave it to chance - get in touch today and let us guide you to the optimal resourcing strategy for sustainable growth and innovation.

If you want to know more abou offshoring vs nearshoring, please visit our blog post : https://thescalers.com/difference-offshoring-outsourcing-nearshoring-onshoring/