Differences Between Offshore vs Nearshore Outsourcing Explained

Encora | November 09, 2022

Meeting your software engineer staffing needs is, to put it simply, complicated these days. The demand for skilled software engineers, especially those with specialized skills, is growing at the global level, leading to competition for talent. Many organizations are addressing their staffing needs with outsourcing, which is hiring an outside team of software engineers. This approach has many benefits, including lower costs and access to a broader talent pool. Of course, like anything in life, there are pros and cons for each model, depending on what exactly your organization needs. Both models are viable options for modern organizations. In this article, we’ll be exploring nearshore vs. offshore outsourcing so that you can make the best decision for your organization. 

What Does Nearshore Outsourcing Mean?

Nearshore outsourcing is when an organization hires a team of software engineers in another country, but one that is close geographically and in the same or similar timezone. Many organizations, especially those new to outsourcing, prefer this middle ground; it allows them to hire the engineers they need while minimizing disruptions to the workflow in the form of cultural differences and timezones. Organizations will delegate work to this third party, which is called outsourcing. Nearshore outsourcing allows an organization to broaden its talent pool with teams in close or similar timezones. This is more cost-effective than hiring in-house talent, which might not be a viable option given the current market. 

What is Offshore Outsourcing?

Offshore outsourcing is the structure where an organization hires a team of software engineers in a different geography. For example, a North American company working with a team of engineers in India or the Philippines is considered offshore outsourcing. Like with all types of outsourcing, offshore outsourcing has unique benefits and challenges. Offshore outsourcing offers a wider array of talent, which is essential if your organization requires specialized skillsets. And, contrary to popular opinion, many offshore outsourcing teams speak fluent English, minimizing the language barrier.

Pros and Cons of Nearshore Outsourcing

When it comes to nearshore vs. offshore outsourcing, nearshore outsourcing has a number of strengths:

  1. Same or similar timezone
    One of the primary benefits of nearshore is that the outsourced team will be in the same timezone or a similar one.
  1.  Fewer cultural differences
    Greater cultural familiarity with nearshore teams will lead to more accessible, more cohesive work. 
  1.   Closer to your organization

Nearshore options are geographically closer to your organization, which minimizes flight time for in-person meetings.

 

Nearshore outsourcing also has its cons as well:

  1. More expensive than offshore

    Your organization will pay more for nearshore engineering teams. Depending on the company, this may or may not be a significant consideration. 

 

  1.  Less talent available, and sometimes harder to find specialized skillsets

    The simple fact is that there are more people in countries like India, and this means they have a broader pool of skilled software engineers to pull from. Depending on the skillset, it may take longer to locate the right talent nearshore than it might offshore. One way to mitigate this challenge is to source talent across multiple nearshore markets simultaneously.

 

Pros and Cons of Offshore Outsourcing

Offshore outsourcing has its strengths as well:

  1. Wider pool of talent

    Given the scale of some of the Asian countries–notably, India–there is potentially a larger pool of available talent, which can speed the ramp-up period of a large team. 

 

  1.   More specialized talent

Arising from the larger scale of talent pool is greater availability of more software engineers with specialized expertise. This can benefit companies with highly specialized needs. 

 

  1.  Least expensive option

Offshore outsourcing is almost always less expensive than nearshore and onshore options. For many companies, this is an important consideration. 

  1.  Less of a language barrier

While there might be a perception that nearshore outsourcing provides less of a language barrier, this isn’t always true. If you outsource to India from America, you’ll likely find more teams that speak English, even compared to Latin American countries.

 

Here are some of the cons of offshore outsourcing:

  1. Cultural differences

There are vast cultural differences between the West and the East. There is always some risk that these differences could complicate the work through miscommunications. 

 

  1.    Differences in working hours

The most practical downside of offshore outsourcing is the difference in working hours.  Offshore teams are unlikely to share more than 2-3 hours per workday with their clients, which narrows the window for in-person meetings and realtime feedback. 

 

Nearshore vs Offshore Outsourcing at a Glance

Qualities:

Nearshore

Offshore

Shared working hours

Typically 6-8 hours

Typically 2-3 hours at maximum

Cultural similarity

Maximized

(Varies by team)

Travel time for in-person meetings

Shorter, with minimal timezone adjustment

Potentially quite long, with significant timezone adjustments

Cost

Lower than internal hiring, but often more expensive than offshore

Typically the lowest-cost option available

Talent pool

Significant scale of talent, with growing expertise and specialization

Largest scale of available talent, with deep specialization

 

If you’d prefer to watch a video about the different kinds of outsourcing, here is a link to helpful content. 

Nearshore Outsourcing with Encora

When it comes to nearshore vs. offshore, the best approach varies depending on the needs and preferences of the company.  Many companies begin with nearshore outsourcing, and as they build familiarity and comfort with outsourcing in general they explore offshoring as a way to expand capacity for similar cost.  Encora helps companies to find the best solution to meet their specific needs and preferences, spanning a range of nearshore and offshore solutions.

Here at Encora, we’re proud to be your premier source of nearshore staffing needs. As demands for skilled software engineers rise, we’re here to help provide the talent your company needs in a convenient package. Our LatAm teams are in similar timezones and have a similar work culture. Take the guesswork out of outsourcing and choose from our group of vetted and qualified candidates. They have diverse talents and experience and can jump into whatever project you are working on. Please reach out to us with any questions or to get started!

 

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