The differences between Nearshore software development, Offshore and Onshore are fundamental when deciding the best strategic outsourcing option for you.
The outsourcing of services or supplies is commonplace, especially in certain areas like Information Technology (IT). Many firms, and particularly smaller companies, cannot afford to have their own in-house software development team covering all the skillsets required for present and future requirements, not just because of the usually high salaries commanded but also for ongoing training to remain up to date with state-of-the-art technologies and solutions.
However, the considerations about which of these strategic approaches to adopt for your specific case apply to the outsourcing of any service, from the supply of parts to advisory services etc.
Let’s look at the pros and cons of each option.
ONSHORE SOFTWARE DEVELOPMENT
In this model, potential partners are readily accessible, being in the same country and probably the same time zone and would normally have the same or similar social culture, business mindset, speak the same language and operate under the same labour legislation and fiscal regulation. The advantages of communication are obvious.
However, the main reason for not choosing this option is usually cost or the limited technological skills in the talent pool.
Face-to-face meetings with potential partners are essential for the vetting process and particularly in the initial stages after adjudication to ensure clarity and transparency and to form a solid basis for what will be a long-term relationship. Follow-up visits will also be necessary for the ongoing monitoring of developments. Travel time and costs for face-to-face meetings with an onshore partner will therefore naturally be lower than for nearshore and especially offshore partners. However, such costs are usually small in relation to salary and remuneration costs. Depending on your country’s cost of living, salaries and other costs may be prohibitively high, especially in high-skill areas like IT. And this is the main reason why firms look at the next two options.
Pros of Onshore Software Development
- Outsourcing company in the same geographical location (same country)
- Same language
- Same time zone
- Same social culture
- Same labour legislation and fiscal regulation
Cons of Onshore Software Development
- Higher costs
- Limited technological skills
NEARSHORE SOFTWARE DEVELOPMENT
Outsourcing work/services/supplies to a company in a nearby country requires weighing up the following factors.
Travel time and costs for face-to-face meetings with a nearshore partner will naturally be higher than for the onshore option but this cost will usually be far outweighed when outsourcing to a country with a lower cost-of-living than yours. The same high level of technical expertise and experience can normally be found in other European countries as in one’s own but with significant cost benefits without compromising quality, efficiency and value. These same countries that may not even share a border can, on the other hand, share other commonalities like languages (besides English), culture and mindset which help to streamline communication between both partners.
Another advantage is that a nearshore partner will usually share the same time zone or have a small difference in working hours if in a nearby time zone, which also is a major advantage over the offshore option.
Pros of Nearshore Outsourcing
- Cost Reduction: Considerably lower cost for a high level of technical expertise and experience
- Access to a Large talent pool of experts and new technologies
- Gain scalability and flexible resources
- Better and frequent communication and a good team integration: Outsourcing company is close to client’s geographical location
- Nearly the same time zone
- Similar labour legislation and fiscal regulation, especially for companies in the EU zone.
- You can focus on what’s important: Your Core Business
Cons of Nearshore Outsourcing
- Higher travel costs
- Different culture that always need adjustments from both sides
OFFSHORE SOFTWARE DEVELOPMENT
The upside of offshoring will always be lower development costs when choosing a country with significantly lower cost of living and salary levels. However, this major advantage may be offset by several considerations that also affect the overall cost of a project. While travel time and costs will always be higher, currency fluctuations could have a drastic impact on the final investment. The political and social stability of the country is also a major consideration. Communication and business culture for forming a transparent and solid relationship may be harder than with a nearshore partner and certainly, an onshore partner and poor communication can lead to cost and schedule overruns.
Pros Offshore Software Development
- Cost Reduction: Considerably lower costs.
Cons Offshore Software Development
- Outsourcing company is not in the same geographical location
- Different language
- Different time zone
- Different culture
GENERAL CONSIDERATIONS
If there is something that the lockdowns resulting from the current global pandemic have taught us it is that it is not only possible to work remotely, but this can also have some advantages. It has also required many firms to adapt their modus operandi and to adopt digital platforms for many aspects of the business than before. Outsourced teams do not necessarily have to operate on-site but can easily work remotely, bringing obvious benefits.
In IT this is particularly so as most IT developments will never need face-to-face contact daily and can be appropriately managed remotely with in-person visits on an as-required basis.
PORTUGAL AS A NEARSHORE SOFTWARE DEVELOPMENT SOLUTION FOR EUROPEAN COUNTRIES
Within the Euro Zone, one country that offers significant nearshoring benefits is Portugal. It has a lower cost of living than other Western European countries and therefore lower salaries but boasts many tech universities and colleges that have produced a large pool of highly skilled talent so it can provide an excellent ROI for any IT development project.
When considering Portugal as a nearshore option you need to receive advice from experts and one such company is BOLD part of Devoteam.
With nearly 10 years of nearshore software outsourcing experience and over 100 experts using state-of-the-art technologies, BOLD part of Devoteam delivers innovative technological solutions.
BOLD part of Devoteam is also part of the Devoteam Group, one of the largest European groups of technology consulting solutions, operating in 18 countries, meaning that it has access to accumulated shared experience and technical know-how that can prove invaluable in a nearshoring partnership