Onshore, nearshore and offshore software development: what's the difference?

Software outsourcing has seen a steady increase in demand over the last decade. This is in line with figures confirming that the global outsourcing industry is now worth US$85.6 billion .

The high demand for software development means there is a shortage of talented developers. Companies are finding it increasingly difficult to hire talented developers from their local area. As a result, more companies are turning to remote teams to fill skills gaps and stay ahead of the competition.

Companies that outsource software development benefit from project efficiency, internal productivity, greater workload flexibility, and an overall higher quality software product.

The first decision companies need to make before outsourcing development is which method will best meet their business needs. There are three different approaches to software outsourcing: nearshore, offshore and onshore.

Let's take a look at the differences between each in more detail:

What is onshore software development?

Onshore software development occurs when a company outsources work to a company in the same country. For example, a company in New York may need a mobile app developer and decide to outsource the work to a vendor in Boston who specializes in that specific industry.

Onshore outsourcing is the geographically closest option for companies. Companies that find themselves under-resourced or overworked often outsource to onshore developers for convenience. This frees up company time to focus on day-to-day business management and can help ensure products are brought to market on time.

Onshore software development is suitable for projects that require location-specific knowledge, for example, a marketplace app for US cities. It can also work well for small or last-minute projects that require a quick turnaround time. Likewise, projects that require a lot of face-to-face interaction are suitable for onshore development.

What is nearshore software development?

Nearshore software development occurs when a company outsources work to a neighboring country that is geographically close to its own. For example, many companies in the US outsource software development to Latin America, where countries such as Colombia, Mexico and Argentina have working hours compatible with US time zones.

Nearshore development allows companies to scale their teams effectively by having immediate access to software engineers in the same time zone. Nearshore companies often share similar linguistic and cultural similarities, which typically makes for a productive working relationship.

Although nearshore software development does not require in-person communication, the proximity of the supplier means that in-person meetings can be scheduled if necessary. Travel costs are generally low, and in some cases, companies can travel to and from meetings with developers during the business day.

Nearshore software outsourcing is particularly suitable for medium and large projects where companies need immediate access to developers. Projects that may require the processing of sensitive information, or where security is a priority, can be managed effectively by nearshore teams.

Cultural compatibility helps ensure that developers understand the underlying principles of the project, which mitigates the risk of miscommunication.

What is offshore software development?

Offshore software development involves outsourcing work to a third party in a geographically distant region from the host country. For example, a company in the US might outsource to an offshore development team in India.

Traditionally, companies outsource overseas to take advantage of cost savings. However, recent trends show that companies are now more concerned about quality.

One of the key benefits of offshore software development is that it provides companies with access to an even larger pool of developer talent that would not normally be accessible by local and local companies. Companies are not restricted to the skills of their immediate team.

Offshore development can work well for projects with limited budgets or those that require hard-to-find expertise.

How to choose between onshore, nearshore and offshore software development?

To determine which approach will be most beneficial for a project, a complete specification must be created outlining the individual tasks that need to be completed.

Companies then need to assess the current skills they have at their disposal and identify those that need to be outsourced.

The level of expertise required will determine the size of the talent pool a company will need to hire, which can impact outsourcing options.

Companies must then consider the complexity of their project and decide whether distance will be a factor in the project's success.

They should also consider what type of workflow the project requires. For example, if the software needs to comply with strict regulations, it will need a robust workflow focused on adhering to guidelines. If the project requires more creative input, two-way communication and feedback will be particularly important.

Finally, companies should check the selected countries' reputation for software development. Whether companies decide on an onshore, nearshore or offshore approach, it is important to be aware of country-specific software expertise.

How to Outsource to a Nearshore Software Team

To help you choose the best nearshore outsourcing team for your needs, we recommend following these steps:

• What specific skills need to be outsourced?
• How big is the talent pool needed to hire?
• How complex is the project?
• Will distance be a factor in the success of the project?
• What type of workflow would suit the project?
• What are the reputations of the selected countries in software development?