Nearshore Vs Offshore Comparison: Which Approach Fits Your IT Needs?

Software outsourcing is a decisive strategy for businesses aiming to stay efficient, affordable and innovative. According to the report shared by Grandviewresearch, the IT services outsourcing market size was valued at $639.59 in 2022.

This indicates the growing need for businesses to support their product launches and upgrades with the help of a remote team. Outsourcing allows businesses to access a global talent pool and focus on core tasks while staying cost-efficient.

However, the outsourcing approach is not universal. Some businesses prefer to partner with companies sharing their geographies while others may want to move to farther shores.

Nearshore and offshore are two popular models that differ in geographical factors, cultural outfit and operational aspects. From time zone differences to communication aspects, we will look at every angle to help you choose a model that best fits your requirements.

What is Nearshore Outsourcing?

Nearshore outsourcing is referred to the approach where you find a tech partner located at the same timezone. The company is located near your country, which offers a time zone advantage and proximity.

You can leverage the distance by frequenting them occasionally. It gives you complete control of your project. You also get full visibility in your project. In most cases, you also share the same corporate and business culture.

What is Offshore Outsourcing?

When the company you are outsourcing your software development project to is located at a distance, in a different timezone, it is called offshore outsourcing. In this case, your communication is entirely dependent on the virtual medium (Skype, Zoom, and Slack for example).

You will be working in different time zones; as a result, you may need a point of contact from both teams that are available across the time zones for effective collaboration.

In this case, there could be a possibility of language acting as a barrier, which can put a roadblock in your collaboration.

Nearshore vs Offshore: The Effective Approach

Check out the at-a-glance comparison between nearshore and offshore outsourcing approaches.

Businesses have accelerated transformation in the wake of new opportunities, and shifting mindsets. This has led to some radical changes in the IT departments, especially software delivery. We will compare the two approaches for a wide range of factors that should help you arrive at the right decision.

#1. Availability of Resources

Winner: Offshore

The demand-supply graph in developed countries like Canada and America is not linear. Though the demand for developers is high, the supply graph is at the low end. You may not get access to highly efficient and experienced developers easily.

However, when it comes to demand supply, offshore countries have an advantage. You will get experts in every niche and technology here, thus making it easier to hire.

Even when a particular programming language is not too popular, you will find an expert in offshore countries, especially India, and China.

This accessibility to labor works in your favor, especially when you want to launch the product at the earliest.

#2. Quality of Solutions

Winner: Nearshore

As you have complete control over the resources, their work, and the overall project, you get better quality. Your project is continually tested against the quality norms and standards before they are released.

When you are working with a Nearshore company, you can connect with them or even go and meet them at the desired hour. As a result, you are checking on the quality regularly, which helps meet your goals.

With an offshore company, you have to find one that can suit your outsourcing and quality goals. You may not get the desired quality, as you don’t meet the developers or connect with them regularly.

However, if you find someone with a good communication process and a thoroughly defined methodology, you can hire them for your development needs.

If you want high-quality solutions with your offshore company, you should partner with the right technology solution provider.

#3. Support from Team

Winner: Offshore

Whether you are in their timezone or not, you will always get the right support from the offshore team. The offshore team will readily offer maintenance and support as a separate package. This may not occur with the nearshore development companies.

You will need to partner with them for development to access support and maintenance. It is part of your development project, which comes with a separate contract. As a result, if you need small maintenance or upgrades for your existing project, you need to depend on an offshore development company.

#4. Government Policies

Winner: Nearshore

The government policies that apply to your country might be best understood and identified by the nearshore companies. The offshore companies operate under separate laws and governance.

As a result, when you work with a nearshore company, the contracts are drawn in sync with your policies. It also ensures proper safety measures, thorough collaboration, and probable initiatives to keep your data safe and secure.

In the case of offshore companies, you might have to work with them to conclude the proper contract and ensure a better understanding of the protection and privacy laws.

#5. Cost-effective Solutions

Winner: Offshore

The hourly rates in India are lower when compared to the rates in America. The offshore companies leverage on low labor costs, which means you will get the product at half the cost. These companies can help you build a cost-effective solution, without spending a lot of money on resources or infrastructure.

The hourly rates are higher in the nearshore companies, which can make your overall development and service cost more.

#6. TimeZone Differences

Winner: Tie

This might seem like a disadvantage for offshore companies. However, if used correctly, it is not a bottleneck but an advantage. As a result, time zones are an advantage in both cases.

For the nearshore, the two companies will be operating in the same timezone. As a result, it becomes easier for the two companies to connect and communicate whenever needed. The work gets done in the same timezone.

However, if the feedback arrives at the end of the day, it will be sent the next day, and you need to wait for the entire day before you get the changes.

In this case, the offshore development company has an advantage. You can give the changes at the end of your day, and expect them ready at the start of your next day. This means you don’t have to wait for the changes to get done.

#7. Cultural and Language Compatibility

Winner: Nearshore

Nearshore companies share the same borders and geographies, thus sharing culture and languages as well. It is also possible that they share similar regulations, business processes and work practices. These companies are proficient with the languages that are commonly used in your geographies, thus allowing them to communicate flawlessly.

On the other hand, the offshore companies may have different cultures and work processes. There is a slight learning curve involved in this collaboration. Moreover, they may need to get training in cultural sensitivity before partnering with your business.;

If you want someone who is culturally aligned and shares similar work processes, you must go with nearshore.

#8. Communications and Collaboration

Winner: Tie

A nearshore company shares your borders and your language. It is easier to travel to a company that is nearby and visit their offices to connect and collaborate on a project. Moreover, you will notice that this model works best when you need more control over the project.

However, offshore companies are not resistant to communication and collaboration. With a slight investment in the proper communication protocols, you can ensure a highly efficient and collaborative team. You can get complete transparency and track the progress of the project.

Moreover, despite the time zone and cultural differences, they can easily work round the clock and collaborate in real-time. These possibilities make working with an offshore team effectively possible.

#9. Project Management & Control

Winner: Tie

You have equal control and management prospects with each case. Neither of the approaches is in-house, which makes it difficult to tie them to control or management.

You will need a project manager to help with the complete control of the project. They will be assisting in managing the entire project from your company. Moreover, you will need to use popular software tools, such as Trello, Slack and others to keep track of the project status.

Case Studies of Nearshore and Offshore

Here are some incredible case studies from top companies that showcase the brilliance of nearshore and offshore.

Nearshore Outsourcing Case Studies

#1. IBM Partners Softtek Mexico

IBM wanted to enhance their global delivery capabilities, so they partnered with Softtek a leading IT services company in Mexico. This was a nearshore outsourcing, where IBM could use the expertise and resources offered by Softtek.

As a result of the nearshore outsourcing, they were able to access resources in the same time zone. This approach also allowed the company to benefit from faster services while accessing a larger talent pool. They could save money while outsourcing to a company that was accessible.

This led to an increase in the service quality and operational efficiency for IBM without spending a lot of money.

#2. Coca Cola Partners Cognizant in Latin America

This partnership was formed when Coca-Cola needed an IT services company for application development and maintenance. They collaborate with a nearshore outsourcing company to reduce costs while accelerating the delivery.

This collaboration was founded owing to the extensive local presence established by Cognizant and its expertise in the niche. They were able to deliver a stable and reliable system to Coca-Cola.

This approach helped Coca-Cola enhance its operations and make its services efficient.

Offshore Outsourcing Case Studies

#1. Microsoft Partners with Infosys India

Microsoft wanted an IT services provider for software development, maintenance and support. They outsourced their needs to Infosys in India, an offshore model. They received high-quality and cost-efficient solutions using the offshore model.

While Microsoft focused on core business operations, Infosys helped with IT services. This partnership increased the quality of solutions, enhanced the in-house team’s efficiency and improved cost efficiency.

#2. AT&T Partners Accenture Philippines

AT&T outsourced their customer service and technical support requirements to Accenture in the Philippines. This led to better customer service while ensuring faster responses and increased cost savings. They could use the skilled workers. In fact, they used the different time zones to their advantage and managed to enhance productivity.

A Focus on Hybrid Approaches

Instead of focusing on a single outsourcing approach, global businesses have adopted hybrid solutions. They have blended nearshore and offshore to streamline their operations and take advantage of both approaches.

Let’s look at the benefits of combining both approaches. This will clearly mitigate the dependency risk. you won't be looking at a single approach or location. If there is a geopolitical issue, your venture won't suffer from it. similarly, it will not cause any operational disruptions in the long run.

Secondly, you will be optimizing the costs of developing a software solution by combining the two. You can allocate the tasks according to the complexity and cost of development, thus balancing the structure and ensuring high quality.

It also helps enhance the service quality for your business solution as you will be able to diversify your skills and create a more innovative solution.

Prominent companies like IBM and Accenture have implemented the hybrid approach for successful completion of projects.

IBM used nearshore outsourcing to partner with companies in Canada and Mexico. At the same time, they outsourced to offshore countries like India and the Philippines for offshore support. This helped them manage the task completion on time and launch products without delays. It also helped them diversify their skills, ensuring partnering with specialized companies.

Accenture blended nearshore centres like Eastern Europe with offshore operations in India to ensure smooth consulting and IT services across the globe.

Using the hybrid outsourcing approach, you can use the best of both outsourcing models to enhance quality, reduce risks and optimize costs. It will help navigate the challenges you face with in-house teams and outsourcing successfully.

Conclusion

Nearshore is a geographically advantageous model that shares your timezone while offshore offers better cost savings. There are time zone advantages and a need for proper communication protocols for both. You can streamline operations and enhance internal productivity for both cases.

With the numerous advantages for both, the choice depends on the project needs, the control type you wish to enjoy and your budget. You must partner with a company that has extensive skillsets, is scalable and offers flexibility.

Expert App Devs is an expert offshore mobile app development company. We help bring down the development costs and offer development to maintenance services. Connect with us if you want to launch a mobile app using our expertise and cost-efficient services.

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Jignen Pandya

Vice President at Expert App Devs

Responsible for creating a sales funnel, attracting top-of-the-funnel customers, and converting the target market.