Nearshore vs Offshore Software Development: Differences, Pros and Cons

If your company has recently tried to hire software developers, you probably know this firsthand – finding experienced talent is close to impossible. You are not alone. American companies are struggling to find the right people to fill key positions for their IT teams. The reason? A talent shortage that’s sweeping the nation and got them resorting to offshore and nearshore software outsourcing.

The situation is far from an exaggeration. According to a recent report, the U.S. is short by around 470,000 professionals with the proper software development skills. This paints a scenario in which companies are trying to fish the right candidates from an ever-shallower pool. In fact, this has become so problematic that business executives believe the shortage is the top emerging risk.

So, how can you find the right people to help you with your development? Well, you can turn to a solution that’s growing with each passing month — outsourcing software development. The practice isn’t exactly new. But the context is so dire that companies are using it increasingly. It has grown so much that the global outsourcing market rose to 85.6 billion U.S. dollars by the end of 2018.

Since it’s an interesting alternative to fill talent gaps, you should seriously consider it to help your company. Where should you start? Understanding the differences between the two biggest existing outsourcing models: nearshore software outsourcing and offshore software development.

Let’s review their strengths and shortcomings so you can see which one suits you the most.

Nearshore Development
Companies offering nearshore development services share the same time zone or have a close one to that of your company’s city. The key to these companies is their proximity in the whole sense of the word. They have very similar working hours and they are close to your headquarters.

Typically, US companies collaborate with partners based in Latin America. Countries like Mexico, Argentina and Colombia all have thriving nearshore development companies that are both close to the United States and share almost identical time zones with it. This is a big differentiator from offshore companies, which are usually far from your country and have wildly different hours (think of India as the archetypical example for offshoring countries).

Working along with these companies can bring key benefits to your software development, namely:

  • Cultural fit: Nearshore outsourcing companies are so close to your country that they share more than just the time zone — they can better understand and even share some of your cultural values. This makes it easier to collaborate with them, as they already understand how U.S. companies work and what they expect from development projects.
  • No language barriers: Though most of Latin America speaks Spanish, the countries where nearshore software outsourcing companies are located have high proficiency status in the English Proficiency Index. In fact, learning the English language feels like a must to the point where it’s taught in schools starting in early grades. This guarantees that you won’t have communication problems like you’d have with companies from other regions in the world.
  • Close proximity: Having a partner nearby for your development efforts isn’t just about the sense of shared culture. It also means that you can meet with them in person to sort essential stages of development. Obviously, this isn’t necessary when outsourcing, but having the possibility to do so (at a low cost given the vicinity of the countries) is something you can’t ignore.
  • Technical know-how: Countries closer to the States have understood the advantage they have to offer their nearshore development services to U.S-based companies. That means that the number of developers with the technical know-how to work on a wide variety of projects is increasing, given that tactical advantage. In other words, you’re more likely to find the staff necessary to fill your gaps.

Of course, there are some downsides when working with nearshore developers. Probably the most common one is that the costs to hire companies from Latin America is slightly higher than the ones that come when working with offshore outsourcing partners from countries like India or Ukraine. And though considering the viability of an option based on cost alone isn’t something advisable, it’s certainly a factor to take into account.

Offshore development
You can surely understand what’s offshore software development by what we said up to this point. Basically, these are third-party companies based on countries that are geographically far from your home country. As mentioned above, India is the first option that comes to mind though it isn’t the only one (Ukraine, Russia and most of Eastern Europe are known for offering this kind of services).

Offshore companies are perhaps the most well-known alternative when outsourcing simply because they’ve been doing so for a considerable amount of time now.

The reason? The 3 main benefits we can associate with them:

  • Lower costs: This is probably the most frequently cited reason for companies hiring offshore partners. Originally, U.S companies hired offshore development services to cut down on costs. The countries offering those services have highly competitive prices, which means you can reduce the costs by working with them.
  • Numerous candidates: There’s a reason why the costs in the countries mentioned before are so low when compared to other alternatives – they have a lot of people working in the software industry. Thus, the pool from where you can pick your partner is larger, which means that you can choose the right fit for what you’re looking for without struggling that much.
  • Work around the clock: Since the time zones where offshore companies are located are so different from the U.S, the partner you can hire there will be working while you sleep. This virtually means that your company will be working non-stop around the clock, which can give you a significant edge.

Though all of these benefits have their appeal, there are some cons you should consider before outsourcing to an offshore company. One of the most notorious ones is the language barrier. India, for instance, isn’t known for its English skills, which might give you communication issues and mismatched expectations. Additionally, the difference in time zones makes it almost impossible for you to meet in real time — and that’s without mentioning that face-to-face meetings are almost out of the question.

Offshore or Nearshore Development – which ones the best?
The answer to this kind of questions is always the same – it depends on the project at hand and your own personal requirements. That’s why you need to outline your needs in detail before making a commitment to an outsourcing partner.

Certain factors you should keep in mind when preparing this outline include:

  • Level of expertise required: How specific is the role you need to fill might limit your options and force you to go look in a specific talent pool.
  • Project’s complexity: Complex projects almost always benefit from having a partner that has the same cultural background, with no language barriers and with availability to chat about the specifics on demand.
  • Communication expectations: This is closely tied to the complexity. Simpler projects might only need a couple of setup meetings to be successful, but complex ones will surely imply more meetings and calls that need partners with similar time zones.
  • Available budget: As we said before, it shouldn’t be the only factor to make a decision. But it can’t be ignored either, since neglecting it might end up with the project’s failure.

Of course, there are other aspects at play when making a decision. The company’s reputation and previous work are things you need to know before choosing the right partner for you. There’s also the matter of quality. Companies have come to expect a certain quality threshold as the bare minimum for their projects, something that not all companies are capable of delivering.

Offshore and nearshore software outsourcing are the alternatives you were looking for to overcome the talent shortage currently experienced in the US. Both of them have their pros and cons, but there’s a reason why they are stronger than ever: they can work with a multitude of projects with great results. Keep that in mind when you find yet another roadblock in your next IT recruitment process.


Staff Writer

All articles published by Staff Writer have been contributed by all our reporters and edited and proofread by our editorial team.
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