What is the Difference Between Onshore, Offshore and Nearshore Outsourcing?

Anna Khrupa by Anna Khrupa on November 6, 2019

What is the Difference Between Onshore, Offshore and Nearshore Outsourcing?

Outsourcing software development, software testing and quality assurance has long been the go-to strategy for businesses and startups around the world due to the considerable advantages it offers. The main reasons why companies choose outsourcing over hiring and training new in-house developers are to reduce expenses and save time. In turn, the efficiency of outsourcing is highly dependent on the model the company uses.


What are the different types of outsourcing

The main difference between onshore, offshore and nearshore outsourcing models lies in the geographical distance from the client to the outsourcing service provider. For example, if your company is located in the US, and you hire a software development team in the US, it is considered onshore. If a company located in the US hired a team in Latin America, it would be considered nearshore outsourcing. Hiring a team from Europe or Asia would be considered offshoring as they are more than five-six time zones away from the client.

While you may have already heard the terms offshore, onshore, and nearshore outsourcing, let us help you understand the pros and cons of each of the models.


  • Offshore outsourcing

In short, offshore outsourcing means hiring a company from a different part of the world. As the most widely known of the three models, offshoring is what most people associate the term outsourcing with in the first place.
For example, China, India, Poland, and Ukraine are some of the leading destinations for the US market in terms of quality offshore outsourcing software development and low labor costs.
Offshoring lets the clients benefit from large talent pools and ridiculously low hourly rates of around $30, that can hardly be beaten compared to the rather expensive onshore options. Another significant advantage offshore outsourcing offers is uninterrupted workflow. Through quality communication and planning, the client can take advantage of the time zone difference between the in-house team and the outsourcing team, setting up their business to work around the clock. Although, it is important to keep in mind that bad coordination can lead to time zone difference being problem rather than a solution.


  • Onshore outsourcing

Onshore software outsourcing approach means hiring a company in your own country, basically, an option that is closest to your home.
This model is best for software development companies that prefer the convenience of the local industry network and are not intimidated by the hefty hourly rates of $100 and higher. So if you’re looking to maximize your budget, onshore outsourcing is definitely not your best option.
Onshore you get a skilled team in the same time zone, that shares the same language and culture. Most companies also find the possibility of having frequent in-person office meetings with the outsource team to be a major plus compared to the offshore model, where onsite visits are very time-consuming.

  • Homeshore outsourcing

Homeshore software development doesn’t differ much from the onshore model, except for the fact that in this case, employees can work remotely from their homes or external offices, dedicating their coding skills to the cause at slightly lower hourly rates.


  • Nearshore outsourcing

The last, but not in the least popular outsourcing model is nearshore software development, which involves hiring companies within similar time zones. In terms of costs and communication, nearshoring is considered the in-between option compared to offshore and onshore outsourcing. For the average hourly rate of $50, nearshoring provides you with the convenience of minimal time zone difference and significantly shorter travel time for onsite visits compared to offshoring.


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Types of outsourcing: how to find the best option

It may be a real challenge to choose the right model and find the right provider for software development, software testing outsourcing, or quality assurance outsourcing that meets your expectations. Therefore, to make the right choice, you should first focus on your priorities.

When it comes to quality, in most cases, it depends solely on the company you hire. The outsourcing industry has improved its competitive edge in recent years and has proven to be very reliable in growing profits for various startups and companies worldwide.

If maximizing the budget is your priority, then outsourcing to countries with lower production costs may help you reduce expenses.

Another important thing to check after the right skillset and affordable costs is communication. If your joint communication and coordination skills allow the in-house and outsourcing teams to synergize and perform well despite the distant time zones, then offshoring is a great option for you.

If you feel more comfortable without having any language barriers or different work habits with your outsourcing team, then consider your onshore/homeshore options. After all, having good English and the right mindset are quite important points in building a productive relationship.

Whether it’s onshore, nearshore, or offshore—outsourcing allows you to be more flexible. You no longer need to burden yourself with looking for and training new in-house employees when you can have a devoted outsourcing team working to their full potential remotely.

There are plenty of reliable providers to choose from when outsourcing. Today, Ukraine is one of the most popular software outsourcing destinations worldwide, as Ukraine’s IT industry continues showing great quality and fantastic growth rate at below average labor costs. On top of that, Ukrainian developers embrace the new technologies and programming languages in a flash, which puts them in high demand internationally.


So, if you haven’t decided where to outsource your software development yet, consider outsourcing to Ukraine.


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Written by
Anna Khrupa, Researcher/Marketing Manager

Anna is a self-motivated and curious research analyst who keeps her eye on digital marketing trends, IT market state, audience response to the content our team puts out, and examines content strategies of competitors. Anna’s multi-tasking skills overlapped with an in-depth understanding of IT outsourcing make her a powerful player on our team. In her free time, Anna likes reading crime fiction and swimming.