Offshoring, Outsourcing, Nearshoring, Onshoring: What’s the Difference?

When companies want to scale their development team, it isn’t uncommon to hire locally — put out job adverts, enlist recruiters, and interview the best candidates. However, it’s easier said than done.

Today, an acute shortage of developers, combined with a continuous increase in salary expectations, has prompted more and more companies to assess their options. This has led to the increasing popularity of models like ‘offshoring’, ‘nearshoring’, and ‘outsourcing’.

However, most of the information available on the Internet is vague and limited. So we’ve put the answers together for you. In this piece, we’ll talk through the definitions, pros, and cons of four headline models: outsourcing, onshoring, nearshoring, and offshoring.

Let’s start with some definitions

Outsourcing

Outsourcing means engaging third-party vendors on a contract basis to deliver software. This either means working with freelancers, or vendors who work with freelancers and is typically the cheapest way of getting work done.

However, with no control over development, the results can be very hit-or-miss and is thus not considered a sustainable, long-term strategy.

Onshoring

Onshoring is the transfer of your software development to non-metropolitan areas within your own country.

Consider a city like London: rent, bills, and wages are all much higher than the rest of the country. By building a development team in a nearby town instead, you can keep the operational costs a bit lower.

Nearshoring

As the name suggests, nearshoring means ‘near’ to home, but not quite. To give an example, developers in Los Angeles are very expensive, and there’s no easy “onshoring” alternative. Good Mexican developers, however, work in a similar time zone and would with much lower costs.

Nearshoring is useful for companies who want constant, real-time collaboration with their in-house staff. For a company based in Paris, nearshoring might be done with Ukraine, who are only a couple of hours ahead.

Offshoring

Offshoring is where you build an independently-functioning development team, anywhere in the world, and everyone on that team is a full-time employee of your company.

Though this adds a time difference, it eliminates the risks of engaging short-term contractors. It also allows companies to hand-pick their developers, with no geographical limitations.

Merits and limits

Outsourcing: a cost-driven model

Outsourcing is a model that is usually defined by low cost. It is traditionally used by companies looking to make significant cost savings, particularly over the short term.

One perceived advantage of outsourcing is flexibility and the lack of commitment. Since the team is not permanently employed, you only pay them for the work that they do for you. If there’s a fall off in demand, no resources are spent on idle workers. This can be a boon for businesses with less predictable capacity.

Read the full article: https://thescalers.com/difference-offshoring-outsourcing-nearshoring-onshoring/