Onshore, Offshore, Nearshore: Difference Explained- nCube

Are you thinking about where to set up your external team? It might seem like the difference between onshore, offshore, and nearshore outsourcing is just about distance. However, each approach has benefits and shortcomings, so the choice can be challenging.

Leveraging our 15+ years of experience in building remote teams, in this post, we’ll break down the difference between the three approaches and explain the pros and cons of each option so you can choose the best fit for your needs.

What is onshore outsourcing?

If you delegate your software development to a vendor located within your country, it’s called onshoring (also known as reshoring). For instance, your HQ is located on the East Coast, and you hire a tech team based on the West Coast. Many companies choose this way of collaboration because it lets the core team and remote team stay within the same context, including the language, legal compliance, culture, and time zone. On the other hand, onshoring comes with higher software development costs, which are comparable to building a local team.

What is offshoring?

It’s a type of remote collaboration where your business and the team are located on different sides of the globe, with a significant time gap. The main advantages of offshoring are lower hourly rates and access to more tech talent. However, the approach offers more challenging communication and team synchronization due to time zone differences, culture differences, and sometimes unfamiliar work ethics.

What is nearshoring?

We believe that the biggest nearshore outsourcing advantage is that it strikes a perfect balance between onshoring and offshoring. As the name suggests, the software development team will be located “near” your HQ, often in a bordering country, ideally, within the same time zone or just 1-3 hours apart. This makes nearshoring a perfect mix of geographic proximity, time alignment, simplified communication, cultural similarity, and a large talent pool.

Onshore outsourcing: Pros and cons

Pro: Proximity

Onshore outsourcing allows for more frequent meetings with your team and vendor, compared to nearshoring and offshoring. Team visits are easier with shorter travel times and no jet lag, which can boost productivity. Additionally, working within the same country ensures uniform laws, tax regulations, and IP protection, providing better confidentiality, especially for sensitive projects.

Pro: Similar time zone

When you work with a local provider, you’ll often benefit from being in the same time zone or at least dealing with a familiar time gap. This alignment fosters greater synergy and makes the process of team synchronization much smoother.

Pro: No language barrier

When team members share the same background, they literally “speak the same language,” which lends itself to smooth integration. However, when a developer isn’t fluent in your language, miscommunications may occur. Additionally, differing work ethics can make it challenging to collaborate toward a common goal.

Con: Higher costs

Onshoring can be costly, particularly in Western Europe and North America. If you’re based in a major hub like New York or Berlin, you will achieve more cost savings by sourcing talent from nearby regions like Latin America or Eastern Europe than by building an in-house team. Below, we compared the rates of developers in several countries so you’ll notice the difference.

Con: An overfished pool of talent

This is a key reason to broaden your talent search radius. With onshore outsourcing, you are tethered to the talent available within your country. It’s not just about the quantity but the quality of talent as well. Large companies often attract and retain senior software engineers, making it harder to find experts locally. In the onshore vs offshore vs nearshore outsourcing paradigm, the last two approaches offer access to larger repositories of senior talent and niche skills. It’s because, in offshore and nearshore zones, service providers dominate the IT market, offering opportunities that attract senior professionals.

Pros and cons of offshore outsourcing

Pro: A global talent pool

Offshoring allows you to tap into Asia’s vast and dynamic talent pool. Countries like India and the Philippines are leading tech hubs, providing access to a significant number of skilled professionals for rapid project scaling. However, with a talent pool this large, you may encounter a mixed bag of expertise, including less competent developers you don’t want to see on your team.

Pro: 24/7 development

Offshore outsourcing lets companies take advantage of time zone differences for continuous development. With a team in another corner of the world, projects are moving forward while your local team rests. Although this keeps productivity high, communication with your offshore branch can be challenging.

Con: Time zone differences

When weighing the pros and cons of offshore outsourcing, time zone difference poses the biggest risk. You will be separated from your team by 10 to 14 hours, which leaves you with a tiny time window to communicate directly and address urgent matters. As a result, the quality and timeliness of project deliverables might suffer.

Con: Culture gap

A small percentage of offshore professionals have a similar mindset and culture values needed to work effectively with Western teams. Cultural differences can create significant challenges for remote teams, sometimes making it difficult to bridge the gap and work smoothly together.

Con: Traveling

Visiting offshore teams often involves flights of 15 hours or more, which is not only costly but also exhausting and time-consuming. Moreover, the logistics of coordinating such trips can be complex and stressful. Unexpected delays, language barriers, and cultural differences can also add to the overall challenge.

Con: Quality Issues

It can be difficult to assess vendors’ capabilities from afar, increasing the risk of selecting those with immature processes and substandard quality. This can result in subpar deliverables, increased rework, and potential delays.

Nearshore outsourcing advantages and disadvantages

Pro: Cost saving

Lower costs of software development is the most lucrative nearshore outsourcing advantage. Besides lower developer rates, you no longer have to set up supporting teams (like HR, accounting, office management, etc), as the provider takes care of your team’s comfort. In the table below, you’ll find how much you can save by sourcing developers from nearshoring regions.

Pro: Time zone alignment

If you want a remote team that aligns with your HQ’s time zone, consider nearshoring to a country with a small time difference. This ensures easy communication during regular business hours, eliminating concerns about delayed email replies or after-hours meetings. Below is a comparison of time zones between North America and LATAM:

Pro: Cultural fit

Nearshore teams usually have similar cultures, which cuts down on misunderstandings and makes working together smoother. Plus, they’re often familiar with each other’s business practices, like the way Eastern European developers match up with Western work ethics.

Pro: Convenient travel

Nearshore teams are just an arm’s length away, making travel quicker, convenient, and cost-effective for face-to-face meetings. This proximity is especially beneficial for projects that require occasional hands-on involvement.

Con: Higher cost than offshoring

While nearshoring saves money compared to onshoring, it’s typically pricier than offshoring. You’ll need to meticulously assess the vendor’s capabilities to build a skilled team so that the higher costs translate into correspondingly higher-quality outcomes.

Con: Potential communication barriers

Although nearshore developers often speak English as a second language, there can still be language barriers and cultural differences. However, English proficiency is improving in regions like Latin America, and cultural gaps are generally narrower than those associated with offshore teams.

Summary: The ultimate difference between onshore, offshore, and nearshore approaches

While onshore vs offshore vs nearshore outsourcing all involve collaboration with teams from different locations, these approaches have several distinctions that can influence which one best suits your business needs. Below we outlined the key differences between onshore, offshore, and nearshore models.

Why we at nCube are pro nearshoring

In the context of onshore vs offshore vs nearshore outsourcing, it’s clear that nearshoring is the optimum choice between the three approaches. It helps lower development costs while still offering advantages like consistent communication within your business hours. Although the hourly rate of nearshore experts might be slightly higher than those of offshore developers, you’ll benefit from real-time collaboration, culture fit, and reduced travel time and expenses.

At nCube, we specialize in building tech teams in Europe or LATAM, the key nearshoring regions. Here is why we are the proud ambassadors of these tech hubs:

High English proficiency

European and LATAM software engineers boast adequate English proficiency. This will simplify communication and work coordination with external teams and help you build strong partnerships without language barriers.

Reduced cost compared to in-house

The concept of nearshoring is all about cost savings. We will help you select a tech hub that will let you source the best talent while optimizing your software development budget.

Western-aligned work ethics

The work ethics in Europe and LATAM closely mirror Western standards. They align with the management style, conflict resolution methods, and collaborative approach of global companies.

A stable business environment

Both regions provide a reliable business climate, ample funding opportunities, strong collaborative networks, and regulatory alignment with North American and EU standards.

Strong potential for innovation

Europe and LATAM are proven centers for innovative software development. These regions boast a dynamic and rapidly expanding technology ecosystem, featuring a wealth of startups, research institutions, and tech companies that fuel continuous innovation.