Your Guide to Offshore vs. Nearshore Product Development Comparison 

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MARYNA DEMCHENKO

Published: 09 Jun 2022

Nearshoring

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Delegating product development activities often boils down to two main approaches, such as offshore and nearshore product development. While both options let businesses enjoy a slew of similar benefits, such as cost reduction and access to vast hubs of tech talent, each of them comes with its own peculiarities, knowing which will help you choose the optimal solution for you. 

As a company that specializes in providing both offshore and nearshore product development services, we will shed light on the definition, similarities and differences between these approaches when it comes to such aspects as time zone, communication, talent pools, budget, time-to-hire, and management. So, should you send your product development activities offshore or nearshore? Let's define these concepts first.  

What is nearshore software product development?

Nearshore software product development means building a team located in another country with the same time zone or in one with negligible time zone differences. Alternatively, some definitions focus more so on location as in they define that nearshoring focuses on setting up a team in one of the neighboring countries. 

What is offshoring? 

Offshoring is also about moving product development activities to a team based in another country – but with a significant difference in time zone. This approach usually implies building a team overseas. 

For a more in-depth understanding, let's do a head-to-head comparison of their similarities and differences.

Offshore vs. nearshore software product development: A comparison

Time zone differences

Time zone differences are an inevitable challenge for distributed teams. It's clear that your tech units should be aligned to work like a well-oiled machine, even when they are scattered around the globe. 

The geographical proximity of nearshore product development teams significantly reduces or eliminates time zone issues. This approach places an external team in the neighboring country, which lends itself to better synchronicity between you and your team.

Offshore teams operate overseas and typically deal with a time difference of 7 to 12 hours. If you’re located in the US, such regions can be Eastern Europe or Asia. Such a significant time zone difference requires proactive management and recalibrating not only your communication style but your team’s as well to enable unimpeded work. 

On the bright side, your team on the opposite side of the globe can work on getting your product done while your US team is asleep. It allows for significant coverage when it comes to the hours worked on your product, as each one of your teams can clock in 8 hours in a 24-hour timeline. 

If such coverage sounds like a significant advantage for you, consider working with an offshore team. But if you’d rather have two teams working in parallel with each other with a tiny difference in time, nearshore product development may be the best solution. 

Communication 

Communication barriers are par for the course with both offshore and nearshore software product development units. Different languages, time zones, and cultures can potentially be a complication in establishing a smooth communication process. There's always a risk of a project going awry due to miscommunication or misinterpretation of messages. To mitigate this risk, it’s best to build teams in regions with higher levels of English proficiency, for example, Argentina or Eastern European countries (for example, Ukraine, Poland, Slovakia, and the Czech Republic). In these regions, English proficiency is estimated between high and moderate as opposed to low or very low proficiency pertaining to Asian countries. For both offshore and nearshore product development units, a solid grasp of English should be a priority. 

Talent pool

Both offshore and nearshore approaches allow companies to take advantage of talent pools outside their regions. The only notable difference related to this aspect is that with nearshore product development you only access talent located in the nearby countries, whereas an offshoring approach expands your horizon to include the global pool of tech talent. If you're a US business, you can count on up to 700,000 developers in Latin America combined in such nearshoring hotspots as Argentina and Mexico. But if you expand your search to add opportunities in Eastern Europe, you can access a pool of 1.3 million developers and have a wider choice when it comes to tech talent. 

READ ALSO: IT Outsourcing Market in Latin America: An Overview

Budget

Both offshore and nearshore software product development are aimed at budget optimization – each solution lets you trim expenses associated with onboarding your own internal teams, such as overhead, insurance, employee bonuses, IT infrastructure, and more. All of them are typically taken care of by a vendor. 

There's an opinion that nearshore product development can be more expensive than offshore when it comes to software developer rates. Offshoring to Asia is cheaper than nearshoring to Latin America for US-based businesses, but it often comes at the cost of software quality and communication barriers associated with teams based in this region. Thus, many EU and UK businesses choose to commit their nearshore software product development to tried-and-true regions, such as Eastern Europe.

Whichever option you choose, keep in mind that the prices tend to vary, depending on the local software development rates, the fees imposed by service providers, your tech stack choice, team size, and a billing model.

READ ALSO: How to Reduce IT Development Costs 

Time-to-hire

The more extensive the pool of tech talent is, the less time it takes to build a team. You can use developer availability as a criterion when choosing between offshore and nearshore product development. Diving into offshore or nearshore regions, you stand fewer chances to compete with other companies vying for tech talent as it often happens when hiring locally. You also don’t have to search for candidates ready to move or hire not based on their skills but the ability to relocate. Not only do offshore and nearshore approaches accelerate the hiring process but also let you access the right kind of talent. 

As a company that specializes in sourcing talent from Eastern Europe and Latin America, we can say first-hand that building a standard product team takes on average up to 20 days thanks to our access to a vast variety of skillsets. 

READ ALSO: Why is it Worth Outsourcing to Eastern Europe?

Management

A complex project that product development requires a well-rounded team member integration and management strategy. When time differences come into play, you may lack instant access to developers. Thus, every activity on your list must be extensively planned for every team member.  

Whether you choose an offshore or nearshore product development approach, be prepared to manage your teams directly, as direct access to team members always guarantees better results. When managing a distributed team, it’s necessary to retain control over the development process to get a predictable outcome. That said, whichever approach you select, you will have to put a bit more effort and time into building relationships with your teams. 

READ ALSO: How to Manage Distributed Engineering Teams

Summary

As you can see, offshore and nearshore product development aren't that different. At the heart of both approaches lies a practice of delegating software development activities to teams in other locations, which comes with such benefits as cost reduction and access to diverse skill sets.

At nCube, we provide nearshore software product development solutions for our clients from the EU and the UK by sourcing Eastern European talent. Our partners from North America view Latin America as a nearshoring region and Eastern Europe as an offshoring destination. We are well capable of building skilled product teams in both regions. Contact us to discuss your product development needs and let’s see if our approach is suitable for you. 

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