Offshore versus Onshore Software Development

These days, both startups and well-established companies seem to be using software outsourcing to fulfill their business needs. From increasing capacity and reducing costs, bringing in third-party developers has many proven advantages for many software companies. The key question is what type of outsourcing to choose – onshore or offshore?

In this blog, we will explore both offshore and onshore software development outsourcing options. By the end, we hope you better understand which one is right for you.

What is Onshore Software Development?

Onshore software development involves outsourcing development to a third party in the same country – on the same shores. This could be a single developer or an entire agile development team, but they should reside or be registered for business within the same geographic borders.

For example, if a tech startup from Silicon Valley, USA, outsources certain software development work to a developer residing in Montana, then it’s known as onshore software development.

Why would the tech startup choose to outsource apart from the regions with lower average salaries?

Check the benefits and disadvantages of onshore software development below. 

Benefits of Onshore Software Development

Onshore software development is the traditional model for outsourcing development tasks. Here are some of its major benefits:

1. Real-time collaboration:

When you’re in the same time zone, it’s easier to collaborate in real-time and hold in-person meetings.

2. Cultural similarity:

If you’re outsourcing to the same country, state, or city, you will likely share common technical terminologies and avoid miscommunication. Likewise, you will not face gaps in understanding consumer behavior or having different holiday calendars.    

3. Timely problem-solving:

Since both you and your outsourced development team will be working in the same time zone, it will be easier for you to sync your meetings and solve issues in real-time without any delay.  

4. Simpler talent search:

Outsourcing onshore brings automatic confidence as there are fewer perceived risks. Moreover, with the right connections, hiring local onshore developers or development teams can be simpler by drawing upon your existing networks.

Disadvantages of Onshore Software Development

Now that you understand the benefits of onshore software development let’s explore some of its drawbacks. 

Here are common drawbacks of onshore development that might influence your decision to outsource:

1. Smaller talent pool:

With onshore software development, you can only hire from within the country. This directly limits the amount of talent you can get per your requirements. As a result, the demand for the right talent exceeds supply – especially if you have specific needs.

2. Higher costs:

Hiring onshore means you will be liable to pay similar salary ranges. Hence, outsourcing onshore developers might help cut in-house recruitment costs, but not by much. On the other hand, outsourcing offshore developers from developing countries can drastically improve your savings.

3. Greater churn:

The flexibility of the gig economy can seem attractive if you’re not looking for a long-term commitment. However, it also makes the retention process challenging for developers who will have no shortage of offers. 

4. Labour costs:

The cost of living varies considerably worldwide. If you’re based in a country with a higher cost of living, then the cost of hiring onshore talent will reflect that. While you might make marginal savings against hiring full-time employees, outsourced developers will always seek to improve their quality of life.

The global shortage of skilled IT professionals means that competition for the best talent can be fierce within a single country, such as the Netherlands or the US. Furthermore, this competition for the best tech talent on home soil inflates local hiring costs – making offshore software development a viable option.   

What is Offshore Software Development?

Offshore software development is when a company contracts out its software development to either individual developers or a team of developers in another part of the world.

Simply speaking, part or all of the software development is outsourced outside the borders of the company’s home territory. This can be done in a variety of ways:

• Contracting a single developer based overseas. 
• Hiring an offshore software development team. 
• Employing an offshore software development company that provides an entire self-managed team of software developers with the relevant skills and expertise.

At Proshore, we combine coding expertise from the Netherlands and Nepal to tailor a team that suits and can facilitate your development needs.

Benefits of Offshore Software Development

Going offshore in search of the right IT talent has a number of advantages. Here are five powerful reasons to consider offshore software development:

1. Broader talent pool:

Unlike outsourcing onshore, we can hire talents from all around the world when we go for offshore software development. And it goes without saying that looking offshore for the right skills and expertise increases the breadth and depth of the available talent pool.

2. Competitive cost-savings:

As the cost of living varies from country to country, offshoring presents an opportunity for software companies in more expensive countries to outsource development at a lower rate to other parts of the world.

Established tech hubs in South Asian and European regions or even emerging South American regions boast abundant development talent at low costs and no compromise.  

3. Simpler scaling:

When you need to add capacity to your software development team, there are two options:

• make expensive in-house hires 
• outsource your development.

An offshore software development company can easily scale with you, adding suitably qualified developers from a larger pool as compared to a saturated onshore market.

4. Faster development:

Forward-thinking software companies are getting the edge over their competitors by using tech talent from around the world across different time zones. Get it right, and you will have 24-hour development taking place, drastically reducing your time to market.

> Detailed list on the benefits of an offshore software development company.

Disadvantages of Offshore Software Development

Offshore software development sounds like a better choice than onshore; however, offshore also has some limitations. Here are some common concerns:

1. Time-zone differences:

Working across time zones can hinder the progress of development if you don’t have a clear handle on your scheduling. For example, if your offshore team has a blocker, they might have to wait as per the time difference before they can resolve the blocker and continue. 

2. Communication barriers:

English is the preferred language of global software developers, but that doesn’t mean miscommunication won’t happen. In countries where English is not the first or second language, accents and proficiency in the language can hinder verbal understanding.

Additionally, In a highly technical field like software development, it’s important to have shared terminology so that it’s clear exactly what’s being referred to.   

3. Cultural differences: 

Every organization has its own company culture. So sometimes there can be a clash when different working cultures come together. This can impact things like way-of-working, coding quality, and, most significantly – expectations. 

4. Controlling quality:

When delegating work to another party, there is always a fear that the quality will not be up to standard. That’s natural in any role.

In software development, because the code is so valuable, it can be daunting to hand responsibility to developers you don’t necessarily know, located on the other side of the world.

Onshore or Offshore Software Development: Which is better?

Choosing between onshore and offshore software development depends on your business’s needs and budget. A key factor will always be finding the right expertise for the job at an affordable price. 

On the one hand, onshore development can enable you to lower potential barriers to communication, sync schedules on the same working day, and make face-to-face meetings much easier to arrange.

But with demand for developers outstripping supply, finding the right talent within the country can be a struggle and costly in some areas of the world. 

On the other hand, offshore development opens up a global talent pool, which is highly skilled and competitively priced. Not only can you use it to your advantage and increase capacity, but working across time zones can facilitate coding around the clock, speeding up your time to market.  

How to choose between Onshore and Offshore Software Development?

The final decision is yours. The right solution for your software company depends on factors specific to your business. However, if you’re struggling to find affordable and reliable talent in your country, going offshore to find highly skilled, cost-effective tech talent makes sense.

To get started, ask yourself the following questions,

1. For Onshore Software Development

• Does the project require a permanent or temporary set of hands to reach the target?
• Should I spend resources on hiring a full-time employee?
• Do I save more (money, time, and effort) if I hire an onshore software developer or development team/company?
• What is the minimum savings I am looking for? If not, should I look offshore?

2. For Offshore Software Development

• Does the individual, team, or company have experience working in a similar domain as mine?
• How is their communication? Will they understand me and vice versa?
• What is the time difference? Will they match my company culture and our meeting/progress frequency?
• What additional benefits do they provide? Like, maybe, self-managed teams or customer support.

Proshore, based in the Netherlands and Nepal, provides highly talented, ready-to-code development teams. What does that mean? You can get any size software development team to increase your capacity and speed up the time to market. You will also save time and money on in-house hiring – as we handle recruitment for you. 

What is Nearshore Software Development, and how does it differ?

There’s a middle way in onshore vs. offshore software development: Nearshore Software Development. Let’s see how nearshore differs from onshore and offshore software development.

Nearshore software development is when a company outsources software development to a neighboring country on the same shores, typically on the same continent. 

As the name suggests, closer geographical proximity means a closer time zone to navigate, and it’s quicker and cheaper to travel for face-to-face meetings.

The biggest drawback to nearshoring is that, like onshore development, software companies are unlikely to see a significant saving in terms of costs compared with hiring offshore development teams. That’s because the cost of living will be broadly similar.