The Difference Between Nearshore, Offshore and Onshore Software Development

If you’ve ever done a search on the web for
“Outsourcing” you’ve probably come across some confusing
terms like onshore, offshore and nearshore. So what is the difference between these three outsourcing models and which one is the best fit for your specific needs? Hi, this is Santiago with VAIRIX Software
Development and today we’re going to look into the three outsourcing models for software
development. So, outsourcing software development either
to a domestic or foreign contractor has become the go-to
strategy for many businesses in the United States looking to stay competitive in their market. And some of the reasons why companies choose to outsource include minimizing labor
costs, fighting talent shortage in their home markets, and being able to focus on core activities. There are three main outsourcing models you can choose from, and they’re called onshore, offshore and nearshore. Onshore outsourcing would involve working with a vendor in your own country. Offshore outsourcing would involve working
with a vendor which is geographically far away
from you, and more than four time zones away. And nearshore outsourcing would involve working
with a vendor which is geographically close to
you, and no more than four time zones away. By definition the onshore model is the closest
to you geographically, and we could safely assume that it is the ideal scenario for most US
businesses looking to outsource some of their project
work. Having the same time zone, the same culture, the same language and the same skills at your
disposal is hard to match as a value proposition. That being said, the big downside of the onshore
model is cost, considering that it’s very hard to
find hourly rates below the range of seventy-five
to one-hundred and twenty five dollars and also talent shortage within the US market will probably make your search more difficult and more expensive. The offshore development workforce has some excepcional talent to offer and its hourly rates are the lowest of the
three models, with the rate for offshore being between twenty-five
and fifty dollars. But on the other hand, this market can get very noisy at times given its massive
size, so it will take more time and effort to find quality companies. The main disadvantage of the offshore model when applied by companies in the United States is definitely time zone difference, which makes communication between Agile development teams a lot more difficult. So flawless organization in this regard is going to be key in order to avoid project delays and unforeseen costs. The appeal of nearshore outsourcing is that it provides you with the combined benefits of the onshore and offshore models. Hourly rates in Latin America range from forty to seventy-five dollars, meaning that you can still maximize your budget while tapping into top talent. The time zone difference is low, ranging from one to three hours away, depending on the country. And high cultural alignment and English language fluency is the norm in Latin America. In order to choose the right outsourcing model for your specific needs, we suggest that you
focus on establishing the following priorities: So starting with price, if your main goal is getting the lowest rates available, offshore might be the ideal model for you, as long as your project requires minimal communication between teams. Quality is another key aspect to keep in mind: Are you looking for expert, specialized developers with specific skills? If you can afford the cost of onshore rates, this model will provide you with the best
talent available. And your next best option are offshore and
nearshore boutiques, which tend to specialize in a specific
set of technologies. Communication is another crucial aspect to
think about: Will your onsite and remote teams be able
to work well within distant time zones? Or is team overlap a must? In the second scenario, offshore as an outsourcing
model should probably be discarded. Team size will also have a big impact in your
decision, so ask yourself ‘How big will my team need
to be, and which of the three outsourcing models
suits my budget in this regard?’ Finally, think about the length of the engagement: Are you looking for a one-time engagement to take care of a specific project, or are you looking for a long-term partner
to go back to whenever you need some extra help? Choosing the right outsourcing partner can help your business grow by servicing more
accounts and being more efficient in your delivery. We hope that this video helped you better
understand the different models available to you. And if you are considering outsourcing as
an option, feel free to get in touch with the team at
VAIRIX by following the link below. Thanks!

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