Outsourcing has become vital for doing business in the modern global market, and the industry as a whole saw a huge boost throughout 2020 reaching a total market size value of 556.67 billion.
Whether your goal is to cut costs, get more time to focus on your core business activities, or augment your in-house team with new talents, outsourcing is a viable way to achieve a wide variety of goals. Outsourcing is especially relevant in software development as many US-based tech leaders cannot get enough experts to fill up all the positions. Not because there aren’t any good experts in the US; there aren’t enough of them.
After spending months upon months trying to fill up essential tech positions, most companies turn to look for the right people elsewhere. That is when you might decide to outsource your tech position or even an entire project to save time and money. If you do decide to go for that option, you may as well want to know more about different types of outsourcing software projects.
What is Nearshoring?
Nearshoring is exactly what it sounds like – outsourcing your project nearshore, to the countries nearby. A typical example of nearshoring would be a US company outsourcing its project to a vendor from Mexico or Canada.
The main advantage of nearshoring is geographic proximity to your vendor, you are going to work the same or nearly the same hours, you will likely be able to understand each other better, and you’ll get the benefit of cultural matching. More so, it will be easier for you to meet in person without travel costs making dents in your budget.
Back to the example of US companies nearshoring to Canada or Mexico, it is also much more cost-efficient to outsource projects to nearby countries than to the U.S. due to the differences in hourly rates. Developers from the neighboring countries have the same level of expertise as your domestic developers but they charge less for an hour of their time. Speaking of expertise, nearshoring opens the doors to a much larger and more diverse talent pool. Compared to onshoring, however, nearshoring leaves you with a lesser degree of control over the team as your developers would be situated abroad. And speaking of the cost, offshoring might be even more cost-efficient than nearshoring.
Nearshoring is not the only option you have though, and there are two main alternatives to nearshore software development outsourcing: onshoring and offshoring. All of those have their advantages and disadvantages, and we are going to take a closer look at each so that you can make your best choice.
Sometimes also referred to as local outsourcing, onshoring is a type of outsourcing in which the client and the vendor are located in the same country or region. If your business is located in the US, and you want to work with fellow Americans, this might be the right choice for you.
One of the main benefits of onshoring is the absence of cultural or language barriers, which improves the quality of communication between you and your team. You will be able to communicate with your team without any issues and be sure they understand exactly what you want. Communication between you and your team is vital for the overall success of your project, which is just one of many factors you need to keep in mind.
The second benefit of onshoring is that you and your team are going to work in the same or similar time zones. There will be no communication gap and you’d be able to work with your team without any delays. Apart from being able to fit your team culturally, they will also be able to work along with your in-house developers.
On-site deployment is yet another benefit of working with onshore developers; they can work remotely or move to your location if that’s what you agree upon. On-site deployment makes it easier for you to monitor the performance of the team and creates that special feeling of unity between you and your vendor. Working face-to-face with your developers does not only make it easier to manage them but also gives your cooperation that personal touch only possible with in-house teams.
The obvious and probably the only disadvantage of onshoring is its cost-efficiency. Hiring people from the same country means you’ll be saving no money on their hourly rates. If you are located in the US and are going to hire people from the US, do not expect to save much money.
Offshoring is the cooperation model that comes to most people’s minds when they talk about outsourcing. In this scenario, the project is being delegated to the vendor in a faraway country, maybe even another continent, in an entirely different time zone. Offshoring is the most common among different types of outsourcing in software engineering and it often means working with teams from China, or India.
The main advantage is that the prices are rock bottom. You can find developers at hourly rates as low as $20 in Latin America, and that’s why so many American companies turn to outsource their projects to the countries in that region. Low cost does not equal high value, though, so you won’t compromise the quality of your end-product trying to save some money.
However, if you choose a vendor who can do a great job while changing less than your local developers, you would get a great end-product at a reasonable price. To make sure you select just the right kind of vendor, you need to go through their portfolio, get references from their previous partners, check their rating on reputable ranking websites; just do your research, and make sure you are not dealing with rookies. A good price to quality ratio is the key, but quality should always be your top priority.
First of all, you are going to work with non-native English speakers, which may result in frequent cases of miscommunication. Surely, you want your team to clearly understand your meaning, which is why you’d want to be careful and make sure that the developers you hire are fluent English speakers.
The second problem here is the communication gap caused by the differences in the time zones. If you work in the US and hire people from India, it is literally the opposite side of the globe, and your team will be working while you sleep and vice versa. Such asynchronous communication may throw a big old monkey wrench into your system making it impossible for you to establish and maintain a robust organizational structure.
Cultural differences and the way people approach their work-related duties in different countries might also make your cooperation a bit peculiar and sometimes inconvenient. These differences might include attitudes towards responsibilities and authority that might be surprising to you and cause a conflict.
What’s the Best Choice?
Well, of all different types of outsourcing in software project management, each has its pros and cons and each can be a viable choice under different circumstances. Onshoring, nearshoring, and offshoring are quite similar in nature but what makes a real difference here are your business objectives, personal preferences, and budget capacity. So, what is the best choice for you? Well, here’s a small checklist for you.
Choose onshoring if:
- Money is not a concern;
- You want to work with your fellow citizens;
- You might opt for on-site deployment;
- You want to avoid a communication gap;
- Cultural matching is important to you.
Choose nearshoring if:
- You want to save money;
- You want to avoid a communication gap;
- Cultural matching is desirable;
- You want to expand your talent pool.
Choose to offshore if:
- You really need to save money;
- You are comfortable with asynchronous communication;
- Cultural matching does not matter to you.
Why Outsource at All?
First of all, the remote workforce seems to be the future of software development, especially after the pandemic demonstrated the efficiency of this model. So, is there really a difference between your employees and outsource developers? Not so much. If they are working remotely anyway, do you really need to onboard a full team of developers, worry about their sick leaves, vacation compensations, insurance, comfort, and all that? All of that could be taken care of by other people, people who provide those developers for your specific needs.
Outsourcing your development project to other companies, whether domestically or abroad, allows you to focus on more important matters than onboarding people and taking care of their needs. More so, you can focus on creating that value product you’ve envisioned and not disperse your attention to other non-essential matters. With all the different types of outsourcing in software engineering, you can find the best talents outside your city, country, or even continent.
Look for partners who do not just code for you but bring additional value to your business. Find truly professional and passionate people who promote the growth of your business and encourage the healthy development of your IT infrastructure.
The main problem recruiters face when hiring skilled developers is that there just aren’t enough of them. A good developer is hard to find, and you just have to imagine how hard it must be to hire an entire team. Developed countries have a sizable demand-supply mismatch in this area, and it’s not to say that there are too few good developers in the US, it’s just that demand is much higher than in other countries.
The demand for professional developers is not going to drop any time soon, and you need to get the job done as soon as possible. That’s where IT outsourcing becomes an integral part of the global tech market.
Quality should be your main focus when choosing the right partner for your software project. All the other factors like language, culture, location, and hourly rates are important but they are not nearly as important as the quality of the end-product. You want to be sure your potential vendor can guarantee a quality delivery, and for that reason, you should look for a vendor who provides quality assurance services along with the coding.
Quality assurance is paramount for custom software development, and there are vendors who offer such services. Here at Intersog, we make sure the code is top-notch by running regular tests throughout the development process. This allows us to monitor the quality of the software and eliminate any possible issues on the go. It is in your best interest to find a vendor who offers quality testing services because they will prove vital for the final delivery.
The good news is that even if you make a mistake, outsourcing is a quite forgiving cooperation model allowing you to quickly change your decisions and adapt to the new conditions. If anything goes wrong, you can always disband the team and quickly gather a new one.
As you see, there’s no right or wrong answer to which model is better, all of them suit different circumstances and different needs. Regardless of whether you opt for onshoring, nearshoring, or offshoring, outsourcing as a whole has proven to be a highly efficient cooperation model. In a modern global market, there’s little difference between whether your developers sit by your side at the office or do the same job from another country or continent.
Bottom line is that whichever model you choose based on your needs, you can always find reliable partners if you pay attention to their expertise. From our experience, the best idea is to partner with people who can deliver a quality product, and the rest of the factors come next.