The *TOP 4* Specifics of Nearshoring-Offshoring-Outsourcing

The difference between

Nearshoring, Offshoring, Onshoring

and Outsourcing

Intro – Nearshoring vs Offshoring vs Onshoring and Outsourcing

Today’s market demands rapid solutions. Within the last few years, the forms of business collaboration have been extended to nearshoring, offshoring, and outsourcing. They gained popularity aiming to help involve the best specialists for clients’ projects and implement bold ideas into life in a fast manner keeping the quality on a high level. Nearshorefriends is ready to assist you in recruiting and team management, finding the best candidates, and setting the workflow according to Agile approaches. But before rushing into collaboration each stakeholder has to consider the model that works best in their individual situation.

Offshoring, nearshoring, and outsourcing are not new concepts, they are something we have already heard of and even tried somehow. They are common terms to use while involving teams from the outside of an in-house team. At first sight, all three terms look pretty similar but in fact have their own peculiarities and differ a bit.

Table of Content – Nearshoring vs Offshoring vs Onshoring and Outsourcing

Nearshoring Definition
The Benefits of Nearshoring
Disadvantages of Nearshoring
Professional Culture – Why important?
Nearshore Teams / Offshore Teams aren’t hard to find
The possible Challenges
Outsourcing Definition
Offshoring Definition
Onshoring Definition
Benefits and Challenges of each way

Now we are to dive a bit deeper into the topic and find out what may be a reason for hiring a remote team. How the processes are set and how to find the best solution for your business.

The business environment constantly changes as well as demands for digital solutions. However, software development can not be a primary specialization of your company. The costs for hiring a temporary team of developers are usually high and the overall process becomes time-taking.

What is a Remote Software Development Team?

Remote work is seen very individually. It can be a person or the whole team working from a different location. In the post-pandemic world, remote workers became a part of in-house teams which work remotely for many reasons, for example, due to maternity leave or some health issues.

The remote team isn’t necessarily located at the next-door office, in fact, they may be located anywhere in the world. They aim to fill in the lack of in-house experts and supply products remotely. They work closely with offshore offices and other teams and their constant presence feels like regular workers. The remote team is always closely monitored what the other models like offshoring and nearshoring lack in our time.

In case of the absence of an in-house expert, like a web designer or a developer for your new app, it is better to delegate your ideas to an external partner specializing in digital solutions that will do this for you. As a rule, the involvement of such workers is done on a temporary basis. They help to bring digital aspects of your business to life as soon as possible and quit as the work is done.

Transferring some processes to an outside expert may have a positive impact on your business. It saves time and budget with no harm to quality.

The benefits may be found in financial aspects as well. The team located in a different country may cost you less and provide high-quality service at lower rates and taxes. Consider entrusting some processes to a team outside your office for saving your resources for the next business ideas.

The advantages of Remote Teams

The candidates you choose. You get the list of candidates and personally approve each worker. There is an opportunity to see whether they match the requirements.

Lower salary expenses. The remote team usually costs less than the onsite one. The compensation rates differ on the worker’s involvement too.
Quality. As the team performance is closely observed and the tasks are monitored the team performance raises up resulting in a high-quality product.
Direct management. The product owner can do it themselves or have a responsible manager to track the teamwork. There is no need for third-party managerial staff.
No office expenses. You don’t have to think of the rental fees and all the equipment needed for your team.

The disadvantages of Remote Teams

Not suitable for short-term projects.
A strong lead is a must to monitor the workflow

Outsourcing Definition

In case you need a supplier or a person to solve certain business tasks, outsourcing happens. The main benefit of an outsourcing company is its flexibility. The outsourcing vendors are perfect for short-term collaboration. If you need a new brand book or a web page you can discuss it with the offshored company and close the contract when the work is done and approved. It is up to the client whether they want to continue collaboration right now or maybe they put further collaboration on hold.

The company stays at its location while the outsourced part can be in a different city or country. The location doesn’t matter as the business is interested in a well-defined aspect of work to be done. The crucial moment is the company headquarters stay at their location while a temporary, outsourced team can work from anywhere in the world.

Pluses of Outsourcing

Flexibility. The processes are well-defined and time-limited. There is an opportunity to switch involved teams according to the company’s needs. Moreover, you can choose between the vendors to find the one that will match you perfectly. It’s likely to be a challenging process because nobody likes to lose clients, but it’s still possible.
Lower cost. No extra budget on the big in-house team. Hiring a team of experts for a clearly defined task may be the best solution since you do not waste your time on the onboarding process and move straight to the task.
Non-risky. You hire a team of experts that mutually guarantees the quality.
Focus on your project. Your business idea definitely needs attention and constant scope brushing. The constant involvement of skilled teams will help to concentrate on the project without much distraction on some minor issues. This is the magic of the right delegation.

Minuses of Outsourcing

Extra costs. Indeed, it is one of the most successful money solutions for any business. However, quite often there are some hidden expenses, so one has to clearly identify the scope and budget for the fixed work.
Lack of communication. The vendor gets the task and maintains the process themselves. No extra control or communication. This issue may have a bad impact on the relationship between companies.
Language barriers. Again, the language gap may cause miscommunication and further mismatch between expectations. It’s difficult to rely on a vendor with poor communication skills.
Different time zones. Scheduling a meeting may become a problem because there is a need to take into consideration the time difference. Both parties have to be flexible at this point
Issues with data protection. Privacy policies differ around the world. Not all countries have legal protection for all the data you provide. Study the state documents before transferring all the data to the chosen vendor.

Nearshoring Definition

The term regards the process of moving either some company parts or the whole business to the nearby country. Nearshoring is a kind of middle distance, neither too close, nor too far.

For example, some US-based companies involve experts from Mexico or Canada. They share the same border, so the companies are considered to be nearshoring. The location within one continent is easy to collaborate with as there is no huge time difference between offices or a cultural gap that may cause some miscommunication during the working process.

But what about European countries? All the countries collaborating in Europe are nearshoring. For instance, if a German company works with Portugal it’s considered to be nearshoring, at the same time, working with Indian dev teams is offshoring.

The costs, quality, and risks are also a golden ratio for those who do not appreciate the idea of having a too distant remote team across the ocean. Nearshoring gives an opportunity to hire high-level teams at lower costs. The product owner doesn’t worry about recruitment or office rent. The price you pay depends on the local tax and salary rates, which may be comparatively lower than the local, in-house providers’. This way the top-notch quality becomes more affordable.

The benefits of Nearshoring

The little or no time difference. This works well on the team’s well being as nobody will work at odd hours to hold some meetings and decide scope changes.
Accessibility. The onsite meetings become more real as the distances are rather short.
Small cultural gap. The closer your nearshoring company is located the more similar things you may share and any misunderstandings are minimal. This helps to reach agreements easily and meet market demands.
Affordable prices. As a rule, nearshoring teams work at lower prices and it gives a great opportunity to invest in other projects.

Disadvantages of Nearshoring

More pricey than offshoring. Some other partners, located a bit further away, can offer more loyal prices for reasonable quality.
The limited list of vendors. By choosing nearshoring you limit yourself to certain geography which limits the choice.

Offshoring definition

Offshoring is also about involving some outer teams to match your business or simply moving your business somewhere abroad. However, this time it isn’t about neighboring countries. You company may consider teams from all over the world. The countries like India, the Philippines, Russia, and China are considered to be offshoring for European countries.

This situation works a bit better due to the bigger talent pool. Even the pickiest business can find one. The chances to get a highly qualified software development team rapidly increases. It may take some time to make a final decision so each business should be prepared for a bit of delay while choosing the right service provider.

Despite attractive prices, the overseas teams may also have some disadvantages like misunderstandings or delays. On the other hand, the situation gets better every year since many providers strive to involve as many clients as possible and increase the competencies of their project managers.

If you are short of your resources but need the product solution you have to try this option as well. But still, one has to consider the fact that price doesn’t always mean quality. Research is crucial at this stage.

Pluses of Offshoring

24/7 support. If you combine in-house and offshore teams you can get constant customer support. Moreover, some development workflows may also combine well and therefore contribute to faster product release.
Lower expenses. The main reason attracting clients to offshoring vendors is comparatively lower prices. That is a great opportunity to save up for further business development.

Offshoring minuses

Time difference. Sometimes it may be just huge. It may cause some inconveniences in meeting scheduling and delivery dates.
Cultural gap. Miscommunication and different cultural backgrounds may complicate the process. The design and the product vision may vary a lot.
Language barrier. It’s important to find a team where you have at least one language in common. Lack of language competence may prolong some processes and foster products of low quality or wrong design.
Location. If the client is used to constant monitoring, offshoring may become a bad decision as it reduces the opportunities for team observation. Frequent journeys may be a huge inconvenience.

Onshoring definition

When the product owner, the headquarters, and vendors are located in one country but different locations it can be called onshoring. Another vital criterion is the same time zone and preferably region. It expects close collaboration with different businesses and expert teams on a regular and sometimes daily basis.

The neighborhood is an advantage for the management team, guarantees frequent and productive collaboration but at the same time works badly on the budget as it is more expensive compared to nearshoring. If your business demands great and problem-free communication it’s totally worth it. If you feel like not handling cultural differences and aim to avoid any inconveniences – onshoring is just for you.

The perks of Onshoring

Great negotiation, no cultural, time, or any other differences within the teams
Opportunities for investments in your country that you may benefit from as a resident
Rapid delivery due to the same workflow rhythm

The disadvantages of Onshoring

Higher budget demands
Lack of highly qualified specialists because of not constant involvement.

Professional culture

Understanding and developing an organizational culture

The key to a successful organization is a culture based on a set of beliefs shared by many people and supported by strategy and structure. When an organization has a strong culture, three things happen: employees know how management wants them to respond to any situation, employees believe the expected response is the right one, and employees know they have a responsibility to implement the company’s values and be rewarded.

Employers play an important role in maintaining a strong culture, from recruiting and selecting candidates who share the company’s beliefs and are comfortable in that culture, to developing training and performance management programs that outline and reinforce the company’s core values to ensure that employees truly live those values.

The culture of an organization determines behavior within the organization. This culture consists of shared beliefs and values that are established by leaders, then communicated and reinforced through a variety of methods, and ultimately shape employees’ perceptions, behaviors, and understandings. Organizational culture provides the framework for everything a company does. Because industries and situations vary widely, there is no single cultural template that meets the needs of all organizations.

A strong culture is what the most successful companies have in common. They all agree on cultural priorities, values that focus not on the individual but on the organization and its goals. Leaders of successful companies live within their culture every day and strive to communicate their cultural identity to employees and potential hires. They are aware of their values and how those values define their company and how it operates.

Conversely, an ineffective culture weakens the organization and its leadership. Demotivated employees, high turnover, poor customer relations and lower profits are examples of how the wrong culture can negatively impact the bottom line.

Benefits and challenges of each way of working

When you get the main idea of various opportunities to involve experts in your project it becomes easier to pick the right model for your business. Here is a brief list to summarize the main ideas mentioned above.

A Remote Team: is about well-observed workflows and constant control of the company manager. Mainly specified by high productivity and equals an onsite team despite working from different locations.
Outsourcing: considers moving the business either partly or wholly to a different location. The collaboration of domestic and companies from abroad gained their popularity during recent years.
Nearshoring: happens when the company moves to a neighboring country, preferably of the same culture and time zone.
Offshoring: expects to move a part of the business to a different vendor from a different place, but matching expertise. Usually implemented as a remote job.
Onshoring: guarantees smooth collaboration and bigger financial expenses at the same time. Usually implemented within one location or country.
Any outsourcing: contracts will be more budget-friendly in contrast to onshoring projects.

The possible challenges you may face while setting outsource work

In general, all the mentioned frameworks work as outsource, they differ in their involvement and location.
Different time zones lead to different working hours. If set clearly they may be of big benefit, but still demand good management skills to handle.
Cultural background. Sounds funny but that may modify your product vision at some point. That’s why it is recommended to be on the same wave with your vendor.
Resource. Scope demands time and costs. The business has to figure out what can be sacrificed and what is a must for idea implementation.
Constant involvement. Since you delegate a part of your job to outsource partners it doesn’t mean you can wait a little bit and then simply enjoy the final result. Daily communication and job track help to reach the desired result.
Each model depends not only on the budget and idea but also on the timeframe. Unfortunately, there is no single recipe for all the projects as it has to be based on many inner factors that can’t be neglected.
The privacy policies differ from country to country. Europe-based vendors have more warranties than similar ones in Asia.
Cheap doesn’t mean quality. Seek a reasonable price and great communication to meet the vendor you need.

Nearshore / Offshore teams and individual experts aren’t hard to find

Nearshorefriends can assist you in recruitment, retention, and various operations. It saves your time and effort and lets you focus on the other business areas.

Hope this article answered some basic questions considering the logic of nearshoring, onshoring, offshoring, and remote teams. The list of benefits is high as well as the list of anticipated challenges. In today’s world, each startup and even small project requires reasonable solutions and great management skills so that it flourishes and brings revenue. Again, considering your business model it is up to the business to choose the one which perfectly matches the company profile.

More blog posts around the topic from nearshorefriends:

https://nsf-new/2022/02/06/the-best-developers-in-2022/

Wikipedia definition of nearshoring:
wikipedia.org/wiki/Nearshoring

Nearshoring vs Offshoring vs Outsourcing – The TOP 4 Peculiarities