offshoring vs nearshoring
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Onshore vs Nearshore vs Offshore. Outsourcing Models Comparison

Every business owner wants its company to be successful while consuming the least possible amount of resources. Reducing costs and staying relevant on the market is not the easiest thing to do these days, especially with such a high level of competitiveness. That is why companies are constantly looking for new solutions that would allow them to do that. One of the latest solutions is called outsourcing and it has three main types – nearshoring, offshoring and onshoring. They all have their differences and similarities that we will discuss later in this article. Let’s go!

Nearshoring: What Does It Mean to the IT Community

Before we actually get to the term ‘nearshoring’, let’s specify what outsourcing means in general. Without getting into deep specifics, it would be fair to say, that outsourcing means delegating your work to the outer executor. It can be a big company or even a sole specialist. However, why do people choose outsourcing at all? Well, it is an excellent strategy for cost reduction, exploring new markets and attracting great new employees.

So what does nearshoring has to do with outsourcing? Some are trying to look for the difference between nearshoring and outsourcing, even though it is completely illogical, as nearshoring is a part of outsourcing. Being one of its main branches (or types), it is gaining massive popularity these days. Unlike other types of outsourcing, nearshoring implies delegating tasks to a country that is located somewhere not far away, preferably within your region. As you see, there is really no point on looking for this ‘nearshore vs outsource’ difference, as there is none.

As a big part of an outsourcing strategy, there is a list of benefits of nearshoring that while looking for the difference between onshore, nearshore and offshore, make it stand out from all that variety. How about we take a closer look at those?

Nearshore vs Other Outsourcing Strategies: Its Benefits

If you put nearshoring vs outsourcing strategies like offshoring or onshoring, you will clearly see its benefits:

  • Pay less. While using nearshore outsourcing strategy you can significantly reduce your business expenses. How? Simply by hiring specialists from countries with less developed economies. Usually, rates of those counties specialists are much lower. However, lower rates do not necessarily mean that your future employee is less experienced or will perform not as well as you expect him to. This is usually the main problem for business owners while considering trying nearshoring. However, think of this, the country you will outsource your workforce from will most likely share your culture and language, which will bring a great deal of trust into your business relationship.
  • Hire the best. Nearshore solutions present you with opportunities to expand your search party for talents to other countries. This way you no longer have limitations about where to hire your employees from and can move to better options.
  • Convenient location and time zone. Even though outsourcing means that someone else does your job, it does not imply that you will not have to mentor the process at all. There will definitely be situations when you will have to personally visit your outsourcing company, at least at the beginning of your partnership. More than that, sometimes it is crucial to meet your team before you actually hire them. You need to trust these people and visiting them first will allow you to make a first impression. This is when the geographical location of the company starts to matter, as it is really inconvenient to travel for many hours to be present at a 50 minutes meeting. This way, in the battle nearshoring vs offshoring, the first one definitely wins.
  • No cultural boundaries. While conducting business, it is important (even though not completely necessary) that both sides share the same culture, with nearshoring you will not have to worry about that, as your contractor company will most likely be located in the nearest country.
  • Expanding your company. While you are making that choice between onshore vs offshore vs nearshore, keep in mind, that nearshoring is also often used as a tool to expand your business to the new market.

So if you are trying to choose your side in the onshore vs nearshore vs offshore argument, just know, that nearshore outsourcing has lots of benefits, described above.

Nearshore vs Offshore Outsourcing: Main Differences

There are lots of points of view on the dispute called ‘offshore vs nearshore’ as both of these strategies have their cons and pros, you just need to choose what will be more suitable for your particular situation. So if you are looking for nearshoring vs offshoring benefits, we have something to share with you:

  • The location. While you are comparing nearshore vs offshore, you have to know, that the biggest difference between these two is the location of your outsourcing company. Sometimes it is a good thing and sometimes it is not. Just keep in mind that in case of nearshoring you will have to look for a company nearby and if you choose offshoring, you can literally look for your future team all around the world.
  • The price. It will be more convenient to choose offshoring strategy if reducing costs is your number one priority. In terms of cost, offshoring could easily win the offshoring vs nearshoring debate.
  • Communication efficiency. While making a comparison like nearshore vs offshore outsourcing, it would be only fair to mention the time zone difference that might be crucial sometimes, especially if your business collaboration will require lots of communication. This way of choosing between offshoring vs. nearshoring, you might want to pay more attention to the latter.
  • The control. For example, while you are working with offshoring, it will be more difficult for you to control the process, due to time zone differences. This way in terms of control, nearshoring is better, though a bit more expensive.
  • Cost reduction. If you compare nearshore vs offshore definition, you will know that in case of offshore outsourcing model you will be able to seek your executors all over the world, which allows you to choose from a wide variety of rates and eventually reduce your costs.

As you see, there are differences in nearshore vs offshore ‘competition’, however, they are not definitive to tell that one strategy is 100% better than the other. It mostly depends on what kind of purpose you have for your business and your priorities. So keep those in mind while you are choosing between nearshore vs offshore outsourcing.

Onshore Development in Comparison to Nearshore vs Offshore

The third type of outsourcing that we will mention in this article is onshoring. Sure, there is a difference between nearshore and offshore, however onshore outsourcing is even more different from both of those. However, all three of them share pretty much the same core – they imply outsourcing some of your company’s less urgent tasks to a contractor. In case of onshoring this contractor is always located within your country.

This is a great option to choose for companies that require direct interactions with customers. They often seem to choose onshoring instead of other types of outsourcing. Onshoring allows you to gain more control over your company’s performance. Not to mention, that onshore outsourcing is particularly good for your country’s economy, as it provides people with more job opportunities.

However, there are also some inconveniences that might make you want to think twice before you choose it as your primary option.

If your main outsourcing goal is, for example, costs reduction, it would be better for you, even despite the nearshore and offshore difference, to concentrate on these two options, instead of onshoring. Pay particular attention to the nearshore type of outsourcing, as this practice is in many ways the ‘golden middle’ in onshore vs nearshore vs offshore run.

Another thing for you to consider is the possible low quality of the services. For example, with nearshoring, you have a wider spectrum of choice, when it comes down to finding the right specialist for the job. On the other hand, with onshoring you are bound by the territory of your country, which might not even have the kind of professionals you need.

Onshore vs Nearshore vs Offshore: A Comparison

Now that we learned about the nearshore offshore difference and how these two types are different from onshore outsourcing, let’s summarize this information in the form of a table. We will compare these three outsourcing models basing on several important criteria, as discussed previously: cost reduction, time-saving, convenience, communication efficiency, and time zone differences.

Onshoring Nearshoring Offshoring
Cost reduction Insignificant cost reduction as the outsourcing company is located somewhere nearby. Semi-significant cost reduction. Great cost reduction.
Time-saving Because of the convenient location, this type of outsourcing is perfect for companies that require immediate communication with the client. You can outsource almost any task, as it is extremely convenient to keep in touch. Can save you lots of time with all types of programming tasks as software development or code writing.
Convenience Extremely convenient for keeping control over the project. Great option for customer support outsourcing. Convenient for keeping the control over the project, however, you will need to travel a lot to keep in touch. Convenient for outsourcing programming and software development tasks (something that does not require lots of control from your side).
Communication efficiency The best communication among all three, easy access to your outsourcing team. Still convenient to keep in touch, slight time zone difference, travel time is usually around two or three hours. Pretty hard to communicate due to significant time zone difference.
Time zone differences no difference (the same country) Insignificant differences (up to 2 hours) Significant differences (up from 2 hours and more)

Hopefully, it is easier for you to choose the ‘right-sourcing’ for your company now. In addition, we would like to show you a list of advantages for every type of outsourcing.

Onshoring

  • Not outsourcing jobs outside of the country is better for its economy
  • Easier communication with the contractor company
  • Easier standardization procedure
  • No cultural or language barriers
  • Easier control over the project

Nearshoring

  • Quite a significant cost reduction
  • Ability to look for new talents outside the country
  • Even though your contractor team is not located in the office nearby, usually the travel time does not exceed two or three hours
  • Cultural and language differences are minimal

Offshoring

  • Significant costs reduction
  • An opportunity to look for the best contractors for your project
  • Saves you a lot of time, as you can outsource massive tasks like software development projects or code writing

As you see, each of these options has a list of great advantages, so it would be absolutely unfair to claim, that one is better than the other. Sure, there is a difference between nearshoring and offshoring, as well as between nearshoring and onshoring, however, that only means that you have to choose the option, that suits you and your needs the best.

So Which One Should I Choose?

We advise you to try and find the best solution for your needs, without paying attention to what others do. Outsourcing tasks can be a positive thing for your business and at the same time, it can do harm, if you do not choose it wisely.

Today you found out about three main types of outsourcing: onshore, nearshore and offshore. Frankly speaking, each of those can become an amazing solution for your business. Outsourcing, in general, is aimed to make business owner’s life easier, reduce costs, provide him with a more qualified workforce, get some free time that he or she can dedicate to more urgent tasks.

These days more and more business owners are choosing outsourcing strategies for their business because of the amazing opportunities that they open. What is best about it – you can customize the solution for your needs, therefore gaining even more advantages than before. With the high competition that we currently have in the world of business, outsourcing might become one of those things, that every company will ultimately use in their daily performance.

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Angelika is a Blogger and Content Marketer passionate about the topics covering IT resources optimization, building R&D centers in Eastern Europe and outsourcing.