The Difference Between Nearshore, Offshore & Onshore Software Development
If you have already decided on IT outsourcing, the main question you may ask yourself is: should I choose offshore, onshore, or nearshore software development? While considering all of the options, you will probably always consider quality versus cost. This is a natural way of thinking, and you are not alone.
Making decisions about IT outsourcing is nothing new. According to a Statista report, this sector generated revenue of $66.5 bn globally in 2019 alone. This shows how huge the market is and that tech companies are not afraid of moving some responsibilities to other countries.
If you are a CTO or project manager in this group, you have to choose the best value-for-money outsourcing alternatives. The options you have include onshore, nearshore, and offshore software development. What do these terms mean? You will find brief definitions below, but fortunately, we have prepared more than just that. Read on to learn more about opportunities related to these three types of outsourcing.
What is nearshore software development?
Basically, nearshore software development is outsourcing work to a neighboring country or another not too distant location. For example, UK-based companies frequently choose software development teams located in Poland.
Advantages of nearshore software development
- Better communication – by choosing nearshore software development, the time difference won’t be more than 2 hours. Thanks to being located in similar time zones, it’s easier to maintain communication between the internal and external teams.
- Similar cultures and languages – thanks to nearshoring, both teams don’t have to face cultural or language problems. Neighbors can usually better understand local workers and avoid communication mistakes.
- Competitive prices – the average local wages of programmers, for example, in the United Kingdom and Poland differ a lot. This difference may be a big enough reason to choose nearshore software development.
- A huge choice of options – by passing on some work to nearby countries, you extend the pool of professionals. Of course, you need to assess their technical skills, but you are not limited to employees on the local market.
What is offshore software development?
Offshore software development means outsourcing work ‘beyond the shore’, far from the home country. For example, if a tech company in North America chooses to cooperate with a team from Europe or Asia.
Advantages of offshore software development
– Real cost savings – the most appreciated benefits from offshore software development are financial savings. You may find information on forums, for example, that some companies can achieve even a 70% cost reduction. This refers mostly to North America, where the wages of developers are the highest.
– Skilled workers – instead of searching for candidates on the local market, you can have quick access to programmers in distant countries. An interesting report prepared by HackerRank may serve as a great guide on where to look for them. It presents 50 countries with the best programmers. The coding skills in this research were rated according to work accuracy and speed.
– English-speaking professionals – in some countries, you may expect very high proficiency in English from software developers. To carry out research you can use a report prepared by EF, in which you can find the countries with the best English language skills. It shows that out of the 14 best English-speaking countries, Poland is among the top 10 European countries.
What is onshore software development?
Simply put, onshore software development is domestic outsourcing. Hired employees could be from the same city, or any other part of the same country. In this case you shouldn’t expect cost savings, but rather the possibility to manage projects on time with extra workers.
Advantages of onshore software development
– An Easily reachable team – with the external team located in the same country, communication should be smoother. This is possible thanks to the same working office hours.
– Culture and language matching – with onshore software development, you don’t have to worry about communication problems. Workers from the same country and speaking the same language have the best chance of getting along.
– Interviewing programmers in person– instead of working through a project manager, you can invite and test programmers’ skills yourself.
– Savings on traveling – having workers close to home doesn’t require traveling to a third-party company. This is actually the only cost-saving possibility when choosing onshore software development.
Remote software development on the wave of growth
The development of IT outsourcing is a result of a growing demand for IT services and a talent shortage. For example, in 2019, unemployment rates for the US tech sector fell to a lowly 1.3%. The labor market is in high demand, and finding IT professionals isn’t a piece of cake. This is confirmed by another piece of research conducted by Indeed, according to which 86% of hiring managers and recruiters find it challenging to source and hire technical talent. Furthermore, over a third (36%) think it is “very” challenging.
What’s also interesting is that in some regions that are the world’s biggest tech hubs, such as London or New York, finding a developer without help from HR agencies is an extremely demanding task.
Domestic markets have become a competition between local tech companies, and as a result they are forced to look for alternatives. Outsourcing therefore seems to be an inevitability for being able to manage projects. Even a report prepared by Statista reveals this. Over 45% of respondents from IT companies say that the reason for IT outsourcing is that it provides access to skills that are not available in-house.
Top reasons for technology outsourcing worldwide 2018
Offshoring: Quality versus Cost
Successful offshoring will be the result of a thorough analysis before choosing a service provider. But the choice won’t necessarily be the same for each company, mainly because different tech businesses face different constraints. Some of them will have more problems with finding programmers who are skilled in a given technology, while others will be hampered by budgets.
Regardless, all CTOs and Project Managers who consider offshoring will need to create a checklist in order to make the right choice of external company. And we have an example one for you. Those elements, when well-analyzed, increase the chances of a successful cooperation with the external team. Those factors should be prioritized in line with the company’s goals and limits.
Key decision factors:
Company’s location – this will impact communication and meeting options. Consider what time-zone flexibility you can accept and for which projects.
Project Quality – this category may cover a few areas. For example, paying attention to customer requirements, on time and on budget service delivery, or previous client recommendations. All of those elements will show you whether a project is likely to be delivered according to your standards.
Technical skills – without skilled workers, any project might be a failure. Check up on workers’ technical certificates and their involvement in the IT community. You can also verify GitHub profiles to see employees’ coding skills.
English proficiency – language skills may affect communication matters. That’s why you should ask about workers’ English certificates or the possibility to arrange online interviews with project managers. You can also check whether the outsourcing company has previously worked with English-speaking countries.
Experience – you need to check the team’s experience in a particular type of software technology or industry. Thanks to that, you may expect a piece of advice on similar functionalities for your company’s use cases.
Cost – if you expect some savings, you should incorporate employees’ benefits, insurance, and travel allowance to the chosen countries.
Communication and transparency – key factors of successful remote software development
Whatever type of outsourcing you choose – nearshore, offshore, or onshore software development, you need to take care of efficient collaboration.
This requires engagement on both sides.
The common saying at Scalac is: “we work with a client in two teams, but in reality we are one team in two locations working on one product or project”. With such an approach, both parties are involved enough to solve problems and get the most out of the available technology.
Any challenges the teams face may be smoothly addressed thanks to effective communication. Let us show you a few tips on how it may support the remote software development process.
- Plan working methods
Agree who will be a contact person on your and the external company’s side. Both sides need to confirm acceptance procedures, paths and working methods. At this point, you should start setting the rules of cooperation. Then you can always refer to the agreed arrangements at later stages of the project in case one side doesn’t stick to them.
- Take care of transparency
You need to create a culture that makes the collaboration clear. In order to achieve that, you should ensure that both parties are on the same page. For example, facilitate introductory meetings to show the bigger picture of the project. Arrange feedback calls to sum up the results of the cooperation at certain stages.
Use productivity tools that enable tracking of tasks and working hours of the external team. Thanks to these, both the client and the outsourcing company can have a clear view of the progress.
- Communication tools.
Passing information about specifications, requirements and bugs in the code requires smooth communication. You will find many apps that help with arranging online meetings or video chats, facilitating project management, and sharing documents. Most tools are quite similar when it comes to their features. That’s why software development companies prefer to use one or two of the same type. For this reason, you should confirm with the outsourcing company which tools they use and, if necessary, have them agree to use your internal apps.
Where to find high-quality software developers at a reasonable price?
The choice of software development companies is as wide as the sky. But over recent years, some countries have become real leaders in delivering software. This has happened mostly because they meet several of the criteria from the above list. To give you an example we should mention Poland.
#1 Coding skills and achievements
HackerRank classifies Poland as the third-placed country when it comes to coding skills. In the same study, Polish programmers ranked first in Java assessments. They were also listed in the top five for other mainstream programming languages like Python, Shell, and Ruby.
The Scala language is getting more popular in Poland as well. On LinkedIn, there are over 3,200 profiles of Scala developers located there. There are even professional companies like Scalac that offer programming services based on this language. You can check out this top software development company on Clutch.
We should also remember about some famous Polish minds in the tech world, who are working for the leading US companies. For example; Nathan Blecharczyk, the Chief Security Officer for AirBnB; Leonard Bosack, the co-founder of Cisco; or Piotr Szulczewski, the co-founder and CEO of the Wish platform.
#2 Environment for skills development.
In addition to this, two of Poland’s largest cities, Warsaw and Krakow, were also included in the top 50 cities on the Tholons Globalization Index. This means that, thanks to emerging innovations, the available startup ecosystems and digital transformations taking place there, this country is a great place to develop coding skills.
English is also the second language that most Polish people learn from primary school. They also tend to travel a lot and have a more Western mindset. These factors probably all contribute to a great command of English among Poles.
#3 Adjusting to the clients’ needs
Software development services have become a Polish national specialization. There are over 700 Polish software development companies on Clutch.co, which is the leading ratings and reviews platform for IT services.
This position was also reached thanks to a great flexibility from Polish teams in terms of cooperation. For example, if North American companies start working with Polish teams then they have to make some accommodation for the different time zones. However, there is still enough overlap of working hours to enable a collaboration and to set up meetings. External teams usually adjust to the clients’ work time without it being a problem for them.
Due to the difficulties of finding IT professionals in most technologically-developed countries, outsourcing software development is now often a must, or at least the best alternative option. As workers around the globe can have a similar skill set to local experts, remote cooperations will soon be a world-wide standard. The growing demand for new technologies will only speed up this transformation.
What’s interesting is that such collaborations have stopped being perceived as just a method for cost reduction. Today, it is simply the preferred way to manage IT projects on time.
If you have already decided to outsource tech work, be sure to take your time over choosing the outsourcing option that best fits your company’s needs. This will help you avoid communication issues and, therefore, project delays. Hopefully, this article will help you to make a sensible decision.