IT outsourcing is hardly a new concept. For decades now, businesses have been outsourcing various tasks in an effort to save time, money, and hassle. The practice was hugely successful at achieving those goals, making it a go-to business strategy across industries.
Most businesses preferred to outsource the kind of work that was necessary but wasn’t really at the core of what they do. Once the internet made its way into homes across the world and basic computer-based technology like spreadsheets and word processors became standard for every business, IT became one of the most commonly outsourced jobs.
Doing so allowed non-tech-related businesses of all types — from retail and manufacturing to non-profits and service businesses — to get their IT needs met conveniently and affordably, so they could focus on the things they do best. As the kinds of technology expanded and became more complex, the need for these services grew.
Today, IT outsourcing isn’t limited to unrelated businesses. Now, it’s common for IT businesses, SaaS companies, and software development firms to outsource all kinds of technology projects as well. With remote work becoming part of the new normal recently, more businesses are open to outsourcing entire positions that were previously handled in-house.
However, even for businesses that see outsourcing as a no-brainer, the best way to do so may be a more difficult choice. IT companies looking to outsource often wonder how to decide between nearshoring and offshoring. We’re here to help!
This article will cover:
- What the terms onshoring, offshoring, and nearshoring mean
- The top 5 differences between nearshoring and offshoring
- How those differences affect IT companies
- Which is a better method for your company when hiring IT developers
- The benefits and advantages of using that method
Let’s start with the basics of each.
What Is the Difference Between Nearshoring, Offshoring, and Onshoring?
When outsourcing, there are three general categories: Onshoring nearshoring, and offshoring. While they all count as outsourcing, there are crucial differences between them. Knowing these differences will help you to decide which option is best for your business.
Let’s start with the simplest one, onshoring. Onshoring is outsourcing to a company in the same country as you. If your business is in the US, then onshoring is when you outsource work to another company also within the US.
Offshoring is when you outsource work to a company that operates out of a different country. When discussing offshoring, the countries being discussed are typically ones quite far away. For example, many businesses in the US will outsource IT to businesses in India as they have an enormous talent pool.
Nearshoring also refers to outsourcing work to a company based in a different country. However, it is unique in one key aspect: The country in question is much closer than those typical of offshoring. US businesses outsourcing to companies in Latin America is a prime example of nearshoring since those countries are much closer.
Offshoring vs Nearshoring: Which Business Practice Is Better for IT Companies?
While those definitions and explanations shed some light on the technical differences between nearshoring and offshoring, they do little to describe the practical differences for IT companies.
Hiring IT developers via outsourcing is a great option for IT companies, more so than many other types of businesses. This is due to the fact that IT work isn’t dependent on a particular location the way some jobs are.
Obviously, retail companies can’t outsource their sales associate positions to a company in another country because the employee needs to be in the physical store to do the job. However, IT employees have no such limitation. The nature of the job allows it to be done from anywhere.
This allows IT companies to take advantage of options like nearshoring and offshoring. However, it does beg the question, what is the practical difference between nearshoring and offshoring when hiring IT developers?
There are five main differences that IT companies should be aware of. We’ll go through each of them and explain more in-depth.
1.) Distance
The first and most obvious difference between nearshoring and offshoring is the distance between the hiring company and the outsourcing company. Offshoring will put more distance between you and your employees.
At first glance, this doesn’t seem like a big deal. After all, the work can be done from anywhere, so why does it matter how far away the employees are? The majority of the time, it doesn’t. However, it isn’t uncommon for circumstances to arise that require in-person meetings.
When it is necessary to have your teams in the same physical location, distance can be make or break. If you have to send employees to a far-away country or bring offshore employees to you, the time spent traveling, additional costs, and dip in productivity can make a huge difference.
Nearshore employees are always a relatively quick flight away. If you need to arrange a meeting, even at the last minute, it will be much easier to accommodate that need with a nearshore company.
2.) Time Zones
With greater distance often comes a larger difference in time zone as well. Time zone differences are one of the most difficult obstacles when it comes to offshoring. When offshoring to a country halfway around the world the time difference can often be around 8 hours or more.
For any IT project to be successful, good communication is key. It’s common to have a lot of back-and-forth conversations with IT employees. When offshoring, this can mean sending a message and waiting a full business day to get a response.
When dealing with anything technical, clarity is essential. Employees asking for clarification on instructions is extremely commonplace. When each message and response are a day apart, this can lead to huge delays.
With nearshoring, on the other hand, the time differences are much smaller, if there are any at all. Oftentimes, you can find a company with employees working in your time zone. That way, everyone is always available during the same working hours and communication can happen much more quickly.
3.) Language
US-based IT companies need to be able to communicate with employees in English. While it’s possible to hire translators or have employees who speak other languages, it’s much easier to hire IT developers who speak English, so all employees can communicate easily.
There are many offshoring companies that have employees that speak English. There are even many offshoring companies with large numbers of employees who can speak English extremely well. However, that isn’t always the case.
Nearshoring companies based in Latin America have a few advantages in this regard. Firstly, countries in Latin America tend to have a higher rate of ESL (English as a second language) programs in schools. They also have higher rates of English proficiency on average than found in many offshore countries.
When clear communication is paramount, having employees that speak English more fluently is a huge advantage.
4.) Development Time
When working on IT projects, development time can be of the utmost importance. IT companies that have faster turn-around times are much more competitive. Even more importantly, in many instances, delays aren’t just a risk to deadlines and client relationships, they can even put the security of the project, company, or client at risk.
Aside from all those benefits of working quickly, there’s also the obvious advantage that comes with being the first to develop a solution. Whoever brings an IT solution to market first often controls the market share. These are all serious reasons to ensure you do everything in your power to keep development time to a minimum.
When working with an offshoring company, the distance, time difference, and communication barriers can all cost precious time that you just don’t have to spare. Nearshoring your development can mitigate all those risks for the reasons listed above. When time is such a precious commodity, it’s vital to save as much of it as you can.
5.) Hourly Cost
Obviously, the goal of any business is to minimize costs and maximize profits. Part of this equation is how much you pay your employees. However, you can’t simply consider the wages in a vacuum. After all, the phrase you get what you pay for is a cliché for a reason.
The best way to deal with this issue is to use a cost/benefit analysis. In-house employees often have the highest cost. They also come with a lot of benefits. The ideal balance would be hiring IT developers that provide as many of the benefits with as little cost as possible.
One of the reasons that offshore developers are so popular is due to their low cost per hour. However, depending on the company and country you’re dealing with, it may take more developers to do the same amount of work in the same time frame, possibly doubling or even tripling the hourly cost.
Also, time spent waiting for workers in vastly different time zones to respond to communications and the extra back and forth that’s often needed to clarify misunderstandings due to language and cultural barriers will add additional time. Eventually, this can easily add up to costing you more in both time and money than it saves.
Nearshoring countries have some of the best IT employees with most of the conveniences you’d get with in-house or onshore employees for a fraction of the price. While nearshore employees do tend to have a higher hourly rate than offshore employees, it’s nowhere near the cost of onshoring and can often save a lot of time and hassle in comparison.
Nearshoring and Offshoring : What is more beneficial for your business?
So, when it comes to nearshoring vs offshoring, which is better for your business? Nearshoring has all the benefits of onshoring with none of the hassle associated with offshoring. Some of the benefits of nearshoring include:
- Less time and money spent on travel
- Easier and clearer communication
- No language barrier
- More cultural similarities lead to fewer misunderstandings
- Faster development time
- The best cost/benefit balance
- Large talent pools
- Lower risk thanks to similar legal frameworks and, in some cases, special agreements with the US
It’s clear that nearshoring has the most benefits and fewest drawbacks for IT companies looking to hire IT developers.
Work with ParallelStaff
ParallelStaff can provide you with a large talent pool of nearshore employees who have good English skills and a wide variety of IT skills. You simply provide us with your job description, and we’ll hand-pick the best talent for the task from our pre-vetted pool of highly talented and experienced developers.
Once you interview our chosen team members to ensure you agree that they’re the best fit, you can begin the quick and easy onboarding process. You could be ready to begin in as little as 10 days!
Ready to get started or learn more? Contact us today to book a meeting!
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