In the past several years, outside factors have forced companies to initiate significant advancement through digital transformation.
First it was the technology boom, where an online presence became essential for companies. The internet became the new phonebook, and slowly businesses sought to become more user friendly.
The Covid-19 pandemic made the entire world remote overnight. Businesses conducted everything almost exclusively online and in the cloud. After the lockdown started, some companies came out on top because they were ahead in the game. Now with the need to catch up, there’s a boom in demand for developers and other IT professionals. In order to remain competitive, many have started outsourcing their projects.
With many outsourcing options, it is essential to figure out which type is best for your company and project. The two main types of outsourcing are offshore and onshore, with nearshoring gaining popularity. You should decide based on your project is and what will make it successful.
Onshore: US-Based Teams
- This type of outsourcing provides companies with ease in communication, as there are no language, cultural, or time zone barriers, and it is much less expensive to travel if needed when staying onshore.
- The quality of work is higher and the time to complete a project generally is shorter, which is a huge advantage when dealing with costly projects.
- Another advantage unique to onshore outsourcing is legal protections; intellectual property is greatly protected in the US, and there are several laws in place to ensure that it is not stolen, and if it is, there is ample retribution.
- Prices are very high due to the cost of living in the US and with the increased demand for talent, it is hard to find talent, as there are more jobs available than there are people to fill them right now.
- Depending on the project, the amount of time it can take to complete a project goes up when there are not enough people to work, or training is needed to meet certain requirements.
Nearshore: North and South American Teams
- This kind of outsourcing combines the best parts of both onshore and offshore outsourcing. Advantages with these teams being in countries just outside of the US are that there are few differences in time zones, travel costs remain low, and with an increased talent pool, prices go down.
- The problems with offshore outsourcing sync up here, where there can be cultural differences and language barriers.
- While the price is lower than it is in the US, it still can be costly, especially dealing with these barriers. With these concerns, the price tag may initially be lower, but in the long run, considering potential mistakes due to miscommunication or other problems, it may not seem as cost effective.
Offshore: Teams based Overseas (traditionally India and Eastern Europe)
- The most predominant advantage of offshore outsourcing is the lowered costs for experienced workers.
- When given the opportunity to go across the sea to find talent, the amount of talent increases dramatically, and a company can get a large project done with access to all necessary resources at a lower cost.
- With offshore talent being so high, more expertise available reduces liability concerns and provides opportunities for flexibility within projects.
- With projects, communication and close oversight is essential. When there is an 8-12 hour time difference, it is very difficult to meet with teams and get on the same page. This is compounded by the language and cultural barriers that are hard to overcome – especially with complex requirements and solutions.
- While costs may be lower, due to multiple barriers, it is likely that additional team members will be needed to close the gap, which can drive up costs.
- Also, in other countries, they will not adhere to the intellectual property laws instituted in the US, which can lead to heavy losses.
- The last thing to consider is that with travel, the prices are much higher to travel across the sea, and with the recent global pandemic, these costs are higher than ever, with additional requirements in place for safety.
- The potential for economic and political instability.
After looking at the pros and cons of each of these, the differences are very notable. Thankfully, this makes finding the best fit for each type of project easier. Armed with the clear advantages and disadvantages to each outsourcing option, let’s discuss them based on project type.
Onshore: This is best for customized software, because the customization can be area specific. Doing this in another country where practices and values are different can lead to some major snags. You should also use this for projects prioritizing protection of intellectual property. It also works for projects on a strict timeline, where regular communication between team members is often necessary.
Nearshore: Great for when low costs are priority, or projects that require more resources without significantly compromising communication.
Offshore: This is best for large, long-term projects that require a large pool of resources at a low cost. These projects generally are much more flexible in terms of timelines and communication. This is a favorable option when you need a larger number of resources in a short period of time.
Maybe your project doesn’t fit into any one specification, but multiple specifications; if that is the case, consider Multi-Shore Outsourcing. If your project has complicated aspects, with a lot of simple or repetitive aspects, you might consider combining teams.
Project requests are sometimes too complex to fit within project parameters. Familiarity with cultural and functional expectations often rely on intuition. You can have this covered by onshore teams, ensuring the project is successful without extra steps. Outsourcing large but simple or common builds that requiring more talent and bigger teams offshore takes care of the rest.
Combining teams can balance out the pros and cons, yielding the best possible outcome for your company. Where downsides of offshore include cultural and timing differences, onshore teams offsets that with ease of accessibility and understanding. Where onshore teams fall short in manpower, offshore teams pick up the slack, carrying the project to completion.
You can easily miss hidden costs with nearshore and onshore outsourcing. You might need a middleman, or even a whole team for the sole purpose of maintaining communication. This can hike up costs significantly, just like delays due to time zones or miscommunication due to language barriers. You will find the complexity of your project and the actual costs incurred are important factors in outsourcing development work as well. Then you can determine whether onshore, offshore, or nearshore is the best fit.