We’ve all heard the story before: some small-scale company manages to beat the odds and turn that start-up frown upside down. At that point, expansion is the only reasonable option.
But, expand all you want, there’s only so much you can do with the in-house crew. When the company grows, so do its ambitions. And matching these ambitions with in-house hiring can be impractical or downright impossible.
Look at the biggest tech cities in America: San Francisco, New York City, Boston, Toronto. Do you know what they all have in common? That’s right: the cost of living there is high. Absurdly high. Because that’s the case, high-level IT specialists usually cost like six figures each.
But look outside these tech hubs and you’ll find no less talented and experienced professionals at a bargain. And, in general, the farther you look, the more affordable these specialists become. So, all that’s left to do is decide how far you want to go.
Onshoring, nearshoring, offshoring. When it comes right down to it, these are the best choices available to you. But which one is the best for your business? And what’s the difference between them anyway? Without further ado, let’s dive right into it:
Onshoring: The General Idea
Onshoring, as you can presume from the name, refers to moving specific tasks or the entire project to third-party vendors in the same country. More often than not, companies from more populated cities and states delegate various business practices to neighboring areas.
To give you an example, there are countless companies that operate from, say, California. As you know, California is not cheap. Moving away from bustling metropolises, you can save a fortune without facing the challenges you might experience moving the work abroad.
Onshoring: Pros
Organization
Different countries have different rules, policies, and laws, both written and unwritten. As much research as you can do to mitigate these issues, they’ll always be there. Navigating foreign taxing policies is seldom easy. So is figuring out overseas countries’ real estate practices and business regulations.
When you onshore the work, these issues can be minimal or downright nonexistent. Because you’re moving the business to the same country, the same taxing and general business policies will usually apply as well (barring occasional state law and regulation differences). Because that’s the case, you can get the project up and running in no time at all compared to offshoring. What’s more, you can work without worrying that you might run into some problems in the future that you’re ill-equipped to deal with.
Cultural Parallels
People can claim otherwise all they want, but every culture is different. You can travel as little as 100 miles and find communities with different traditions, customs, and beliefs. So, as you can imagine, these differences usually become all the more staggering when you move not hundreds but thousands of miles. And, as professional as we all try to act, these things define us. They define what we do at work almost as much as what we do outside of it.
That being said, when you speak the same language and share cultural proximity, navigating delicate work matters normally becomes a lot less problematic. Delegating various processes, cooperating and collaborating on wide-scale tasks, revising changes, and moving at the same pace. These are all the things that you can have a hard time with offshore colleagues and, more often than not, breeze through with teams from the same region.
Local Business Support
This one’s easy. You might be able to communicate with offshore vendors as well as with onshore partners. You might acquire the same security guarantees. But you cannot invest in your homeland’s economy when you move the work abroad, no two ways about it.
We’re not saying that that’s a bad thing, by the way. At the same time, supporting local businesses doesn’t hurt one bit, does it? Providing native workers with jobs, you boost the country’s economy, and that might have a direct impact on you as well. You’re killing two birds with one stone, and doing a good deed in the meantime. Plus, depending on the business, your onshore partners might also use domestic tools, facilities, and infrastructure, reaping additional benefits along the way.
Onshoring: Cons
Small Talent Pool
Even tech powerhouses like the aforementioned San Francisco do not compare to the talent pool you can access across the globe. And, generally speaking, onshoring entails moving the business away from these metropolitan areas, so the talent pool shrinks many times more.
You can like the peace and quiet that the small cities have all you want. At the end of the day, they don’t have as many qualified specialists as major cities, that’s just a fact. In other words, you’ll have a harder time finding high-level professionals. At times, it might even prove outright impossible to find someone with the necessary skillset in that area.
More Expensive
Wages in less populated cities and states can seem drastically different from big-city wages. But first-world employees will always cost you more than specialists from developing countries. Besides an occasional exception with ridiculous funding, start-ups need great ROIs at first. Otherwise, they might not survive.
You might save a decent sum with onshore assistance. But you’ll never save quite as much as you can save nearshoring or, even more so, offshoring the work. So make sure you crunch the numbers first ‘cause there’s a decent chance onshoring may not be an available option for you.
Nearshoring: The General Idea
Nearshoring, when done right, strikes that perfect middle ground between onshoring and offshoring. As you can likely guess, nearshoring is an offshoring-type practice that delegates part of the operation to third-party agencies from neighboring countries.
For companies from the United States, that usually means partnering up with Mexican agencies. For Western European firms, the choice mostly boils down to Ukraine, Belarus, or Poland.
Again, when done right, nearshoring gives you the best of both worlds. But it is just as easy to get yourself in a ‘neither fish nor fowl’ situation with this model, so make sure you do your research first.
Nearshoring: Pros
Proximity
As the name suggests, your nearshore partners will be near you. With this geographical proximity, you receive multiple benefits that you wouldn’t with an offshore team. First (and maybe foremost), you’ll have either the same time zone or no more than 2-3 hours of difference between you and your nearshore colleagues. What that means is that you won’t have to adjust shifts. You should have no problem synchronizing online meetings. And you can run them more frequently, increasing the teams’ collaboration efficiency.
Second, this model also enables more affordable business trips and, therefore, more frequent face-to-face meetings. And it is hard to oversell the positive impact that in-person communication can bring to the business table. You can boost the teamwork output and avoid countless different expenses that may arise due down the line. Collaborating frequently face to face, you can also mitigate all kinds of misunderstandings that will disrupt the workflow.
Cultural Closeness
Chances are, you will encounter more cultural differences with your nearshore associates than you would with the onshore crew. But they’re nothing compared to the cultural incompatibilities that you can run into whilst working with offshore specialists. They’re less likely to speak the same language fluently. They’re more likely to have different holidays from yours. They’re also more likely to value different things, something that may cause cultural clashes in the future.
Your nearshore co-workers, on the other hand, will usually provide enough shared cultural crossovers to ensure well-nigh seamless collaboration. And, as a bonus, there’s a pretty good chance that the taxing and financial laws up there will be comparable to yours.
Infrastructure Efficiency
IT, like any other sphere, has its urgent issues that always arise sometime down the road. That’s the bad news. The good news is that you and your nearshore colleagues will be able to resolve them faster than any distant operation.
Aside from the obvious time zone advantage, that’s also because nearshore agencies normally have a reliable communication infrastructure and stable Internet. As such, they’re able to prevent delays that can arise from awful load times or any unforeseen outages.
Of course, this will all depend on the country and the region. For example, most Eastern European countries have excellent IT infrastructures, whereas India and Southeast Asia cannot always rise to the challenge.
Nearshoring: Cons
Limited Candidate Selection
Though they’re usually better in these regards, nearshoring entails more or less the same disadvantages that onshoring does. Starting with the talent, because you’re not surrounded by 100+ countries, you’re still working with a limited candidate selection.
In fact, in the USA case, the talent pool might be even less impressive near shore than it is on shore. Since Canada is almost as expensive as the United States, your only real nearshore partner is Mexico. And, robust as it is, Mexico’s IT scene is not exactly that huge. So, once again, you might not be able to find what you’re looking for professionally.
Not Cheap
Fitting the same mold, nearshoring is not as expensive as onshoring, but also not as affordable as offshoring. More often than not, employees from neighboring countries will cost you more than specialists from distant countries. Depending on the agency and the country, you might be paying more for people that are not any more qualified than their offshore competition.
You’ll save some, sure, but the cost-benefit and the ROI that you’ll gain from this partnership might not be optimal. So, to rephrase what we’ve said before, make sure you know what you’re paying for and whether or not you can get a better deal elsewhere.
Offshoring: The General Idea
You know what offshoring is. It has been the IT scene staple since the 90s. When the in-house staff cannot handle the workload or you feel like expanding but the local talent is expensive, offshoring is what you do. The decision-makers behind the biggest IT enterprises use offshore talent these days, and, chances are, so should you.
Employing specialists from distant countries, you can realize the most ambitious projects with top-level professionals and huge cost savings.
Offshoring: Pros
Bottomless Talent Pool
There are at least 55 million ICT specialists in the world. And, when you’re willing to hire offshore, you can access most of them. You can operate from San Francisco, New York, London, or Paris. It’s irrelevant where you are or where you’re from. All that matters is whether you can attract the best specialists or not.
When you hire worldwide, you can pick and choose from the most talented, skilled, and experienced contractors. You can find people with the most versatile skill sets. You can also go in the opposite direction and hire someone with a very specific IT ‘arsenal’.
Can you do the same without ‘shopping’ at the global IT market? Sometimes, maybe, but we wouldn’t bet on it.
Low Cost
This is the most obvious one, but it needs to be stated nonetheless. More cost-effective workers are the biggest reason companies started outsourcing the work offshore sometime around the 90s, and it remains the biggest reason today.
Looking at the recent surveys, the IT companies in the West save 50-70% of the cost when they outstaff a lot of the work to developing countries. Needless to say, this is a huge difference.
Software devs from the former Eastern Bloc charge somewhere between $25 and $50 an hour. Their colleagues from South America charge around the same. Software engineers in Africa and Asia, on the other hand, will cost you as little as $20-40$ an hour.
At the same time, developers in the United States earn between $75 and $125 an hour. Are they good (on average)? Sure. But they aren’t 3 times as good as, say, Ukrainian developers. So it’s no wonder why 72-75% of Western IT companies outstaff different business processes to the South or East.
Work Around the Clock
Most people look at the time zone difference (at least 5+ hours to separate offshoring from nearshoring) as the offshoring model’s biggest downside. And while that’s not necessarily false, you can also turn this drawback into an advantage.
You can have software developers in, say, Manilla building a solution, while the team in Ukraine is testing its functionality. Coordinating teams from across the globe, you can maximize the project’s efficiency and accelerate different processes, practically removing downtime from the equation.
Apart from that, there’s also the 24/7 support that you can provide with offshore specialists without making anyone work night shifts.
Offshoring: Cons
Little Oversight
Depending on the agency, this can be an advantage as well as a disadvantage. Because the offshore team is located worlds away from you, you cannot manage them as tightly and as closely as you could the onshore hires.
Some outsourcing agencies from developing countries run like well-oiled machines, so the fact that you don’t have to manage them is a huge plus. But, of course, some are not as self-sufficient as others, so you may have a hard time organizing them and keeping everyone on the ball. Make sure to ask them the right questions before hiring them.
Bottom line, everything will depend on who you partner with. As long as you do your due diligence, you should be able to mitigate these issues and avoid any hidden pitfalls. Click here for the top 6 things to keep in mind before hiring an offshore development team.
Communication Issues
Again, everything will depend on the team you choose to work with. But, in general, you’ll run into more communication issues with offshore contractors than you would with onshore partners.
People from developing countries seldom speak the best English, so that might create some misunderstandings in the long run. And, despite best efforts from communication platforms like Slack, Zoom, Skype, and more, long-distance cooperation remains problematic at times.
Hire the right people and everything should run smoothly enough. Hire the wrong people and the distance between you might exacerbate the problems that already exist between IT partners.
In Conclusion
If you’d like to cut your costs a little bit but continue working with people you know, the onshore route should suit you just fine. The cultural differences should be practically nonexistent and you’ll be supporting your country’s economy.
If you need to cut your costs some more but are not ready to take the offshore plunge just yet, consider nearshoring your work. The geographical proximity will let you synchronize online meetings with ease and have semi-frequent face-to-face meetings.
And if you want to be able to access the international IT talent pool and save big in the meantime, offshore is the way to go. You’ll always be able to find the specialists you’re looking for and these specialists will cost you a fraction of the Western price.
So, are you ready to look for the best offshore talent? Well, you’re in luck: you’ve already found it! At Wonderment Apps, we have the most knowledgeable, experienced, and flexible specialists at an unbeatable price. We’ll help you realize your every tech, QA, product, and design need. So strap in ‘cause, at Wonderment Apps, the ride doesn’t stop ‘till the project is complete.