Outsourcing, Offshoring or Nearshoring? What to choose for your software development needs

More and more companies around the world are facing a lot of challenges during their growth and development. In these difficult moments, they are bound to make big decisions, such as how much to invest in developing certain projects.

A company’s financial priorities can determine whether those projects can be done by hiring an in-house team. Most of them will find this rather difficult and time-consuming. Costs aside, the whole process of finding, hiring and training the right people can take months. Plus, there’s always a risk of a bad person-organisation fit that resets the whole process.

Luckily, outsourcing IT services gives you the option to balance costs and quality in order to achieve your goals. We will take a closer look at what outsourcing means, its benefits and risks. Additionally, we'll explore nearshoring and offshoring in the software development industry and help you understand what's best for your company.

What is software development outsourcing?

Outsourcing is the action or the decision to employ another company to develop or take on specific projects or tasks. For example, a healthcare provider needs to build a medical records tool. They could hire an entire development team, but this means allocating more time and money just for this project.

Instead, they decide to work with a software development company that already has experience creating digital healthcare solutions.

Outsourcing benefits include:

  • No long-term commitment: sign a contract with the outsourcing software development partner for a specific project or task, such as maintenance. If you need other tools in the future, you can turn this into a long-term technology partnership
  • Cost savings: compared to hiring a full in-house team, outsourcing can be the answer to a more profitable outcome. For example, you can look for developers in nearby countries and get the same quality
  • Flexibility: test the market to see what works best for you and only then make a firm decision. Changing providers comes way easier and cheaper than changing your employees or even entire teams
  • More time for your business goals: working with a software development company saves time that can be spent improving core business functions. You can focus on running things more smoothly when someone else does the heavy lifting.

Of course, outsourcing can also have some downsides:

  • Communication issues: poor communication can derail a project. However, you can avoid this by choosing a trustworthy IT outsourcing provider and implementing remote work best practices
  • Culture: if the outsourcing provider has vastly different values and work ethic can be a deal-breaker. But cultural diversity is an advantage if you’re both flexible and open to learn
  • Language barriers: you need to speak the same language to work together, so English proficiency is a must. However, some providers may also speak your language if you're worried about this aspect.

Another great advantage is that the IT partner can be located anywhere in the world and still do the job. Sure, you can outsource operations in the same country, also known as onshoring. Based on the provider's location outsourcing can also be divided into offshoring and nearshoring.

What is offshoring software development?

Offshoring is when a business outsources in another country, usually overseas. For instance, a company from Europe or the United States partners with a software development provider in India, China or The Philippines.

There are a fair amount of reasons why a company might decide to offshore projects:

  • Cheaper labour market: offshoring countries typically offer very attractive costs
  • Diverse talent pool: taking advantage of skilled professionals that can perform at a decent quality and bring a different perspective
  • 24/5 availability: having an in-house and offshoring team working in different time zones can be an advantage since there's always someone to fix issues.

There are also some potential risks involved with offshoring:

  • Longer distances: the distance can be a bit overwhelming if you want to be actively involved in your offshored projects. Travel costs and the time spent on the journey can be costly and much more than expected
  • Cultural and work-related differences: cultural differences can lead to many misunderstandings. Plus, there's a chance that their work style might not match your expectations
  • Time zone differences: yes, 24/5 or even 24/7 availability may be a plus in some cases. On the other hand, it can cause issues, especially if the in-house and offshoring teams need to work as one team.

Oftentimes outsourcing is conflated with offshoring in today's complex and global labour market. However, it's not the only option that companies have. Nearshore software development is just as attractive and has the same or even more benefits.

What is nearshoring in software development?

Nearshore software development is the practice of outsourcing in neighbouring countries. Popular examples include Western and Eastern European partnerships, such as Germany and Romania.

In choosing so, they are still getting better prices than in their own country. But they're benefiting from a skilled talent pool with a similar culture.

Here are the main advantages of nearshoring:

  • Geographical proximity: less expensive travel costs and similar time zones make face-to-face meetings and good teamwork easier to achieve
  • Cultural affinity: countries from a common region, such as Europe, have specific cultural preferences that reflect their communication and work styles
  • No hidden costs: the same regions usually have common regulations and laws in place, increasing the chances of total transparency
  • A skilled talent pool: most European universities have similar teaching styles. Additionally, many Eastern European companies have a Western mindset, so professionals have much-needed soft and hard skills
  • Good value for money: the costs of hiring and retaining IT professionals is still lower for a nearshoring company. So, they can offer attractive prices and high-quality work

And here are a few cons to consider:

  • Higher costs than offshoring: nearshoring does require higher costs than offshoring. You'll often encounter more highly-trained professionals and the cost of living is higher in nearshore countries
  • Not so many providers: you may have more options in countries like China or India. However, you don't need hundreds of providers, just a good one.

In choosing so, nearshoring IT services means getting better prices than in your own country. But you’re also more likely to benefit from a skilled talent pool with a similar culture.

Offshoring vs nearshoring: making the right decision

All in all, both outsourcing types solve the IT skills shortage problem. So, choosing between offshoring and nearshoring can be hard even if outsourcing is right for you. 

Everyone wants a faster time-to-market, a great product and stellar collaboration. In reality, incompatibility will waste your time, resources and money, even moreso than choosing nearshoring over offshoring and vice versa. 

Offshore and nearshore are relative. At Qubiz, we've worked with both Western European and US companies, which means that we don't like to have a label. However, here is a quick comparison to help you make the best decision for your situation.

Making the right decision 

With its vibrant Western-influenced culture, proximity to Western Europe and highly skilled specialists, Romania is one of the top destinations for nearshoring. However, it's also quickly advancing in the offshoring world, enjoying great collaborations with countries such as the US.

Qubiz is a one-stop-shop technology partner located in Romania. We cover the whole application lifecycle, including functional design and consulting, software architecture design, UX/UI design, software development, QA, and maintenance. 

With more than 15 years of experience and many more successful collaborations, we have what it takes to support business transformation and continuity.

Learn more about what we do and how to contact us

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