Considering bringing in outsourced talents but can’t decide which model makes sense for you? Nearshore or Offshore? Making a choice between these two options may need hours of hard-working. By giving you in this post all information needed to take this decision, we hope to make things easier for you.
So, let’s look at the differences between nearshore and offshore software development, their benefits and drawbacks, and the guiding principles to consider when picking one of them.
However, before we go, let us first gain a better knowledge of the big picture, that is, why should a business choose outsourcing in the first place.
Table of Content
- Customers and Vendors Win by Outsourcing Software Development
- Definition, Benefits, and Drawbacks of Nearshore Outsourcing
- Definition, Benefits, and Drawbacks of Offshore Outsourcing
- What’s the Difference between Nearshore and Offshore?
- What Makes Brazil a Popular Nearshore Location for the United States and Canada?
- Nearshore Journey
- Conclusion
- FAQs
1. Customers and Vendors Win by Outsourcing Software Development
Outsourcing, like any other business decision, has advantages and disadvantages. In this section, we’ll focus on the parameters where the generated benefits outweigh the perceived negatives.
Cost savings and lower administrative costs
There is no doubt that both outsourcing models save money. It provides you with access to a big pool of experienced software specialists who charge less than half the rate of an American or Canadian programmer.
Hiring and training an in-house team also demands expanding your office space, providing other logistics, making compensation and benefit provisions, and giving them time to adjust to the office environment before they can begin delivering. Outsourcing allows you to avoid all of these because your technology partner already has all of the logistical requirements in place and a skilled crew that can begin delivering right away.
Availability of talent
Aside from cost savings, being not limited to your geographic location provides you with the opportunity to discover and hire the greatest professionals from all over the world.
In developed countries, there is a trained professional demand-supply mismatch. It’s not that the United States and Canada don’t have skilled people – they just don’t have enough to fulfil market demand.
If a specific sort of IT specialist is not available or a programming language is not widely used in your area, an offshore expert or team can add significant value to your project. Outsourcing is a much easier and less expensive alternative to relocation.
Quality service
When you choose an outsourcing partner, you entrust your projects to skilled people. They have years or decades of experience and can get the job done perfectly the first time while maintaining high quality standards.
On the one hand, it ensures that quality work is completed, while on the other, it saves you time, money, and effort in establishing that capability in-house by running significant recruiting drives and interviewing people for abilities you are unfamiliar with.
Project-based or scalable task development
Because outsourcing contracts are project-based, you can scale your labor up and down based on your workload. You also have the option of selecting different providers as needed. Furthermore, once the work is completed, you do not need to have a development team on your payroll.
Despite the many benefits, outsourcing has its own set of obstacles, which vary depending on the sort of outsourcing considered. Let’s look more closely at nearshore vs. offshore outsourcing and weigh the benefits and drawbacks of each in the following sections.
2. Definition, Benefits, and Drawbacks of Nearshore Outsourcing
Nearshore outsourcing occurs when a business delegated its software development and maintenance activities to a development team based in a neighboring nation with a minimal time zone difference. Let’s look at the benefits of nearshoring to better comprehend the discussion between nearshore and offshore.
Nearshoring Advantages
Minimal cultural differences
Cultures are broadly comparable when workforce is outsourced to a neighboring country. It is easy for teams to integrate and collaborate. This results in faster communication and more productive interactions, which improves the productivity and quality of deliverables.
Almost Same Time Zone
Because of their close proximity, clients’ and vendors’ working hours frequently overlap. It makes real-time cooperation easier. This makes it simpler to:
– Organize meetings
– Experience more productive interactions
– Resolve difficulties more quickly
– Spend less and get more
– Keep the project on track
Reduced business travel duration
Nearshore areas can be reached in two to three hours by plane. Resulting in shorten work visits and spending less money.
Improved security and auditability
By nearshoring your development projects, you have greater control over your intellectual property. You and your vendor would be subject to the same data protection rules, making it easier to draft contracts and enforce confidentiality throughout and after the project.
Nearshore Outsourcing Disadvantages
Price
You save money when compared to onshore or in-house suppliers, but your hourly billables are greater when compared to offshore vendors. You must conduct additional due diligence in terms of job quality and vendor competencies to ensure that the quality of deliverables is worth the additional expense.
Less vendors
When it comes to selecting vendors, nearshoring lowers your options. As your talent pool shrinks, you may struggle to find the skilled professionals your project requires.
3. Definition, Benefits, and Drawbacks of Offshore Outsourcing
Offshore outsourcing occurs when an organization delegated its development to a team situated in a distant nation with a significant time zone difference. Though there are other benefits, cost savings are a primary motivator for outsourcing, as software specialists in developed economies such as the United States and Canada command high wages. To enter the nearshore vs offshore argument, consider the following benefits of offshoring.
Offshoring Advantages
Savings on Costs
Software experts in the far offshore locations such as India, Russia, Ukraine, China, and the Philippines can be found for less than half the hourly wage of those in the United States, Canada, and other developed nations.
Worldwide Talent Pool
You can select your offshore location based on your skill requirements. Offshore locations have experienced an increase in the number of training institutes providing expert technical courses such as engineering, mathematics, science, and technology.
Shifts
Offshore professionals are available to work the shifts that their clients require. This ensures that working hours overlap, as in nearshore countries, and a fast turnaround.
Offshoring Disadvantages
Differences in time zones
The time zone difference for clients in the United States is often between 10 and 14 hours. This is difficult to overcome, and work hours overlap to a lesser level. It has an impact on the frequency and quality of meetings, which in turn has an impact on project deliverables.
Cultural Differences
Offshore countries contain a wide diversity of peoples, and their cultures are radically different from those of the United States. Cultural barriers can be difficult to overcome for remote teams unless a small fraction of workers are appropriately qualified or have sufficient experience working with western customers.
Quality concerns
Due to the distance, it may be difficult to evaluate vendor competency and internal processes. In these locations, a substantial number of IT offices have sprouted that lack developed processes and are unable to meet industry quality standards.
Travel Time
Offshore travel requires at least 15 hours of flight time. It is also taxing on both the intellect and the body. It translates into fewer and longer business visits, as well as less personal interaction.
4. What’s the Difference between Nearshore and Offshore?
| Parameter | Nearshore | Offshore |
| Travel duration | 1.5~5 hour flights | 30 hour flights, including sleeping arrangements costs |
| Work together | Same time zone, so it may be possible to meet. | Difficult to organize owing to time zone disparities of 7 to 10 hours |
| Cultural similarity | Very similar | The majority of offshore outsourcing locations are in Asia and Africa, which have significantly different cultures than North America. |
| Security | Agreements like WIPO, WTO, USMCA, and PCT | Some agreements don’t apply |
| Costs | $25 – $50 per hour | $15 – $100 per hour |
| Ideal for |
Easier collaboration, more coordinated communication, and consequently higher work quality Projects in which cost cutting is not the only criterion Complex software development that needs real-time collaboration Frequent visits to supervise remote team BPO and KPO operations, as well as other operations requiring a lot of decision making |
Maximum financial savings Sporadic site visits Software development that is simple IT chores like maintenance and support that are performed on a regular basis Real-time collaboration is limited Projects that need support 24 hours a day |
Comparing nearshore and offshore, we can see that offshore works effectively when cost is your primary concern, real-time cooperation is minimal, you’ve done it previously, your internal processes are mature, and your desired deliverables are not complex. Basic customer support, data entry, designing simple websites and applications, infrastructure maintenance such as server patching and monitoring, and so on are examples of projects that can be successfully delivered from offshore locations.
Now, talking about nearshoring, it can assists in overcoming a few of the issues associated with offshore outsourcing while preserving the majority of the benefits – it tries to provide the best of both worlds.
5. What Makes Brazil a Popular Nearshore Location for the United States and Canada?
Nearshore software development provides the ideal blend of onshore and offshore advantages. Minimal cultural barriers and lower labor expenses are important factors in aligning your team members with project requirements.
Why is Brazil a popular nearshore location for clients in the United States and Canada? Brazil ‘s specific location and demographics provide the following benefits to American and Canadian clients, in addition to the conventional benefits of nearshore outsourcing:
Cost advantages
Brazil charges $30 to $60 per hour for software development services, including agency costs. When compared to the United States and Canada, where hourly rates start at $75 and can exceed $850 for enterprise-level projects plus agency fees, this is a significant savings.
Agency charges are an evident and transparent aspect of doing business with any company, and they will rise as you get closer to home. However, if you’re recruiting in-house, you need be aware of some hidden expenditures in addition to hourly salary. Consider the following:
According to official sources, the overall cost of employing a new employee in-house can range between $4,000 and $8,000.
Replacing an internal employee can cost the company up to 60% of the annual salary.
You could lose 1% to 2.5% of your earnings in the time it takes to hire an in-house employee.
When comparing in-house with outsourcing, the latter is a more attractive alternative. So, to see the larger picture of nearshore versus offshore, let’s take a closer look at the varying prices per specialization.
| Role | Onshore* | Nearshore** | Offshore |
| Senior DevOps | $70 – $125 | $40 – $65 | $30 – $55 |
| Middle DevOps | $55 – $85 | $35 – $50 | $20 – $40 |
| Junior DevOps | $45 – $55 | $25 – $30 | $20 – $25 |
| Business analyst | $115 – $210 | $25 – $45 | $25 – $55 |
| Architect | $105 – $295 | $45 – $85 | $40 – $105 |
| Project manager | $65 – $205 | $25 – $65 | $25 – $55 |
| Junior developer | $45 – $65 | $25 – $35 | $15 – $30 |
| Middle developer | $55 – $85 | $30 – $50 | $25 – $55 |
| Senior developer | $70 – $135 | $40 – $65 | $30 – $65 |
| Lead developer | $75 – $185 | $55 – $75 | $35 – $75 |
| Junior QA | $40 – $55 | $20 – $30 | $20 – $75 |
| Middle QA | $45 – $75 | $25 – $40 | $25 – $85 |
| Senior QA | $65 – $105 | $35 – $60 | $25 – $85 |
| Junior UX/UI designer | $50 – $75 | $20 – $30 | $25 – $55 |
| Middle UX/UI designer | $60 – $85 | $25 – $40 | $25 – $70 |
| Senior UX/UI designer | $70 – $120 | $35 – $60 | $30 – $85 |
| Graphic designer | $55 – $105 | $20 – $45 | $15 – $40 |
As you can see, offshore pricing vary greatly. Nearshore pricing, on the other hand, are more predictable.
*Onshore: These costs do not include labor benefits for on-shore prices, which would raise the hourly rate by about 15% to 20%. These rates may be modified on the onshore model due to common labor advantages offered by organizations in the United States, such as general insurance, PTO, vacation compensation, sick days, dental insurance, free lunches, 401K for retirement, and so on. The price range would significantly increase if such perks were included.
**Nearshore: pricing, on the other hand, includes all labor benefits. We cover yearly bonuses, life insurance, performance bonuses, extra bonuses, free training and awards, and much more in the case of Brazil.
Convenient time zones
Brazil has time zones that are nearly identical to those of the United States. This enables you to organize meetings during normal business hours. You don’t have to be concerned about waking anyone up too early (as in offshore nations) or upsetting someone’s evening activities. Interactions are more direct, brainstorming sessions are more fruitful, and issue solving occurs in real time as opposed to sending emails and awaiting a reply the next day.
Extensive talent pool
Every year, 53 thousand new IT workers are formed in Brazil
Excellent English level
In Brazil, English proficiency varies greatly depending on industry and geography. It’s not the most widely spoken language in the country (if you visit as a tourist, you should learn some Portuguese), but there are many experts in IT who speak English at a very high level, frequently near to native.
Potential for personal interaction
In sharp contrast to the 30-hour journeys required to reach India or China, travelling to Brazil from US airports requires far less time and energy.
When compared to offshore places, the voyage takes around half the time. You can surely have a face-to-face meeting, return home, and sleep in your own bed within 24 hours.
Ongoing professional development
The Brazilian talents are hungry to learn and improve their skills. In addition to technology, they develop soft skills that allow them to engage professionally with global clients.
If you’re looking to outsource in Latin America, check out our list of the top IT outsourcing businesses in the region.
Nearshore Journey
1. Daily meetings: Can you imagine yourself doing calls at 5:00 or 6:00 a.m. Pacific to align with an offshore team?
2. Issues during the day: say a problem develops at 3:00 p.m. PT while the offshore staff is napping. You’d have to wait seven to ten hours for the situation to be resolved.
3. Urgent issue: Imagine having an urgent issue every other day, but having to wait until the next day to complete it, resulting in poorer productivity.
4. Long calls: Consider a call to discuss a code issue with a lengthy explanation of the code. That might be conceivable if you did it in the middle of the day. However, live cooperation should be limited to three to four hours at most, as it is detrimental to productivity.
5. Culture: Brazil is noted for its happiness, whilst other countries appear to be in a different mood.
6. Conclusion
Choosing between nearshore and offshore outsourcing is mostly determined by your budget and the type of your project. When deciding between nearshore and offshore, it is critical to define your objectives in terms of money, complexity, and real-time cooperation requirements.
If you live in the United States or Canada and are seeking for a nearshore partner for talent, Amazing Devs is the place to be.
Contact us for a quote if you’re seeking for skill, professionalism, and technological expertise.
FAQs
What is Software Development Outsourcing?
Software Development Outsourcing is the arrangement that occurs when a corporation delegates the development process to a third-party company in order to cut costs, have the greatest talent, and deliver projects with higher quality.
How Does Nearshore Outsourcing Work?
Nearshore Outsourcing is the practice of assigning software development to a team located in a neighboring country with a comparable time zone. Nearshore has advantages like as a comparable culture, real-time collaboration, and convenient time zones.
What is Offshore Outsourcing
Offshore Outsourcing is the practice of delegating software development to a team in a distant location with a significant time zone difference.
What makes Brazil the greatest Nearshore software development location for the United States and Canada?
Among the many advantages of Nearshore software development in Brazil are cost savings, convenient time zones, a skilled and talent pool, cultural affinity that helps to improved communication and collaboration, and shorter business flights