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What Type of Outsourced Software Development is Better: Brief Guide for Businesses

Updated: Dec 8, 2023

Get ready to find out what differences are hidden behind onshore, offshore, or nearshore outsourcing development. This article will help you decide what kind of outsourced team is suitable for your business.

Gartner promises that the global IT market will grow to $4.5 trillion in 2022 because of the high demand for IT services. Companies go beyond short-term crisis developments and start global projects. Of course, many of them cannot move forward without outsourced specialists, as in-house resources are often limited.

Choosing the outsourcing software development team, managers have three core options. They can cooperate with onshore, offshore, and nearshore engineers. In this post, you'll discover the difference between them and what type of team would be suitable for your company.

Onshore vs Offshore vs Nearshore Outsourcing Software Development: What’s the Difference?

Talking about the models of outsourcing software development teams, the main distinction between them is their location. It creates several factors companies should consider before making a final decision. Let’s find out what the peculiarities of each team are and how they affect the level of such team involvement.

Onshore Outsourcing

Onshore Outsoursing: Pros & Cons

What is it?

The onshore outsourcing development team is located in the same country as their clients. It's like your ally is living near you. Convenient? And how! But for software creation, often it's not the most reasonable way because of high service cost. Therefore, onshore teams are less popular than offshore or nearshore ones.


#1 The same approach

It is easier for people living in the same country to understand each other. And it's not just about the absence of a language barrier but also psychological and behavioral peculiarities. Since fruitful communication is essential to a software development project's success, it is most likely that the onshore team can ensure it.

#2 The same time-zone

It is convenient for clients to work with a vendor while in the same time zone. This bonus simplifies communication, control over the development process, etc.

#3 Live communication

Regardless of the circumstances, customer-side managers and outsourced team members can communicate offline, organize joint events, etc. It promotes faster decision-making and a higher degree of mutual trust.


#1 High service costs

Usually, onshore outsourcing is costly for clients because both parties operate under the same market conditions. For foreign companies, such software development prices may seem affordable. But if the enterprises are parts of the same ecosystem, the project will require comparatively significant investment.

#2 Limited range of talents

It's one more disadvantage of interacting with a team living with you in the same country. Vendors rarely involve foreign specialists in cooperation because, again, it is expensive. Therefore, the supplier company will apply its existing background to your business situation. There is nothing wrong with it. But, for example, choosing an offshore or even nearshore team, you can count on extensive expertise and reach life & professional experience. Both of these factors matter for the creation of cutting-edge software solutions.

For whom it might be suitable

This approach fits companies that strive to reduce software development risks and want to make sure of vendor reliability using live communication.

Nearshore Outsourcing

What is it?

The nearshore software development team is located in your neighboring country. Many companies choose this approach because of the almost imperceptible differences in time zone and people's behavior. It provides customers with certain agility.


#1 Affordable service costs

Pricing, in this case, is variable and depends on the country of the vendor. However, working with a nearshore outsourced team, you can count on a pleasantly low hourly rate. Either way, you will have at least a few options to choose from.

#2 More talents involved

By enlisting the support of developers from a neighboring country, you can be sure that their experience and knowledge will be diverse. You have more opportunities to attract specialists cooperating with large foreign brands and having expertise in creating complex solutions.

#3 Low risks

This model is also suitable for companies wishing to minimize development risks. There's always room for attentive and convenient control. Moreover, you can also easily host live meetings with the team to remain on the same page. Neither distance nor time zone can stop you.


#1 Slight difference in behavior and traditions

It seems that neighboring countries are similar, but it is not so. The approach to work and negotiations for both parties may be different. It is crucial to understand the subtleties of behavior and the peculiarities of another culture and consider them when choosing a nearshore outsourced team. Otherwise, they can cause misunderstandings and affect the final result.

For whom it might be suitable

A nearshore model is an excellent option for businesses that want to expand their horizons by attracting professionals with a versatile experience while avoiding significant risks.

Offshore Outsourcing

Offshore Outsoursing: Pros & Cons

What is it?

Offshore software development is perhaps the most common type of outsourcing, where customers and vendors are located in different countries. For example, the US-based company can involve the Indian team in software creation. It opens unlimited opportunities for customers and allows them to choose the most suitable vendor.


#1 Wide range of talents

Before deciding on this type of team, the customer considers different options and can evaluate the background of each specialist. Based on the experience relevance, the company is likely to make the right choice and entrust the development of pros in this area.

#2 Variety of options

One more visible pro: businesses have the opportunity to choose a team that will suit absolutely all requirements: first-rate specialists, low hourly rate, convenient location. Of course, the effectiveness of these developers will show up during the development cycle, but the company may find people who fit it in all aspects.

#3 Affordable price

Sure, customers can go through the global market and involve experienced specialists working for reasonably modest money. The difference in living standards will allow the company to сut the investment for development without saving on product functionality. At the same time, customers can leave developers satisfied. Win-win.


#1 High risks

When choosing offshore software development, you should understand the level of risk. You will most likely never see your partners offline; force majeure can interfere with the project, etc. It is not just about the vendor's reliability but also about external circumstances that may affect the work process in a particular location.

#2 Management challenges

Managing people from a distance is a special kind of art that companies are beginning to master, moving into a hybrid work mode. Your managers need to be ready for the realities of remote collaboration and be able to solve issues through the laptop screen.

#3 Perceptible cultural differences

Different languages, cultures, and customs can become a significant difficulty on the way to the results. It would be best to choose a team that you feel comfortable with. Minimizing the influence of cultures on the process of communication and development is one more challenge that needs to be dealt with.

For whom it might be suitable

Offshore software development will fit companies with real experience in remote project management. It is the option for those looking for a multinational team with a solid background and who are not afraid of challenges.

The Bottom Line

Vendors cannot always be onshore, offshore, or nearshore. It often has an international B2B audience and can have a certain status for each client (depending on its location).

Each of these approaches has its advantages and disadvantages, but you need to focus on your needs and abilities to choose the only correct option.

Are you looking for a reliable vendor regardless of its location? We're here to help!

Tell us about your business issues, and our experts will advise you on the most reasonable way to solve them.

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