Daria Spizheva

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I’m a writer with a passion for technology and a firm believer that the key to explaining detailed technical and business information is simplifying it into concepts everyone can understand.

The Best 4 Alternatives to Nearshore Software Development Outsourcing

Updated on August 8, 2024

Scaling

👍 Rating — 5 (8 votes)

What’s in a name? It turns out a lot.

“Outsourcing” is often confused with and/or used as an interchangeable term for “Offshoring.” But they are very different animals, as I found. Outsourcing refers to software development for short-term projects, in which an outsourcing agency rents you a team of developers for a limited period of time. By the end of 2023, the engineering outsourcing market was predicted to be worth more than $1,300,000,00, BusinessWire says.

Where the work can be done outside better than it can be done inside, we should do it.

Alphonso Jackson Former United States Secretary of Housing and Urban Development

Offshoring, by contrast, refers to a long-term solution for software development, in which remote developers are hired directly for you by an agency or a tech hiring partner like TurnKey and you have full control over what they are working on and when.

Nevertheless, over 65% of organizations plan to increase or keep up their tech outsourcing activities in the next two years. You know why? Outsourcing is typically best when you need to build an MVP or prototype of a product, or when you need to maintain a legacy platform that you expect to sunset over time. It is rarely used to drive sustainable innovation at a company because the turnover is high, the quality tends to be lower and you have limited control over the team.

As a result, most startups and high-growth companies turn away from outsourcing – even if it’s “nearshore” (meaning in the same or similar time zone as your headquarter) – and look to partner with a skilled offshore software development company in order to find developers faster and more cost-effectively.

4 of the Most Common Alternatives to Outsourcing

In this article, I’ll compare four of the most common alternatives to nearshore software development outsourcing, including:

Offshoring means contracting with a development team that is located in a low-cost offshore location. However, time zones can be a challenge, as there is limited overlap between the working hours of the development team and the product team.
Nearshoring is a popular spinoff of offshoring since it simply means a remote team of developers in a similar time zone as your company (so Mexico, for example, would be a nearshore option for a U.S.-based firm). Like offshoring in general, this option has many benefits, including high quality work and low cost.
Onshoring involves contracting with a development team that is located in your home country. Onshoring can be more expensive than both offshoring and nearshoring – and it can be difficult to find qualified developers in the US due to a lack of supply.
TurnKey Tech Staffing approach is the perfect solution for companies looking for a dedicated team to help achieve ambitious software development goals quickly without breaking the bank. From highly-skilled developers to expert graphic designers and full QA teams, TurnKey Tech Staffing provides efficient and affordable talent that matches your exact product development needs. With a customizable hiring plan and process – as well as flexible engagement models – TurnKey Tech Staffing gives you total control over your software development team.

Read on to learn more about the pros and cons of each option and learn which one is right for your company.

Time to Replace Outsourcing? How Offshoring, Nearshoring, Onshoring Compare

For those visual learners out there, I prepared a quick summary of the main options available when you’ve outgrown “outsourcing” (or can avoid heading down that path in the first place):

Offshoring for software development. What is it?

Offshoring has long been the solution to sourcing skilled technical talent outside of the United States and Western Europe.

India began the offshore software development wave due its cost advantages and English-speaking capabilities. This success was quickly followed by other offshore locations in Eastern Europe and Asia, enabling tech companies to easily build quality technology skills at competitive rates.

Offshoring is now widely employed by startups and high growth companies because it enables them to access a broader pool of development talent – as well as certain skill sets that are hard to find locally – at highly cost-effective rates due to the lower costs of living in these regions. As a result, offshore software development continues to remain the de-facto choice of development for most companies.

Pros of Offshoring

More flexibility. Offshore software development allows for more flexibility both in terms of choosing members as well as managing the workflow process – something that is impossible to achieve with outsourcing.
Cost-effective. Offshoring can be an ideal solution for startups as it allows access to tech talent in countries with lower hourly rates than those of the U.S. or Western Europe.
Easier and faster to build a team. Rather than dedicating valuable time, money, and resources to building an in-house development team, offshoring allows these steps to be streamlined (especially if using a partner like TurnKey!). Startup teams can concentrate on other, more important aspects of your operations.
Full control. While the cost advantage of offshoring may be its biggest draw, offshoring is actually a great strategic move too since you are keeping control of the team completely in-house. This is dramatically different than an outsourcing model where you have limited insight or control over the team.
Wider talent pool. Offshoring provides a much broader selection of skilled developers compared to local markets; as a result, companies can choose the best combination of talent more easily and quickly.
Less liability. Usually, startups and high growth companies have to deal with expensive legal fees and paperwork when dealing with local labor laws, but this isn't an issue with offshoring since your partner is responsible for managing this.
More development time. Working with highly skilled offshore programmers means that you can have more hours of each day spent on software development. The offshore team will be coding during your off-hours, and vice versa.

But though Offshoring has all these amazing benefits, it also comes with a few downsides, such as:

Cons of Offshoring

Time zone challenges. If decisions need to be made quickly and with minimal delay in communication, offshoring often leads to less synchronization due to time zone differences.
High turnover. As offshore developer churn is often high - with the industry average coming in at 40% – if not managed appropriately engineers may not feel emotionally invested in their output, leading them to move on quickly. (That’s why you need a partner like TurnKey!)
Integration with other teams. Integrating the offshore team into the core engineering team and culture at headquarters is critical, though many companies don’t place an emphasis on doing this the right way.
Potential communication barriers. If most of the team members are in places where English isn't the native language, communication can break down quickly. This means you need to be recruiting for English speakers as a key part of their skillset (and be willing to pay more for them in a given market).
Collaboration issues. When assembling an offshore team, the ability to effectively collaborate is crucial. It's like trying to build a tower out of Jenga blocks – if you don't make sure the pieces fit together properly, everything will topple over.
Less teambuilding. When your developers are located overseas, you can no longer stay late in the office to thrash out problems or connect on a personal level over coffee or a beer.
Higher travel costs. If you want to fly overseas to meet with team members who may be hundreds or thousands of miles away, the expenses soon mount up.

Nearshoring for software development. What is it?

People often get confused about what is nearshoring. To put it simply, the nearshore model is a subcategory of offshoring. It refers to offshoring but doing so in a nearby country in the same or similar time zone. So an American company would “nearshore” their software development to Mexico or Colombia, while a Western European company would “nearshore” to Ukraine or Romania.

And specifically as it relates to American companies, the booming tech industry in Latin America has allowed for more talented coders than ever before, which has greatly expanded the use of nearshoring in the United States.

And remember, here we are talking about the advantages of nearshoring, and not “nearshore outsourcing,” which means using an outsourcing agency that is located nearby and has all the same problems with outsourcing discussed earlier (limited control, poor quality, high cost, bad retention rates and more).

Pros of Nearshoring

In addition to all the benefits of offshoring outlined above, nearshoring also provides other advantages too, including:

Zero time zone challenges. With nearshoring operations, you can take advantage of all the great economical value of offshoring without sacrificing quality and time zone convenience.
Greater collaboration. Investing in nearshoring allows you to reap the rewards of the economy of time and more of each day can be spent working together.
Closer to your schedule. It can be tough to have conference calls with clients overseas when there's an 8-hour time difference and your evenings are being used up by late-night meetings - but not with nearshoring. You can easily switch things up and keep operations running smoothly and on schedule.
Easier to communicate and work with. You don't have to deal with language barriers or time zone differences, making it much simpler for everyone involved.

Cons of Nearshoring

High turnover. Like offshoring, you need to manage developer churn carefully. If developers feel like they are left out on an island –even if its a closeby island – they will move on.
Team Integration. Integrating the nearshore team into the broader product development culture at your company is key to operating a high performing development organization. But companies often de-prioritize this type of initiative and erroneously believe that it’s only the code that matters.

Here’s an example of how we at TurnKey help tech businesses grow faster with offshoring.

TurnKey played a pivotal role in scaling up a company called R1. We helped them onboard a powerful team of 40 full-time staff spread across various functions like UI/UX design, DevOps & Infrastructure, Implementation & Integration, and Customer Support. The result was a significant boost in productivity, as evident from their impressive performance – 51 product updates per year. This high-paced work rhythm equates to an almost weekly release cadence. As the folks at R1 put it when asked about their EOR team members, “We often forget they’re not in the same building as us.”

If you need the best nearshore software team, look no further than the experts at TurnKey.

Call us today!

Onshoring for software development. What is it?

The difference between offshore and onshore is that onshoring refers to building a software development team inside your own country. This can be beneficial in a few ways, such as better communication and stronger culture due to a common language, and minimized time zone differences. However, onshoring does come with some potential drawbacks in cost and geographical restrictions.

Here is the balanced scorecard on onshore software development:

Pros of Onshoring

Better Communication & Collaboration. Onshoring facilitates closer communication between you and developers making it easy to monitor performance, receive feedback quickly, and develop relationships with team members. Meeting with them face-to-face (at least periodically if your company is all remote) improves productivity levels, encourages innovation, ensures stronger compliance with security protocols, strengthens employee loyalty, and more.
Zero cultural conflicts. With onshoring, startups and high growth companies are able to build an in-house development team that works efficiently without the burden of cultural disconnect.
More responsive technical support. Having operations in the same time zone allows the dev team to be more instantly reactive in dealing with emergency situations, providing an invaluable advantage during a crisis (such as blanket downtime).
Lower travel costs when needed. Onshoring reduces travel expenses significantly as developers already live in the same country, reducing both time and cost for any offline meetings or training requirements.

Cons of Onshoring

Much higher cost. The annual salaries of onshore developers in the United States or Western Europe are often two to three times more than those required offshore. And adding to the high salary cost are high taxes and expensive healthcare benefits, meaning your total cost for each developer may be three to four times that of an offshore developer.
Much more limited talent pool. Software developers are a finite resource. So if you limit your search to just one country (ie your own!), then by definition you have a much smaller pond to fish in than if you were to expand your search to offshore locations.

Here’s a quick summary of which option (onshoring, offshoring, nearshoring, outsourcing) is best for which situation:

Outsourcing:
- Best for short-term projects.
- Suitable for building an MVP or prototype.
- Useful for maintaining a legacy platform with plans to sunset it.
Offshoring:
- Ideal for long-term software development solutions.
- Offers flexibility in team management.
- Cost-effective, especially for startups.
- Faster team building compared to in-house development.
- Provides access to a broader talent pool.
- Less liability with regards to local labor laws.
- More development time due to time zone differences.
Nearshoring:
- A subcategory of offshoring, involving nearby countries in the same or similar time zone.
- Combines the benefits of offshoring with convenience:
  - Zero time zone challenges.
  - Greater collaboration.
  - Easier communication and work.
- Similar challenges as offshoring, including high turnover and team integration.
Onshoring:
- Best for software development within your own country.
- Offers better communication and collaboration.
- No cultural conflicts due to a shared language and culture.
- Provides more responsive technical support.
- Lower travel costs for in-person meetings.
- High cost due to higher salaries, taxes, and benefits.
- Limited talent pool compared to offshoring.

Tired of grappling with building a local development team but afraid to give other options a try?

Call TurnKey today!

The TurnKey Way - What is it?

When our founders ran their own software startup, they got exhausted from all the irritating headaches with managing their offshore vendors. That’s why they decided to create an innovative solution built entirely around the needs of the customer.

Think of TurnKey Tech Staffing approah as an upgraded version of Offshoring and Nearshoring. Here are the key components:

Built around your needs and goals

You no longer need to worry about trying to find the perfect fit for your team or product. With us, we custom recruit developers that precisely suit your mission and vision. We eliminate the hassle of finding an ideal match while ensuring every team member is exactly what you are looking for, from day one.

Fully dedicated to you

With us, all teams are 100% dedicated to you and you stay 100% in control of what they are working on and when. This is YOUR team using YOUR process working on YOUR roadmap. As a result, developers not only bring their skills and expertise to the table but are also emotionally invested in your success.

The absolute top talent

We’ve developed a rigorous recruiting and screening process for finding the top software developers in Eastern Europe and Latin America. Only the best 3% of talent make it through to final interviews and our onboarding and best practices help ensure that the team doesn’t churn as well.

White glove customer service

Since TurnKey is based in Silicon Valley, you never have to worry about contacting someone and getting an answer the same day (or even the same hour). This way, you can get a response and immediate assistance when you have an issue or question that needs resolving. At TurnKey, white glove customer service truly means having VIP access anytime it is needed.

No language barrier

We guarantee that the software developers who join your team have an excellent grasp of the English language and are able to recognize the nuances of communication in order to understand how things are done in an American context. We even offer advanced English lessons for free so that a developer’s mastery of English continues to grow over time and communication never becomes a problem.

High retention rates

We have a comprehensive talent retention program that offers a range of professional and personal benefits. These efforts have paid off: we have less than 10% developer churn compared to an industry average of 40%.

No administrative hassles

Building development teams offshore is a bureaucratic headache. From legal documents to benefits to payroll services, TurnKey handles it all on your behalf and ensures that clients are completely protected from any liability that may crop up. Making life easier and more secure for our customers is our top priority.

And here is a quick graphic that describes everything written above:

How can TurnKey help you streamline your entire offshore software development efforts?

Finding and retaining the best offshore developers can be a tricky business, and without the right guidance, it can easily become a nightmare. Fortunately, TurnKey is here to solve for all the most common pain points that arise when it comes to legal, compliance, recruitment, payroll, and more. This includes:

Our custom recruiting team ensures that you don’t get buried under irrelevant resumes; instead, you get the top five applications presented to you in under 30 days.
With our focus on talent retention, we guarantee an 85% year-on-year employee retention rate – significantly higher than the industry average of 60%.
With our bulletproof legal shield, you can rest assured that all your payroll and contracts are in order so there won’t be any untoward surprises down the road.

Need to find awesome alternatives to nearshore outsourcing? We’ve got you covered.

Call us today!

FAQ

What is the difference between offshoring and nearshoring for software development?

Offshoring refers to the practice of hiring software developers in a country or region that is different from your own. Nearshoring is a subset of offshoring that refers to hiring software developers in a country or region in a similar time zone as your own (so Mexico would be nearshore for an American company and Ukraine would be nearshore for a British company). Both options offer huge advantages in terms of a broader talent pool and lower labor costs, but nearshoring tends to offer easier communication due to the lack of time zone differences.

What are the types of remote software development?

Startups and high growth companies can choose from three types of remote development – onshoring, nearshoring, and offshoring – depending on their software development needs. Onshoring involves creating a remote team in the same country, while Nearshoring utilizes a team located in a nearby country. Offshoring employs developers who work from remote locations that are often several time zones or more away.

Which model (outsourcing, offshoring, onshoring, nearshoring) is best?

It comes down to finding a balance between cost, quality of work, communication options, and other company-specific factors that will benefit your startup in the long run. However, offshoring and nearshoring are the most popular since they offer companies more control, higher quality and lower costs than outsourcing or onshoring.

How to choose the right software development model for your startup?

First consider your product goals, external stakeholders, timeline, technology stack, budgeting constraints, resource availability, team size, skill levels, and other essential factors that contribute to your product’s eventual success. By understanding the available options alongside your unique context, you can make an informed choice that allows you to proceed with confidence towards realizing your product development objectives.

#Custom Hiring #dedicated teams #Offshore Development #Outsourcing

January 2, 2024

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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