Pros and Cons of Offshoring: Which One Is The All-Pro Choice?

Pros and Cons of Offshoring | TurnKey

In our last blog post, we put on our scuba suits and took a deep dive into the differences and similarities between Offshoring, Onshoring, Nearshoring, and (the highly spectacular) Yourshoring. In this post, I’m going to narrow the focus to Offshoring vs. Yourshoring—and outline the benefits and nuances of both.

Just like you do when you’re weighing any other important life decision, we’re going to make a pros and cons list. When we get to the end of it, you’ll see that Offshoring has a handful of pros and a very long list of cons. Yourshoring on the other hand, is as all-pro as Tom Brady. (No, for real, there are no cons. Read on.)

Here’s how we break it all down:

This article includes:

What is the difference between Offshoring, Offshore Outsourcing, and Outsourcing?

The term Offshoring is flexible and fungible—a bit like the unsung superhero Plastic Man (who everyone seems to co-opt for their own purposes). The concept is used in manufacturing, supply chain management, call centers, and much more.

From a technology perspective, Offshoring means finding development talent (wicked smart developers and engineers, for example) that are not physically located in the same country you are. Say you are a high-flying startup based in Austin, TX; when you leverage killer developers in Romania or Brazil, you’re Offshoring.

The tech offshoring market is poised for tremendous growth, with a projected worth of over $1.3 trillion by the end of 2023, Marketsplash reveals. 

Sometimes Offshoring is referred to as “Offshore Outsourcing” which can be confusing because there is also just plain old “Outsourcing.”

It’s nuanced, so let me break it down for you real quick: Offshoring is like a long-term relationship, it’s your dedicated dev team who’s in it for the long haul, even though they’re far, far away. Outsourcing, on the other hand, is more of a fling – a short-term, project-based solution. This team comes in, does its thing, and then bows out. (Still confused? No worries, check out this wicked smart post we wrote so you’ll be talking the talk in no time!)

How Offshoring, Nearshoring, Onshoring and YOURshoring Compare | TurnKey

Ready To Rock? Call TurnKey and Get Your Own Yourshoring© Solution Started.

What are the pros of Offshoring ?

There are myriad reasons why businesses use Offshoring. Here, we give you a brief synopsis of the most common reasons why:

  • Lower labor costs: If you live in America or Western Europe where the cost of living is among the highest in the world, Offshoring allows you to tap into markets where talented labor pools are just as deep, but way more affordable(ish).
  • Access to specialized expertise: Sometimes your home market has a shallow bench, especially when you’re in search of specific technological expertise. These specialists can usually be found Offshore. Two good examples are Artificial Intelligence and Machine Learning. Pound for pound, Eastern Europe has the richest density of experts in these fields, which is why Offshoring to countries in this region makes sense for a product company that relies heavily on either of these two technologies.
  • Round-the-clock development: Some software companies intentionally build offshore development teams in time zones where there is only a small overlap in working hours. This is because—much like a factory that runs a day shift and a night shift—companies can often double their product velocity by having more hours of each day devoted to software development.
  • Tax benefits and other financial incentives: Countries that are actively trying to induce foreign investment will often offer special incentives (such as tax breaks) to entice companies to set up shop. When combined with lower labor costs, these incentives can provide even more of a cost advantage to Offshoring.

To learn more about when offshoring is great, watch “When Offshoring is Great, and When It’s a Dog.”

What are the cons of Offshoring?

Alas, nothing in life is perfect. Which means the list of inherent challenges to Offshoring is a long one. Let’s cover some of the low points:

  • Limited control of the team:Your offshore team will be able to do complex work. But you won’t have full control over how that work is done—you can’t really dictate the hours that the team works, the culture in which they work, or how much each team member gets paid.
  • No choice of talent: The vast majority of companies that use an offshore development agency to help them manage (and often mismanage!) their team, don’t get to select the specific developers that get assigned to their project. This means those long-term developers you need aren’t necessarily going to last because of a poor skills fit or cultural alignment—hence the next bullet point. Bummer, right? It’s hard to build custom software when your team isn’t custom. (We’re putting that on a t-shirt, stat.)
  • High turnover: Running a globally distributed engineering team is hard, but it gets even more difficult when there is constant churn of developers. Sadly, the industry average for offshore development is about 40%. Which tells you that every time you hire 10 developers, four of them are likely to bail on you each year, slowing down your development trajectory and causing a distraction for the ones who stay. Left unchecked and unmanaged, poor retention will eventually squash any chance of offshore success.
  • Lower quality if you aren’t careful: As the old adage goes, “Out of sight, out of mind.” In offshore software development, if you don’t want to become a cautionary tale, you have to be extremely careful. Pick an offshore firm that can prove to you how they ensure high levels of performance.
    According to BusinessWire, more than 68% of companies spend one month or more to recruit a single developer. At the same time, one in five (20%) new recruits must be replaced. To avoid these hidden costs, organizations need a better solution to quickly onboard quality developers.
Cost of Churn | TurnKey
  • Language and communication barriers: In America, there’s a dismal record of teaching the population a second language. Europe is better at it—many countries speak their native language as well as English. Some are not as proficient (like Asia), and still others land in the middle (Latin America). Sourcing the right talent with the right English skills takes time.
  • Cultural and social challenges: In addition to the language challenges just noted, you may have to overcome cultural barriers with your offshore team such as attitudes towards work and deadlines, and your preferred communication style. You know what happens when you assume…so just know you’ve got to lock the right mechanisms in place from the start or you’ll lose a lot in translation.
  • Time zone considerations: Rocking around the clock is a plus, but a team in a different time zone can be detrimental to company goals and values, too. Zoom and Slack mean that global collaboration is easy (and expected), so many companies are prioritizing working together as a single team—at the same time. This is often referred to as Nearshoring.
  • Security and infrastructure concerns: If the agency helping you build your offshore team is also based overseas, you might be subject to their security protocol instead of yours. This can open you up to risk since your development efforts are not contained within the same environment.
  • Legal exposure: Do you understand all of the local tax laws and regulations in the country from which you’re hiring your offshore team? (Fun fact: We do.) The number of required vacation days, government pension contributions, payroll taxes, accounting treatments, IP protection–all of these are different, and all of them can trip you up when you hire developers offshore. You want someone managing the regulatory process who knows that market inside and out.

Pro Tip: Find a Way to Do Both Offshoring and Nearshoring and Reap the Benefits. This is Our Jam, We’ll Make You a Pro in No time.

How do you keep the pros and erase the cons?

We feel your pain.  Back in the day, before TurnKey Labs was even a glint in their eye, our founders, Sterling Lanier and Boris Glants, had another tech startup, Tonic Health. They faced many of the above pros and cons when determining their own offshore development strategy. It was frustrating—maddening, really. Enough so that they decided to come up with a better way: They call it Yourshoring.   

Think of Yourshoring like Offshoring 2.0. It’s an advanced version, the one you want with all the good stuff and none of the gunk. Yourshoring amplifies all the advantages of Offshoring while putting in place the people, processes, and best practices needed to fully negate all of its disadvantages.

TurnKey’s Yourshore model is new, unburdened, and the technically savvy way to build high-performing remote software development teams. This is because it’s the first—and only—framework that is built entirely around YOUR needs. This is YOUR team, YOUR rules, YOUR vision, YOUR terms. Exciting, right? I know. Let’s dig in right here, right now.

yourshoring benefits

The first customer we helped to applying Yourshoring was R1 RCM, a leader in healthcare workflow automation software. We joined forces with TurnKey to enhance their engineering capabilities. Through this collaboration, R1 achieved an impressive weekly release cadence of 51 releases per year, driving constant software improvement. With an annual churn rate of less than 5% over three years, R1 maintains engineering stability, ensuring uninterrupted support for their millions of patients and clinicians.

TurnKey’s YourShore model allows us to easily integrate developers directly into our organization so that they are truly my team. I honestly forget most of the time that they aren’t working in the same building as me.
AnyaGeneral Manager at R1 RCM

Yourshoring and its All-Pro list

With Yourshoring, you can ditch the disadvantages of Offshoring. Trust your build to TurnKey and watch your team take your product into the Hall of Fame. Here’s what you have to look forward to:

  • Fully dedicated teams: Yourshore teams are fully dedicated to you and you are in control. You set the hours, the culture, and the cadence. Another benefit—teams that are embedded and integrated into your organization are emotionally invested in your collective success. Their loyalty lies with you. (That sounds like a random Star Wars reference, but it’s true. The force will be with you.)
  • Completely customized talent: We custom recruit every one of your developers and engineers from square one so that you always get a perfect match. Our model is predicated on getting you the exact right fit for your team and your product goals. Yourshore supports YOUR mission and YOUR vision.
  • Dramatically reduced churn: We understand that remote software development doesn’t work if your team keeps turning over. That’s why TurnKey has developed a robust talent retention program that provides a wide range of benefits (both personal and professional) and acts as an outlet for developers to raise any concerns before they can fester. The result? TurnKey customers enjoy less than 15% churn versus the industry average of 40%.
  • Higher quality: Our rigorous recruiting and screening process is intentionally designed; only the top 3% of talent in Eastern Europe and Latin America make it to final interviews for your team. We also help onboard your team using our best practices, and optimize your quality control by conducting regular one-on-one discussions with each developer. Here’s the example. Ever since ResNet teamed up with TurnKey, they've been on a roll. They've pumped out over 800 features, cranked out more than 300k lines of code in just two years, and the best part? They've kept their dev team rock solid with zero - yes, you read that right, zero - churn. Talk about a dream team!
  • Breaking the language barrier: The candidates we bring to the table have a high level of English competency and a communication style that vibes with the way we do it in the United States. We further supplement this approach by providing free, Advanced English lessons for all of your developers so that they are constantly improving over time.
  • Multiple time zones: A key tenet of Yourshoring is using remote teams that best fit the priorities of your organization. This means that whether you need around-the-clock development or a team in a closer time zone (or both!), TurnKey has you covered. We’ve got every option, and we’ve got your back—even if what you want to do is mix and match different teams in different regions.
  • Your security infrastructure: Yourshoring means Yoursecurity. TurnKey developers work entirely within your security environment. Since you call all the shots, you determine what protocols, systems, and processes within which your entire team operates. There is no room for unknown risks or unanticipated security incidents.
  • Zero legal exposure: Local laws and regulations are tricky, and most offshore firms don’t go the extra mile to make sure you are completely protected from all liability. Not TurnKey. With our Rest Easy! promise, we not only make sure that you are compliant with each country’s laws where you have developers, we also ensure you are entirely shielded from any potential exposure. (And never fear, you still get every last stitch of the IP.)
  • White glove customer service: Most offshore firms are based overseas, and contacting senior management is difficult (if not impossible). That’s not the Yourshore way. TurnKey is based in Silicon Valley. When you Yourshore with us, you hold the cell phone number of every senior executive at TurnKey, so you can get a response to any issue or question when you need it.

Some final thoughts

...Where the work can be done outside better than it can be done inside, we should do it.
Alphonso JacksonFormer United States Secretary of Housing and Urban Development

Like anything else, when it’s custom-made, it just feels better. No blisters, all bling. Offshoring is good, but is it good enough? Is it right for you? Your product isn’t third-string, it’s a starter. Go all-pro with Yourshoring. You’ll get what you need, the way you need it. And TurnKey will make sure your product shines.

The Advantages and Disadvantages Are Clear as Day. TurnKey is The Way. Call Us.

FAQs

What are the benefits of Offshoring?

When you hire an offshore team, you’ll enjoy cost savings, potential tax benefits, specialized expertise, and access to round-the-clock development.

What are the disadvantages of Offshoring?

Offshoring gives you a team you can rely on for technical expertise. But you have to let go of hiring control, cultural fit, communication skills, work ethic, control over security, and potentially, sleep (time zone differences are real).

Is Offshoring good or bad (and why)?

This depends on your company and your product. Saving money is obviously good, as is the specialized expertise. But the list of cons (see our recap) is daunting.

What are the risks of Offshoring?

Apart from the standard communication and cultural misalignment problems frequently faced, there are some serious legal exposure and security issues that come up with a team you don’t have complete control over. (Risk averse? TurnKey’s Yourshoring solution is here for the taking.)

September 29, 2023

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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