Offshoring vs. Outsourcing vs. Yourshoring: What These Are and Which is Best (hint: the last one!)

If you need your software developed, you look for a solution you can trust. You can go for a quick fix (outsourcing), or a longer term solution (offshoring). But rather than settle, sacrifice, or sculpt something that doesn’t really fit, why not partner with a resource whose sole interest is building a team exactly around your needs? A team that is dedicated to YOUR business growth, who works YOUR way, and fits into YOUR culture. We call this new model Yourshoring: the very best way to build high performing software dev teams.

What’s it called? It’s not offshoring or outsourcing… it’s YOURshoring. And it’s what we do at TurnKey.

So, what is Outsourcing, Offshoring, and Yourshoring—and which one is best for you? Here’s how we break it all down in six sections:

1. How did we get here?
2. What is the difference between Outsourcing and Offshoring? 
3. What are the pros and cons of Outsourcing?
4. What are the pros and cons of Offshoring?
5. What are the shared benefits of both Outsourcing and Offshoring?
6. What is Yourshoring and why is it the best solution?

How did we get here?

Marc Andreesen (you know the guy, co-founder of a little firm called Netscape, famously sold to AOL for a tidy billion dollar sum) once famously opined that “software is eating the world.” He was right of course, as he has been on most of his predictions.

By contrast, we predicted a few years ago that mint chocolate chip ice cream would be named an essential food group. We were incorrect (but remain hopeful).

But if software is going to eat the world, it has to be written first. It doesn’t just magically appear out of nowhere, ravenous and ready.

Herein lies the rub: So much software. So little talent to go around. (At least locally.)

The good news is, it’s a big, bad world chock full of tech companies. Cutting edge talent is literally everywhere. External remote developers and agencies outside of America and Western Europe are willing, able—and frankly, quite well-equipped—to help build all the in-demand software you need.

Historically, this offering has come in two flavors: Outsourcing and Offshoring.

What is the difference between Outsourcing and Offshoring?

Outsourcing:

In its simplest form, Outsourcing is project-based: You need some type of software built and you contact an Outsourcing agency. Said agency sends back a quote—they’ll do the deed in this many weeks for this many dollars. Booked, delivered, paid. Need met, period.

Think of Outsourcing in these day-to-day terms. When the important holiday/business/anniversary dinner is looming, and your local Whole Foods is out of wild-caught lobster tails AGAIN, what do you do? You drive 30 miles and make a one-off purchase. You get what you want from the nice guy behind the fish counter, but you’re not in a relationship or anything. Need met, period.

Offshoring:

By contrast, Offshoring is more of an ongoing relationship: You need some type of software built, but you also need it maintained over time, which means you need someone on a more long-term basis. You contact an Offshoring agency. Said agency sends back a quote—they’ll “rent” their developers on a long-term basis for an hourly rate. This is often called a “dedicated team” but don’t let that term fool you—developers may or may not be working full-time for your company.

Think of Offshoring in these day-to-day terms: Who wants to sit in traffic every time you need six crustaceans? So, you sign up for a subscription service and get your high-quality seafood nestled in dry ice and delivered to your door on a regular basis. It comes to you right when you need it, and it’s good, but honestly, sometimes you end up with four pounds of scallops when what you really need is a whole Branzino. 

Side note: Offshoring’s cousin is Nearshoring. Same deal but the team working for you is physically closer to your location, thereby eliminating frustrating time differences.
To learn more about when to offshore, watch “When Offshoring is Great, And When It’s A Dog.”

What are the pros and cons of Outsourcing?

PROS: Outsourcing is great when…

• You need to build a Minimal Viable Product (MVP) or prototype to show proof of concept, or you have a hyper specialized need (like automating a certain part of your code).
• You don’t have the internal resources to dedicate to a development project.
• The software you need built lies outside your firm’s core competency.
• You need to build something fast.

CONS: Outsourcing deficiencies include…

• No growth: It is difficult to scale when the product is being built as a temporary solution.
• No control: You have no control over who is doing your software development, including what they work on, the culture within which they operate, or how they get paid.
• No staying power: There is usually super-high turnover amongst staff working on your project since few are emotionally invested in your success.
• Less quality: You typically get lower quality engineers-for-hire; most are either super junior or are asked to do things that they don’t have a ton of experience in.
• Less visibility: You have near-zero visibility into any challenges the team is facing and how they are being addressed.
• Less alignment: The incentives are fundamentally misaligned: tech companies are trying to build for the long term, the outsourcer is trying to get a product out the door as fast as possible.
• Less vibe: The outsourcing firm is almost always based overseas—hard to reach and coordinate.

What are the pros and cons of Offshoring?

PROS: Offshoring is great when…

• You need to build a product that you expect to service and maintain over the long term.
• You have the management expertise internally but are struggling to find good technical talent.
• The software you are building is within your company’s core skill set and purview (i.e. You aren’t a software company who is trying to build a military drone).
• You are investing for the long term, so taking a more methodical approach (i.e. more time and energy) works for you.

CONS: Offshoring deficiencies include…

• No real control: You aren’t directly overseeing the team, their hours, the culture, or how they get paid (and thus how to incentivize them). Their loyalty lies with the offshore agency, not with your company.
• Incredibly high turnover: The industry average is 40% in this model as well, because engineers don’t feel emotionally connected to the customer or the product.
• No scalability: There is little integration into the core engineering team at your company, so growth potential is limited.
• No choice: You get what you get. In other words, whoever is available is who will be assigned, whether or not they are a good fit for what you are trying to build.
• No visibility: Hiring an offshore team gives you a bit more of a sight line than outsourcing does, but you still have no idea how much your developers get paid, how their success is measured, or what else they are working on.
• No control over incentives: The offshore agency is incentivized to keep increasing billable hours regardless of whether there is a clear ROI for your project.
• No culture alignment: The offshore agency is typically headquartered overseas so cultural differences are likely.

Indeed, both Outsourcing and Offshoring have their bloody Macbeth moments. However, it’s not always offshoring vs outsourcing—they’ve both got their good hair days, too. That said…

What are the shared benefits of both Outsourcing and Offshoring?

• Lower cost: Labor costs are often double for US-based teams or those in Western Europe.
• Easy access: Top-notch technical talent is yours without having to set up foreign subsidiaries or deal with complicated tax and payroll laws.
• Less liability: Labor laws and other regulations won’t tie you up.
• Easy to build: Your team can come together quickly (at least initially) because you aren’t limited by the slim pickings of local talent.

What is Yourshoring (and why is it the best solution)?

We feel you. When we ran our own software tech companies (that’s a story to be told in another blog and/or over a case of beer), we got so tired of dealing with the business process headaches above that we decided to come up with a better way. You need your own global team.

Our solution? Yourshoring. We call it that because it’s the first remote development team built entirely around your needs.

This is YOUR team, YOUR culture, YOUR roadmap, YOUR needs, YOUR values, YOUR vision, and YOUR rules.

TurnKey created the Yourshoring solution by taking the best of what Outsourcing and Offshoring offer, and leaving the rest. When you choose Yourshoring, you get everything you want and nothing you don’t:

• Dedication: The development team is 100% yours. Everyone else talks about dedicated teams–Yourshoring is the first to actually make it a reality!
• Control: You have complete control over what the team works on and when.
• Connection: The team is completely embedded and integrated in your organization—the engineers are emotionally invested in your collective success (not just their own).
• Visibility: You have full transparency into how much the team makes and how to control incentives.
• Customization: We custom recruit your entire team from scratch so you always get a perfect fit (and custom software development).
• Better build: Because the developers are better, the code is better: This is a long-term solution built to last.
• Less turnover: We have a best-in-class retention program that reduces your churn by more than 50% against the industry average. (TurnKey customers enjoy less than 15% churn. Yep, 15%. That’s not a typo, that’s a fact.)
• Scalability: It’s a highly scalable approach that allows you to spin up new teams quickly and easily.
• Ease: You have zero administrative headaches or liability exposure. This is a huge advantage when you are raising capital or getting acquired. (Dare to dream, kid.)
• Local contact: We are based in Silicon Valley so you always have someone to call if a problem arises, you want to bounce around ideas, or you just want to say hi.

Summary: Outsourcing vs. Offshoring vs. Yourshoring

Just in case you’re a visual learner (long live comic books!), we’ll make it easy for you. Here is a quick summary of key differences for you to share with colleagues.

When the question is “How do we find a fully dedicated team that we can work with to build high-quality products faster, cheaper, and better”…the answer is Yourshore. Yourshoring means you’re saving money and focusing on your business activities while we handle the hiring process for you.