A comparison of the differences between outsourcing models
Outsourcing yes, but where to? You are probably already aware that outsourcing software development is a necessary response to the shortage of skilled labour and – depending on the project – can also mean cost savings. However, many people underestimate how important the location of the development team can be for the success of a project.
In this article, we will therefore show you what nearshore, offshore and onshore each mean, what these three terms have to do with your individual software and which option is often the best choice when it comes to nearshore vs. offshore.
When it comes to outsourcing software development, onshore, nearshore and offshore describe different geographical locations. Onshore means that development teams work in their own country. Nearshore refers to development teams in nearby countries, while offshore means that development teams are located in distant countries. The location usually influences costs, communication and efficiency.
With onshore outsourcing, the development team works in the same country as the company that commissions the customised software development. For example, a company from Zurich commissions a team of developers from Bern and thus keeps the software development within Switzerland. This model has the following advantages and disadvantages:
Advantages
Disadvantages
Onshore outsourcing has also long been credited with the advantage of enabling faster coordination and direct meetings. As you probably know from your own experience, these meetings have decreased significantly since 2020 at the latest. Daily routines are easier to implement remotely and a remote team can work very well independently after sprint planning.
What’s more, onshore is usually more expensive than nearshore and offshore outsourcing. The high cost of living in the DACH region drives up salaries, and the shortage of skilled labour also has an impact: Salaries are usually higher in countries with an already limited supply of qualified developers.
With nearshore software development, the development team works in neighbouring countries. This enables lower costs than with the onshore model, while at the same time retaining advantages such as minimal time differences and cultural proximity, which makes collaboration and communication much easier.
The fact that remote setups are now standard also makes the move from onshoring to nearshoring all the more sensible. The advantages and disadvantages at a glance:
Advantages
Disadvantages
For example, we rely on the nearshore model with locations in Switzerland and Slovakia. This gives you access to a stable IT market and highly qualified specialists, and you benefit from the cultural proximity to the DACH region. This ensures efficient collaboration and reduces the risk of quality losses. Compared to an internal development team, you can reduce costs by up to 40 per cent.
What is the difference between offshoring vs. nearshoring? In offshore outsourcing, the development team works in distant countries such as China or India. This model offers the greatest cost advantage, but poses challenges in terms of communication and management. The advantages and disadvantages at a glance:
Advantages
Disadvantages
The difference between nearshore and offshore therefore lies in the fact that offshore requires significantly more management overhead. When it comes to offshore vs. nearshore, offshore is only an option if low costs are a priority or your company has close business relations with the target country anyway.
But why does the location play a role in software development at all? One of the most important factors in outsourcing is efficient collaboration. Modern software development is agile and requires fast and direct communication – long communication channels, time differences, political instability and cultural differences can therefore have a direct impact on project success and time-to-market.
Riwers therefore consciously utilises the advantages offered by nearshoring: Through our development centre in Bratislava (Slovakia), we offer you access to an excellently trained network of specialists, thus combining efficiency with economic benefits without compromising on quality.
For example, a senior developer in Slovakia delivers the same top quality as a Swiss colleague – but without a long search for personnel and at a much more efficient price. In addition, Slovakia’s political and economic stability and its proximity to the DACH region create ideal conditions for smooth project realisation.
Whether you opt for onshore, nearshore or offshore outsourcing therefore has a significant impact on the progress and success of your software project – and from our point of view, there are many reasons in favour of a nearshoring partner. The following overview shows you why this is the case:
| Onshoring | Nearshoring | Offshoring | |
|---|---|---|---|
Location & time zone |
In your own country, no time difference |
Geographically close, usually no or little time difference |
Far away, often large time difference |
Cultural proximity |
Highest cultural proximity |
High cultural proximity |
Often major cultural differences |
Structures & work organisation |
Very well organised, familiar structures |
Well organised, comparable standards |
Varies greatly by region, often requires customisation |
Communication |
Very high, personal meetings easily possible |
High, thanks to similar cultural values & time zone |
Limited, requires complex coordination |
Transparency |
Very high, on-site visits easy |
High, on-site visits possible |
Low, longer journey & language barriers |
Costs |
Highest |
Moderate to low but scores with fast time-to-market & ROI |
Most favourable |
Flexibility & scalability |
Restricted by shortage of skilled labour |
High, good scalability & availability |
High, due to flexible employee structure |
This is how many companies imagine outsourcing in software development: The development team is based in India and the project drags on forever because all sorts of communication problems, cultural differences and coordination difficulties bring the collaboration to a standstill.
However, it is important to differentiate precisely between what is a cliché and what is a real challenge. Many clichés are based on bad experiences with unqualified providers or inadequate project preparation. Behind the prejudices, however, there are also some real stumbling blocks that you can overcome with the right planning and strategy:
One of the biggest clichés is that external teams do not adhere to the same standards as internal developers. But in fact, the quality depends heavily on which development partner you choose.
We recommend that you pay attention to the references and team selection of the provider. At Riwers, for example, we ensure quality through comprehensive project controls and strict requirements for the qualifications of our team members.
Language barriers are of course not just a cliché, because developers outside the DACH region usually don’t speak German. But – in our experience – technical expertise counts for more than perfect German. It is crucial that communication remains clear and effective.
That’s why you should make sure that the provider provides you with a team that is at least fluent in English. In addition to this requirement, we rely on chat tools or translators, for example, and communication with our location in Switzerland is of course in German.
Documentation or the wealth of knowledge built up over the years is also often cited as a factor in the decision not to outsource. However, smart translation tools, such as DeepL, can also help here. This enables an external development team to quickly grasp and understand the business context.
Another cliché is that the organisation of work in external teams is chaotic. However, this problem also depends on the provider. We recommend that you choose a provider that works with well-established teams and also provides resources for project management, thus minimising management overheads.
Our experience shows that the opposite is often the case. Many outsourcing providers are so efficient that a company learns new best practices during the collaboration and can integrate them into its own processes. With the right partner, outsourcing can become a tangible productivity boost.
Every outsourcing strategy has its advantages and challenges. While onshore scores points for cultural proximity and optimal communication, this is where costs are highest and the shortage of skilled labour poses a problem. Offshore models, on the other hand, offer cost advantages and a large talent pool, but are often accompanied by cultural, communication and organisational difficulties.
In a comparison of nearshore vs. offshore vs. onshore, nearshoring is therefore the golden mean: it combines cost efficiency with geographical and cultural proximity, enabling smooth collaboration.
This is where Riwers comes in with flexible models, be it for individual software development, with software teams or a complete software department as a service.
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