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Outsourcing tech services can be a daunting affair. When searching for possible outsourcing vendors, you're confronted by terms like nearshore and offshore. What do nearshore and offshore mean?
There isn't an ultimate outsourcing model that reigns supreme. Each is inherently unique and offers its pros and cons. Understanding how nearshore and offshore outsourcing works allows you to leverage cost-efficiency, access to the right talents, and productivity when you choose the suitable outsourcing model.
In this article, I'll take you through these common outsourcing models and make my case on which one is the best choice for startups.
Offshore vs. Nearshore Outsourcing
Presumably, you're starting up a business in developed countries like the US, UK, or Western European countries. In such countries, you'll have to deal with tech talent shortage or pay a considerable sum to hire offshore software developers and IT experts. For startups, every dollar that goes into building an app counts.
Hence, startups in Western nations often turn to IT outsourcing. After all, outsourcing is associated with cost reduction, skilled talents, quality deliverables, and faster time to market. However, such results are not always valid, and they depend on the type of outsourcing model you choose.
What Is Offshore Outsourcing
Offshore outsourcing refers to the act of hiring an IT vendor in a country with a considerable time difference from your own. It is safe to say that outsourcing usually involves a time zone difference of 8 hours and above. For example, a US startup engaging an IT vendor in Eastern Europe is considered outsourcing.
Why Choose Offshoring
Startups turn to offshore outsourcing to take advantage of the lower hourly rates charged by the developers. India is a popular outsourcing country where software developers charge a meager fee for their services. According to Payscale, you can hire developers in India for an average of $7.24 per hour.
Besides economic factors, offshoring is also a popular option amongst startups due to the access to a global talent pool. As mentioned, there's a talent scarcity in countries like the US and UK. However, such a problem is non-existence when you hire from offshore countries like Ukraine, and India.
One of the secrets of getting your apps quickly to the market is to work with experienced developers. Offshore outsourcing connects you with IT teams that have worked on various and potentially similar projects. You benefit from their skills and know-how in avoiding common pitfalls when working on your app.
Possible Disadvantages of Offshore Outsourcing
Before you choose an outsourcing vendor, you'll need to be aware of several drawbacks that come with this model. First, the considerable time zone difference between you and the vendor might be an issue. It could be difficult for real-time meetings or impromptu discussions between a US-based startup and a remote IT team in India.
If the difficulty in sharing information doesn't frustrate you, cultural and language differences may occur if you work with developers who are not fluent in English. Miscommunication might result in an extended timeline for the app and nullify any cost benefits you have from offshoring. This is why you'll want to choose an offshoring partner in countries like Ukraine for cultural affinity.
What Is Nearshore Outsourcing
Like offshoring, nearshore outsourcing involves working with an IT vendor from a foreign country. However, there is not a huge time difference in nearshore outsourcing. Nearshoring usually involves a neighboring country or one within 5 hours of air travel from your location. A collaboration between a UK startup and a Eastern European developer is considered nearshoring.
Why Choose Nearshoring
With nearshoring, it is possible to arrange physical meetings between the startup and the vendor. This allows you to communicate the project requirements clearly to the developers. There is also a lesser risk of cultural and language differences. If you're working with Eastern European developers, you'll find that we're proficient in English and share similar working cultures.
Nearshoring also affords you tighter control over information and the app. This is important if you need to comply with data privacy regulations. For example, Eastern European countries like Poland and Romania are regulated by the GDPR. If you're building a tech startup in the UK, working with outsourcing partners in the EU region provides a common understanding of data privacy laws.
Possible Disadvantages of Nearshoring
Nearshoring may not always result in the lowest development costs. It depends on where you're outsourcing to and the cost of living of the said country. For example, Eastern European developers charge between $35 - $60 per hour, but Asian developers rarely charge $35 per hour. Offshoring is still the more competitive option, but nearshoring allows you to work in similar or convenient time zones.
Nearshore vs. Offshore: Differences Explained
Now that we've established the definition of nearshoring and offshoring let's look at how both compare in different areas.
Obviously, offshore outsourcing involves a greater timezone difference compared to nearshoring. When you hire a nearshore developer, you can hold teleconference calls within working hours or commute for a physical meeting. Meanwhile, you'll be 8 hours or more apart from an offshore vendor, which makes getting real-time collaboration difficult.
Offshoring is undoubtedly the most economical option. It's hard to beat developers' ultra-low hourly rates in India and China. Despite that, you'll still enjoy a considerable saving when you engage nearshore developers. For example, software developers in London command a salary of $70,000 per year, but the same position in Eastern Europe takes back $36,000 annually.
Hiring offshore developers often mean you'll need to deal with cultural differences. For example, US business professionals are used to being direct in communication. However, Chinese developers are more reserved in voicing their options, and the cultural disparity makes collaboration more challenging.
There's no doubt that offshore outsourcing brings you a comparatively wider pool of talents compared to nearshoring. When you outsource from neighboring countries, you're limited to IT professionals residing in a handful of countries. Offshoring brings you talents in diverse disciplines from various countries, often at a lower cost.
What Makes Ukraine an Competitive Outsourcing Destination for Startups?
Ukraine has built a stellar reputation as the preferred outsourcing destination for years, particularly for US and Canadian startups. Ukraine has a bustling IT outsourcing industry that has gained strong support from its government. With more than 200,000 software professionals, Ukraine is in a prime position to source the tech talent crunch of American and Canadian co-founders.
Concerns of cultural difference are also non-existence as Ukrainian professionals are used to western working cultures. Besides, Ukrainian developers are fluent in English, as demonstrated in this article. Also, the time difference between Ukraine and the US is about 7 hours, and it is still possible to call up your Ukrainian IT partner during working hours.
Pricing-wise, Ukraine is an attractive option with well-balanced developer fees and quality. You can build a high-quality app in Ukraine for almost half of what it costs to hire developers in the US or Canada. Ukraine's appeal to global tech companies and startups indicates a supportive IT ecosystem.
Offshoring can turn up in your favor when you choose the right destination. You'll get your app to the market in the shortest time and at a lower cost. Also, outsourcing to an offshore IT partner solves your recruiting problems. Eastern Europe has proven to be an ideal outsourcing destination for US and Canadian startups. The obvious advantages of working with a Eastern European software company have connected Dollar Shave Club to us.
Talk to us and learn how to build great, affordable apps for you.