Nearshoring vs Offshoring: What is the Difference?

Oksana Zabolotna
HBD at Qubit Labs

Running a business can be overwhelming and challenging, especially when you need to hire more people: endless interviews, training, and extended team integration. Unfortunately, these factors don’t let you focus on your business goals. That’s why many founders have found a great decision of outsourcing. Offshoring and nearshoring are the most common business practices involving hiring a remote IT specialist or even a team in another country to perform a task or project.

So what will work better for your business? This article provides an overview of the difference between offshoring and nearshoring, how they both work, and their advantages and disadvantages, which will make it easier for you to decide which one fits best. 

 

What is Offshoring?

Offshoring means hiring developers or vendors in another country, usually several times away. You can also hire an offshore team in multiple countries. For example, one part of your team can be in Ukraine, Moldova, or Bulgaria, and your company can be in the USA. To have a more precise understanding of what is offshoring, let’s have a look at a tech giant like WhatsApp. It is probably one of the most famous messengers worldwide with an extensive in-house team. But still, WhatsApp has hired a remote team of developers in Eastern Europe, which is an example of offshoring. Or another example: Western European companies often hire their remote team in Asia.

Example of offshoring. What is offshoring?

 

What is Nearshoring?

Nearshoring is quite similar to offshoring – you hire your team in another country but in the same time zone or region. In other words, your stuff is “near” you. So, what does nearshoring mean? It means outsourcing your operations to a nearby country. Oftentimes, the nearby country shares a border with the country where the company is located. For example, many Canadian and USA companies nearshore their software development to Mexico. Companies from the UK or countries from Western Europe such as France, Netherlands, Germany prefer to hire developers from nearby but cheaper countries like Ukraine, Poland, Georgia, Moldova or Romania.

What is nearshoring? Example of nearshoring

 

Nearshoring vs Offshoring Benefits and Pitfalls

Now let’s look at all nearshoring vs offshoring benefits and weaknesses to understand which one will work the best for you: 

Pros of Offshoring 

  • Budget-Friendly 

Many companies prefer offshoring because it helps reduce the cost of workspaces, equipment, paying salaries and taxes. So they offshore to places where labor is cheaper, but the talent pool is vast. In addition to the lower labor cost, offshoring can also reduce or even eliminate the cost of recruitment. 

  • Your Business Operations Work Non-Stop

Having a team in a different part of the planet and different time zones makes your business function over the clock. When you’re asleep, your team on the other side of the world could be working. If there are incomplete tasks in your parent company, your local team can hand over those tasks to your remote staff. This will ensure that there’s a continuous workflow on projects in both your parent and offshoring team.

  • Unlimited Talent Pool

The location of your developers is no longer a limit. Offshoring provides you an opportunity to choose the best candidates who will fit your requirements and budget globally. Offshoring makes the hiring process a lot easier and quicker as you are not limited to only one country. Also, you can choose the country with rich industry expertise in which you are interested most – for example Ukraine, Poland and Romania are the best countries to hire game developers.

Cons of Offshoring 

  • Time Zone Differences 

Many offshoring teams operate within a 5-12 hour difference from their client, meaning work schedules may need to be adjusted to accommodate your team. Furthermore, unless your staff commits to staffing late-night shifts that work with your company’s time zone, you may have to wait for responses from your remote team. These time differences can also lead to lengthy delays in project deadlines as both companies struggle to accommodate each other.

  • Communication Issues

Even though a team can speak English very well, that doesn’t mean that communication will be as smooth as it is when communicating with someone who is a native speaker.

  • Cultural Differences 

Offshoring usually presents cultural barriers as well. Your offshore team might have certain work behaviors that don’t align with your expectations. They may not understand or appreciate your policies and workflows.The discrepancies in cultural and social practices can lead to a misunderstanding of complex business problems. This in turn leads to business and personal misunderstandings, and challenges that wouldn’t be the case when everyone on a team has a similar overall business dynamic. To avoid this kind of issue, we would recommend working with an experienced vendor which has its own HR and knows exactly all the tips and tricks of recruiting, and how to find the best candidate for you. 

Let’s have a closer look at the advantages and disadvantages of nearshoring:

Pros of Nearshoring 

  • Cultural Similarity

It is always easier to build communication with your team from nearby regions: you have the same vision on things which makes work scaling more productive. 

  • Opportunity to Visit Your Team

Face to face meetings are important to build stronger business relationships with your team. With nearshoring it is easier to meet them whenever is needed and you don’t need to spend much time on traveling. 

  • Convenient Time Zone

The neighboring countries often are located in the same time zone. Even the small time differences like 1-2 hours will not badly affect your business. 

Cons of Nearshoring 

  • Limited Options 

Compared to offshoring you have limits of where you can hire your team. Hiring developers in nearby countries could decrease your chances to find the software engineers you need and save money. 

  • Takes More Time

Because of the limited talent pool it can take longer time comparing with offshoring to hire tech specialists in nearby countries.

  • More Expensive 

Considering hiring developers with nearshoring requires a slightly bigger budget. Compared to offshoring – nearshoring is more expensive as you have limited options with locations you can hire in, hence less chance to hire a team cheaper. 

 

What to Choose for Your Project: Nearshoring or Offshoring?

There is always a battle of nearshoring vs offshoring, but which one is better personally for you? Well, to answer this question you should think about all your business goals and requirements and what do you expect from your team to be? 

Both of these models can provide you with a team of talented and competent people who make great products without slogging through a year of interviews. At the same time, offshoring and nearshoring work in different ways and have their benefits and weaknesses. 

Offshoring vs nearshoring - what to choose, checklist

As you can see both offshoring and nearshoring have their strong and weak sides. There is no “better” or “worse” option. You choose the one which fits your business needs and requirements. If you still have troubles on which one model to choose – Qubit Labs can help. 

Cannot Decide Nearshoring or Offshoring? Contact Us

 

Get the Best Experience of Hiring Your Team With Qubit Labs

If you would like to get all benefits from hiring a remote team with both: offshoring and nearshoring – Qubit Labs can help. We hire developers in the biggest IT hubs like Poland, Ukraine, Georgia, Moldova, Brazil, Mexico, Kazakhstan, and Azerbaijan

We are a company which services make building dedicated teams easy and risk-free. With us, you can scale your team by hiring vetted developers in the best IT outsourcing locations. You’ll focus on core business goals while we handle the back-office hassle. We cover recruitment, onboarding, HR management, payroll, taxes, legal aspects, social packages and much more. 

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Oksana Zabolotna
HBD at Qubit Labs

HBD and Head of Partnerships at Qubit Labs. Oksana is proficient at Search Engine Optimization; performs as a speaker for international tech conferences; author of webinars and guides on peculiarities of remote recruitment, top markets for hiring IT experts, and latest tech trends. Oksana is one of the partners of Women in Tech Ukraine – large-scale social project created to increase the number of women in IT industry.