Onshoring, offshoring and nearshoring can each add value to a software development project. This overview presents the case for and against each of these options! Making an informed choice and managing the risks appropriately can deliver material gains to a software development project.
Onshoring is often known as domestic outsourcing. The development team is located in the same country as headquarters, but in a separate location and provided by a third party. This is often done to overcome the shortage of a particular skill set. It may also be used to ensure the company remains focused on its core capabilities, while still ensuring the required work is completed in closely connected way.
In comparison to other options, onshoring has are some benefits:
- An onshore development team is relatively accessible.
- Language and culture should be very similar.
- The relevant timezones should be the same, or if not, closely aligned.
- The legal framework is familiar and there should not be anything new to learn.
However, onshoring can be considerably more expensive than offshoring or nearshoring (discussed below). Many major tech hubs around the world face talent shortages, and it may not be possible to attract the required level of talent in a cost-effective way.
Offshoring is where software development is relocated to another country, often in a distant region of the globe. An offshore country may have entirely different cost structures, administrative requirements, talent availability and cultural norms. This can be positive and negative!
Offshoring has some potential benefits:
- Offshoring allows the project to access a global pool of talent.
- The gap between onshore and offshore labor costs can be considerable, delivering large savings to the company for individuals and teams.
- Offshoring also opens up the project to a wider range of service providers.
- Time zone differences may have a positive impact, for example, allowing work on a project around the clock.
Offshoring is also associated with some risks:
- The working culture in an offshore country can be significantly different. Attitudes toward hierarchy, scheduling, responsibility and decision-making are just some of the areas where national working cultures can be divergent. Work habits might also be different.
- Communication can be challenging, particularly if English is not widely understood to a high level. Direction, messages and even specific instructions can be misconstrued.
- It may not be easy to directly visit an offshore production team. Long flights and high costs may drastically reduce the amount of ‘face-time’ that is possible.
- Offshoring may also introduce new risks to a project, particularly from political, social and legal disruptions in the country.
There are many approaches to manage these risks. Some companies employ local project managers who are originally from a similar country or culture, or invest significantly in training and alignment. Approaches like Scrum and advances in technology are also overcoming many of the traditional risks that are presented by distant offshore locations.
Nearshoring is where a software development team would be located in a nearby country, or even a neighbouring country. For example, consider a team of PHP developers located in Vietnam for a Hong Kong or Singapore-based company. This approach can be seen as a strategy to reduce the risks of offshoring.
Many of the same benefits of offshoring can be accessed by using nearshoring. The available pool of talent is expanded and labor costs can be significantly reduced. However, nearshoring offers additional benefits in comparison to offshoring:
- Time zone differences are reduced, allowing greater overlap in the working day.
- Cultural differences may be reduced and your nearshore production team is more likely to have direct experience of your culture.
- Travel costs and necessary travel time are reduced, potentially increasing the amount of time spent together and the regularity of in-person contact.
- By being more able to visit, it’s more likely that an effective working relationship will be established and maintained.
The project may still face culture and communication issues, however nearshoring reduces some of these challenges and allows a company to implement a range of additional tactics.
Many Implementation Options
Of course, you can onshore, offshore and nearshore in a range of ways. You might pursue these strategies through an outsourced service provider, or perhaps you’ll pursue your own company located in a separate legal jurisdiction. You might even use freelancers in a limited way to test if the solution works for you and your project.
If you’d like to offshore a production team to Vietnam from the United States, or nearshore to Vietnam from Singapore or Australia, get in touch with Metasource. We can provide a range of options that will make your operations a reality.