Nearshore vs. offshore outsourcing – what to choose?

What you will learn from this blogpost:

– What’s the difference between nearshore and offshore outsourcing?

– What to take into account while comparing nearshore vs. offshore outsourcing?

– Who can benefit from nearshore and offshore outsourcing?

Nearshore vs. offshore definition

Nearshore outsourcing refers to outsourcing to countries situated close to your location. Nearshore features include the same time zone or a few hours (1-2) time difference and a distance that can be covered in a few hours.

Offshore outsourcing refers to working with suppliers in remote countries where the differences between time zones are significant. Usually, we talk about offshore while considering outsourcing to partners located on other continents, with up to 8 hours of time difference.

Examples of nearshore vs. offshore outsourcing

Nearshore for DACH countries (D – Germany, A – Austria, and CH – Switzerland) would mean vendors from a.i. Poland, Ukraine, and Romania. Offshore would be outsourcing to a.i. Vietnam, China, India, Argentina, Brazil, Chile.

In the case of North America (USA, Canada), nearshore means companies from a.i. Mexico, Costa Rica, and offshore could be Poland, Ukraine, China, etc.

Factors to consider when choosing between nearshore and offshore outsourcing

We prepared a complete list of factors to take into account when comparing IT outsourcing for near-  and offshore locations. The main factors are:

– time zones,

– wages,

– risk differential (political, economic, financial),

– level of the IT education,

– English proficiency in professional use,

– cultural differences,

– integrity with the local law,

– service quality,

– travelling costs,

– work methodologies,

– technological compatibility,

– quality and regularity of documentation,

– stability of the currency,

– people retention (churn),

– time of response.

Key factors

While deciding between nearshore vs. offshore, there are a couple of key factors that need to be considered.

First of all, the cultural differences. Diversity is a value in the context of building an inclusive organizational culture and products that meet the needs of various target groups. However, it can influence the efficiency of cooperation. Managed consciously, it can bring added value. On the other hand, undermanaged significant cultural differences may cause chaos.

Legal integrity is rarely considered in the decision-making process. However, as a source of possible risk and a time-consuming issue, it plays an important role and should be carefully thought through. A vendor with experience in a particular market means faster contract processing and safer decisions.

Last but not least – the differences in frameworks, methodologies, tools. Compatibility of workflows means an easy project kick-off, team comfort, and more effective collaboration. Additionally, it also serves to flatten the learning curve.

j-labs: nearshore vs. offshore

In business, every choice is good as long as it’s relevant to the company needs. Both nearshore and offshore outsourcing have their pros and cons. What is crucial is the vendor’s preparedness for cooperation for the nearshore and offshore mode.

As j-labs, we have worked with clients from all over the world since 2008. We know that the decision concerning a vendor is complex. When entering particular markets, we make careful preparations and take specific market needs into account. We are based in Poland and have been working with companies around the globe for years.

Based on many years of experience in nearshore (DACH, Benelux, Scandinavia, etc.) and offshore (North America, Asia, etc.) cooperations, we created high internal standards.

As far as nearshore, we pay much attention to specifics in the agreements that need to adhere to European Union directives and law, agile work methods, and precise documentation. In terms of offshore collaborations, we put a lot of thought into managing asynchronous work, communication standards that include cultural differences, the flexibility of working hours, etc.