Onshore vs Offshore Company: Difference and What to Consider?

Onshore Vs Offshore

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People have been debating nonstop about the onshore vs. offshore company business models for a while. These are not new terms in the business world. 

 

Businesses from multiple domains are rapidly adopting these two models per their business needs and budget. This is paired with the report of Nano Global that offshoring can save 81% of the cost — all while avoiding a reduction in product quality.

 

However, are you aware of these two concepts’ ins and outs and what they can offer?

 

We’ve covered you if you’re planning to outsource a software development project and are unsure where to turn. We’ll go over some advantages and drawbacks of both nearshore and offshore outsourcing, as well as project types and common destinations, so you can decide which option fits your needs best. 

 

Onshore vs. Offshore Company – An Overview

An onshore company is an entity built in the home country to complete a project within a specific jurisdiction.

 

You choose to avail of services from a company located in your country. In this case, you may have to spend more in terms of labor costs, but the benefit is you have to coordinate with the local employees.

 

This means you don’t have to deal with any language barrier or cultural differences. 

As per McKinsey & co. and the Sourcing Journal, a step-change in onshoring will accelerate the market in the upcoming years.

 

The factors that will drive growth are advancement in automation and sustainability concerns.

Onshoring makes more economic sense with advanced technology, as automation helps in enhancing productivity. 

 

So, what is an offshore company? While onshore companies are the type of company you encounter daily, offshore companies, on the other hand, are a whole different concept.

An offshore company is a legal entity incorporated in a jurisdiction outside the investors’ home country. This far-off-the-land incorporation is because offshore jurisdictions can offer favorable tax treatments in terms of low tax advantages or even tax-free.

 

A few Key Stats to Consider

  1. More than 44% of the chief intelligent officers want to take advantage of outsourcing. The outsourcing statistic from 2018 clearly depicts that the complete IT sector wants to consider outsourcing.
    In fact, 51% of technology executives say that they outsource applications and also software maintenance and 40% outsource data centers. 
  2. Cost-saving is the major motivation for IT outsourcing. Freeing up resources in order to focus on your core business and cost-saving are the reasons for IT outsourcing.
    45% of organizations claim that their projects are meant to save money. 46% say outsourcing gives them access to skilled workers that are not available in-house.
  3. 24% of small business outsourcing to enhance efficiency. For startups and small business owners, efficiency is a priority. They don’t have access to the necessary resources; budget restrictions are major reasons.
    The US outsourcing stats depict that any startup firm outsources its project to increase available expertise and seek the help of experienced professionals.
  4. India tops in global outsourcing. According to ATKearney, India tops the list of global IT outsourcing. This clearly means many countries consider India as their IT destination.
    For years together, India has managed to maintain its position as the top IT leader in the industry.
    Offering a diverse range of skilled English-speaking developers that no other country provides at this rate, Indian developers have a good reputation in the market.

    As per the outsourcing statistics for 2017, India tops the list with an index of 7.07, followed by China having 6.31.

Also read: Inhouse vs. outsourcing – everything you need to know

 

Onshoring vs. Offshoring: The Difference

  • Communication

    Verbal communication is very important. But there are certain limitations related to language, accent, and dialect differences.
    Unclear communication causes confusion. The clear and more detailed instructions, the better it is.

    • Onshore:

      When you are onshore in your project, it is easy to communicate. As the time zone is the same, meetings can be held at a time that is decided mutually by both teams.

    • Offshoring:

      Communication takes place with the help of efficient collaborative tools like Skype, JIRA, Basecamp, and Slack.

 

Detailed documentation helps in understanding the requirements and expectations of the company in specific. Better understanding results in less confusion, saving a lot of time for the team members.

 

  • Business Hours

    • When you are working with an offshore team, the time difference plays a significant role.
    • This can either be positive or negative; everything completely depends on the work involved at that particular time.
    • For certain businesses, it is important to stay active 24 hours. This is only possible when you hire software developers from an outsourcing company.
    • As they are in different parts of the world, they work in multiple shifts.
    • This way, your in-house team works on the project for fixed hours, and the offshore programmers work when they sleep. This further ensures that the project is being developed throughout the day.
    • But the outsourcing team of developers has to be very careful about this.
    • Too much ‘back and forth tends to extend the timeline of the team members or the complete project.
    • There should always be a good amount of respect for the in-house and outsourcing teams.
    • Onshoring
      • Many organizations today still prefer onshoring as they feel it makes more sense to them. The time is standard, and language has no barrier.
      • They gel up with the team in the least possible time. And most importantly the culture is respected and holidays are the same.
      • The aforementioned points have clearly depicted that outsourcing is the best option to consider.

Points to consider while outsourcing

Collaborate with the offshoring partner once you are confirmed. They will strive hard to complete your project on time. 

  • Avoid IT outsourcing communication gaps and keep everything very clear from the beginning.
  • Make sure “Agile development practices are followed.
  • Carefully evaluate the abilities of the offshore team. 
  • Predetermine the timeframe of every task within the project.
  • Analyze the risk factor while hiring professionals. 

 

Factors to Consider When Choosing Between Nearshore and Offshore Outsourcing: 

  1. Pros and cons of nearshore vs. offshore outsourcing
  2. Common nearshore outsourcing destinations
  3. What projects offshore outsourcing fits best
  4. Where to find your outsourcing provider

 

Pros and Cons of Nearshore Outsourcing

Let’s have a quick overview of the pros and cons of the nearshore outsourcing model.

Pros:

  • Same time zone:

Same Time Zone nearshore outsourcing

None of you and your outsourcing partner have to work overtime or shifts to synchronize the development process. The time zone remains the same.

 

  • No cultural differences

No Cultural Difference nearshore outsourcing

Being in the same continental region, you don’t have to face cultural differences. Compatibility and productivity are high.

 

  • Quick problem-solving

Quick Problem Solving nearshore outsourcing

There is no time zone difference issue with an onshore business model, so managing the team while monitoring the projects is easier.

 

  • Proximity

Proximity nearshore outsourcing

The biggest advantage is they are very close to your business. This allows for less expensive and more face-to-face meetings.


It further makes it easier for you to manage the team while monitoring the projects you have outsourced them.

  • Easy communication

Easy communication

Communication is easy as you communicate in the same language. This makes it easy for the team to coordinate with one another. 

 

  • Rules & Regulations

Rules and Regulation onshore development

Having an onshore company by your side means the same regulations govern both you and your onshore team.

It becomes easy to find if the onshore team is not complying with the country’s regulations, and you can immediately raise the alarm. 

Now let’s move offshore.

Hire Top Offshore Developer

Cons:

  • Higher Bill Rates: 

Onshore development will likely cost more due to the quality of the software engineers working on your project. You’re essentially paying more for experience and expertise; however, the high bill rates tend to translate to better software solutions.

 

  • Backdoor Offshoring: 

Onshore companies will outsource some of their development to offshore companies. Such a practice is known as backdoor offshoring. Some companies will do this to cut costs, but it can lower the quality of your software. 

 

Pros and Cons of Offshore outsourcing

Let’s quickly overview the pros and cons of the offshore outsourcing model.

 

Pros

  • No long-term contract is required

    You can sign a contract for a particular project and get it done within the given timeline. However, if you require long-term assistance, you can have a discussion with the company.

 

  • No need to provide equipment and software to the offshore team

    The company at a different geographical location is well-equipped and has updated software and technology stack knowledge.

 

  • It saves you the cost

    It saves costs as well as the hassle of hiring in-house professionals. This otherwise turns out to be a very expensive affair.


Reduces the costs by taking advantage of the availability of a labor market that is very cheap whilst maintaining high-quality standards.

 

  • Specialized professionals

    You can take advantage of trained and certified professionals. This clearly means that you hire developers with the expertise to develop your project in the best manner possible. 

 

  • Focus on your core business

Outsourcing peripheral projects and services gives you a lot of time to improve your core business, which may otherwise be working that smoothly.

 

Cons

  • Communication Barriers

If you choose an offshore company located in a country where English isn’t the primary language, communication may become a real challenge. Trying to communicate your software development needs, wants, and questions can be tricky if you’re dealing with someone who doesn’t know the language. 

 

  • Cultural Differences

Cultural differences can be communication barriers in themselves. For example, you may use particular phrases or terminology commonly accepted within your industry or by businesses in the U.S. that people in other countries aren’t aware of and may misinterpret. 

 

Such cultural differences can lead to misunderstandings and confusion and hinder your ability to convey what you need. 

 

When to Choose a Nearshore Outsourcing Company?

Nearshore outsourcing might be the right choice for those looking to augment their in-house team in Agile projects. In those types of projects, constant communication between project team members is a critical requirement of the development process and can make or break a project’s success.

 

For full project outsourcing that requires close collaboration between project stakeholders and the outsourced team, nearshoring is also a suitable option. And finally, for projects where regular on-site visits from both parties are required to release the project and manage its progress, it’s best to hire a vendor close to home.

 

What Projects offshore outsourcing fits best?

It helps to look at what you’re hiring an outsourcing development partner for to decide whether you should consider factors other than cost. 

If you’re looking to fill in the skill gap of your team on advanced technologies or narrow domain expertise at a reasonable cost, an offshore outsourcing partner might be a good fit. 

 

Similarly, you might want to look offshore for full project outsourcing with a need for a good price and quality balance — just be sure to choose a vendor with some working time overlap to ease communication. 

 

Lastly, for simple projects where cutting costs is essential, an offshore software development outsourcing partner will be the best choice for you. 

 

Points to consider while outsourcing

Collaborate with the offshoring partner once you are confirmed. They will strive hard to complete your project on time. 

  • Avoid IT outsourcing communication gaps and keep everything very clear from the beginning.
  • Make sure “Agile development practices are followed.
  • Carefully evaluate the abilities of the offshore team. 
  • Predetermine the timeframe of every task within the project.
  • Analyze the risk factor while hiring professionals. 

Also read: How to Choose the Best Outsourcing Partner in An Offshore Location?

 

Why Should You Choose “Your Team In India” as Your Offshore Company?

Your Team In India offers various offshore advantages. They have unparalleled connectivity and accountability as compared to many of its competitors. 

Additionally, Your Team In India reduces communication concerns while ensuring a major amount of time is spent on development and software.

Even while having time zone differences, the offshore development center manages the work efficiently, delays communication, and strives hard to deliver its best. 

The offshore development company delivers

  • Cost-effective software development resources
  • Dedicated high-performing Agile Teams
  • Committed to the decided deadlines
  • Quick ramping up and seamless integration
  • Specialist in every technology (Java, Python, .NET, React, Flutter, Angular, Php, etc.)

We have a passionate team fully equipped to tackle all the company’s software needs. You get a team of global software experts that work on the dedicated project.

We offer high-quality solutions without any hassle so that you can focus on your business. You will soon realize how Your Team In India can improve the way your company does business.

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