Outsourcing, Offshoring and Nearshoring: What's the difference?

If you’re in the tech industry, you’re likely familiar with the term “outsourcing.” Whether it’s outsourcing your IT department or hiring a remote team to assist in software development, more and more companies are beginning to look outside their organization and region for engineering help.

But confusion tends to arise when we start throwing in words like “offshoring” and “nearshoring.” What’s the difference between outsourcing and offshoring? Are they the same thing? And what about nearshoring?

What is Outsourcing?

Essentially, outsourcing refers to any time a company contracts work to an outside organization. This is a broad definition, but one that tends to apply across the board.

However, some people tend to confuse the term “outsourcing” with “offshoring.” Outsourcing and offshoring, though a part of the same family, are notably different concepts.

Outsourcing includes all types of contracted work done by an outside party, including local, nearshore, and offshore teams.

On the other hand, offshoring refers to a specific type of outsourced work.

What is Offshoring?

So, what is offshoring, then?

Offshoring refers to the practice of contracting work to an organization in a different country. Typically, it refers to a significant distance “offshore” from your country of origin. (Like, across an ocean somewhere.)

The benefits of offshoring include:

A larger labor pool to pull from
Cheaper engineering rates
An increased number of work hours

For that last one, think about it this way: due to living in a different time zone, you can have people working around the clock, literally.

The cons?

Offshoring tends to bring with it a number of difficulties. For starters, there are frequent miscommunications. Also, there may be different work cultures and habits to navigate and decreased physical access to your team (due to their location).

Nearshoring: The Happy Middle

Think of nearshoring as the happy middle between hiring expensive local engineers and inexpensive, sometimes unreliable offshore engineers.

Nearshoring refers to outsourcing work to a country geographically closer to your country of origin. Nearshore developers typically live within a similar or identical time zone, saving you from those brutal 1 a.m. conference calls.

But if you’re looking for more perks, we got you:

Nearshore teams share a similar culture, helping to avoid miscommunication. Nearshoring also comes with the advantage of being “nearer” than an offshore firm, making it easier for you to visit your team in person, and have face-to-face meetings if necessary.

Which option is right for me?

Whether or not outsourcing is right for you depends on several factors:

Your specific project goals
The size of your existing team
Your budget

It’s also just the tip of the iceberg.

Within the world of outsourcing, you can also explore staff augmentation and distributed teams. Both are different ways of supplementing your pre-existing (or nonexistent) team with affordable and flexible talent.

The bottom line?

If you’re tired of paying too much for local engineers, and wasting time and energy looking for the next “rock star developer,” it may be time to consider expanding your horizons beyond your shores.