Offshoring, outsourcing, nearshoring, onshoring: what’s the difference?

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Let’s start with some definitions

Outsourcing means engaging third-party vendors on a contract basis to deliver software. This either means working with freelancers, or vendors who work with freelancers and is typically the cheapest way of getting work done.

Business outsourced to reduce costs
However, with no control over development, the results can be very hit-or-miss and is thus not considered a sustainable, long-term strategy.

Onshoring is the transfer of your software development to non-metropolitan areas within your own country.

Consider a city like London: rent, bills, and wages are all much higher than the rest of the country. By building a development team in a nearby town instead, you can keep the operational costs a bit lower.

As the name suggests, nearshoring means ‘near’ to home, but not quite. To give an example, developers in Los Angeles are very expensive, and there’s no easy “onshoring” alternative. Good Mexican developers, however, work in a similar time zone and would with much lower costs.

Nearshoring is useful for companies who want constant, real-time collaboration with their in-house staff. For a company based in Paris, nearshoring might be done with Ukraine, who are only a couple of hours ahead.

Offshoring is where you build an independently-functioning development team, anywhere in the world, and everyone on that team is a full-time employee of your company.

Though this adds a time difference, it eliminates the risks of engaging short-term contractors. It also allows companies to hand-pick their developers, with no geographical limitations.

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