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Nearshore vs. Offshore Development: Which is Right for You?
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Finding international engineering talent can be a big boost to your development team. Global talent can help your time find developers more quickly and at lower costs than domestic hiring and have become part of the standard playbook for modern engineering teams. However, deciding on nearshore vs. offshore development services can have major differences. We’ll explore nearshore vs. offshore development and the three biggest factors to consider when choosing between them.
- What is nearshore vs. offshore development?
- Communication and time zone alignment
- Differences in costs
- Talent quality and skill level
What is nearshore development vs. offshore development?
Nearshore development refers to developers or software development services in neighboring or nearby countries that share a similar time zone, culture, and language. For U.S. companies, leading countries for nearshore development are:
Similarly, offshore development refers to developers or software development services in more distant countries, creating bigger gaps between time zones and share cultures. For U.S. companies, typical countries for offshore development are:
Communication and time zone alignment
When it comes to offshore development, the communication and time zone differences can be significant barriers to effective collaboration. If a company in the United States partners with developers in India, there could be a 12-hour time difference. This means that the Indian team may be starting work just as the U.S. team is finishing for the day, and there may only be a few hours of overlap each day for communication and collaboration. This can make it challenging to have real-time conversations or to quickly address issues that arise.
Offshore developers can be very effective to create a global “follow the sun” style development model. For companies where full-time developer coverage is critical, offshore developers can be a critical part of your team infrastructure.
Additionally, there may be cultural differences that can impact communication and collaboration. For example, language barriers or different work styles can lead to misunderstandings or delays in communication.
On the other hand, with nearshore development, the communication and time zone differences are typically much smaller. For example, a company in the United States that outsources software development to a company in Mexico or Canada may only have a 1-2 hour time difference. This allows for more real-time collaboration and faster response times to issues or questions that arise. For startups still looking to find product-market fit or looking to iterate quickly, time zone alignment can be critical.
English proficiency is higher in nearshore countries than offshore countries. According to reports by both Toptal and Accelerance, nearshore countries generally score much higher on English proficiency tests than offshore countries. Additionally, there may be fewer cultural differences to navigate, as there are often more similarities in work styles and communication norms between neighboring countries.
Differences in costs between nearshore vs. offshore developers
Both nearshore and offshore development have cost savings over domestic hiring. Across the board, hiring abroad will be better for your budget than hiring domestically.
The costs of offshore and nearshore development vary depending on various factors, such as the location of the outsourcing company, the level of expertise required, and the complexity of the project. You can see 25 – 40% savings for hiring nearshore developers, whereas offshore developers can typically save you between 50 – 70% due to lower costs of living. Those numbers have been compressed in recent years as the global workforce and economy have shifted.
Talent quality and skill level
There are no studies that suggest that one group of developers is inherently better or worse than the other. Quality and skill level of software developers depend on a variety of factors, including their education, experience, training, and individual abilities. There are highly skilled and talented developers in both nearshore and offshore locations.
One thing to note: the quality of work and skill level can vary significantly between locations and talent regions, as pockets of talent and expertise tend to concentrate. For instance, Guadalajara, Mexico has become a hot spot for tech companies because the government invested in the city’s technology infrastructure, it’s close to the US, and has great universities. It’s become a center for investment in both startups and talent.
Nearshore vs. Offshore Development: which should you choose?
Here at Terminal, we believe nearshore development is the way to go. The advantages you gain in collaboration and communication from nearshore team members outweigh the slight cost savings you gain from offshore development. For teams looking to build mission-critical products, collaboration is key, and nearshore teams offer the best options there. Offshore teams are certainly helpful for teams looking to have “follow the sun” coverage, but their advantages stop there.