Nearshore vs. Offshore Development: Which Is Right for You?

Greater diversity, enhanced innovation, and access to niche skills. These are just a few of the benefits of remote work.

The rise of remote work has led to a surge in cross-border partnerships and working arrangements. In 2023, tech was the industry with the highest percentage of remote workers globally, with 67% of tech employees working fully or mostly remotely. 

Although overseas software development has been popular for several decades, in recent years, the trend has grown significantly. If you’re looking to tap into the distributed team model, there are two main approaches to consider: nearshore vs. offshore software development. 

What is nearshore development vs. offshore development? 

A type of offshoring, nearshore development refers to working with developers or teams in neighboring or nearby countries. These regions are in the same time zone as or have significant time zone overlap with your business. For the US, nearshore destinations are usually Latin American countries like:

• Mexico
• Canada
• Costa Rica
• Colombia
• Brazil

Offshore development involves working with developers in distant countries, typically several time zones away, often with few—if any—overlapping business hours. For the US, offshore destinations include:

• India
• Philippines
• Vietnam
• Poland
• Spain
• Romania
• Ukraine

Pros and Cons of Each Approach

Nearshore Development Benefits

Research shows that ​ “culturally diverse teams separated by physical distances across multiple time zones face significant challenges in collaborating effectively with each other.” Nearshore teams have both time zone overlap and cultural similarities with the US, strengthening team dynamics and results. This also leads to easier integration with on-site or onshore development teams. 

Teams can communicate in real-time, which often means fewer hiccups. Moreover, thanks to similar regulatory standards and legal requirements, risks are lower as well. 

Offshore Development Benefits

It is not always feasible to hire nearshore talent from a LatAm time zone. Perhaps, for example, you want to hire talent from Europe or Asia. There are several upsides to working with offshore software engineers. For example, offshore workers will be active when US team members aren’t working, ensuring around-the-clock attention and a 24-hour total workday. 

Offshore development allows you to tap into a larger talent pool. That means you may have a better chance of accessing hard-to-find skill sets. The offshore model is often lower-cost as well. 

Tips for Nearshore and Offshore Collaboration Across Time Zones

Working together across regions and time zones requires careful planning. To start, establish preferred working hours for all team members. Ask team members to set their time zones and work hours in collaboration tools like Slack so everyone knows when their colleagues are available. Bear in mind that some team members may prefer to work early or late, outside of typical business hours.

Use a shared calendar to track vacations, national holidays, and absences. This will help you collaborate more effectively. Leverage tools like World Clock Meeting Planner to find times that work for everyone.

Even in the case of significant time zone overlap, you should make use of asynchronous communication, too. This is important for encouraging team members to remain independent. Project management tools such as Jira allow you to track and manage project progression without micromanaging. Ensure that everyone knows how to use these tools and that deadlines are clearly marked.

Finally, underscore the importance of communication, synchronous or asynchronous. Be clear but concise, ensuring understanding at every turn. Document everything; that allows you to track projects and reference discussions. 

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 numerous 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 of note: 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: Choosing the Right Approach Based on Your Goals

The right approach depends on your focus and priorities.

Nearshore development is typically better if:

• Your projects depend on close collaboration
• You need to reach market fast. 
• You anticipate scaling quickly.

Offshore development is typically the best approach if:

• You want coverage at all hours.
• You need to optimize costs.
• You’re aiming to have a global, rather than simply regional, presence.

You don’t always need to choose between these approaches. Sometimes, businesses use a combination of both nearshore and offshore development, leveraging the skills of developers around the world. 

Nearshore vs. Offshore Software Development: Final Considerations

When deciding between nearshore vs. offshore software development, time zone alignment is certainly a factor, but it’s not the only one. You should also take long-term partnership potential, employer of record concerns, and legal, security, and IP factors into consideration.

Be mindful of different work cultures; you may not always align on communication and collaboration styles. Still, your team members must have English language fluency and alignment. 

Finally, hone your onboarding process to keep it from being overly tedious. Employees are more likely to remember the various procedures for sync or aysnc work if the training is engaging, not just informative.

Remember: There’s no one-size-fits-all approach or answer to global software development. It’s not just about the region—it’s about the qualities the particular developer offers. The best approach aligns with your business stage, goals, and team preferences.

Terminal Nearshore and Offshore Markets

At Terminal, we find and hire top engineers from both nearshore and offshore markets. Whether you work with talent from Latin America, Europe, or Canada, you can accelerate development and improve collaboration. 

Explore markets in:

• Canada
• Chile
• Colombia
• Costa Rica
• Mexico
• Hungary
• Poland
• Romania
• Spain

Learn more about our nearshore hiring hubs in Canada, Latin America, and Europe, or contact our team to get more info!