Onshore Outsourcing vs Offshore Outsourcing: what is the better choice?
Outsourcing is a very efficient practice by which companies get their projects done quickly, with greater accuracy and higher chance for success. There are different kinds of outsourcing that companies choose depending on what kind of service they need. The three main types of outsourcing are Onshore, Offshore and Nearshore.
Outsourcing usually happens when the company enters into a contract with a freelancer or a service provider who provides a team of professionals with varying skills and talents. The contract itself is of different types – project basis, hourly contract or monthly payment. This would be based on the kind of project the company needs to get done. They prefer to go for the hourly contract if the project is small. However for big e-commerce projects or similar ones, the contract can be renewed until the work gets over. At the end of the project, the company might retain a small team for scaling, maintenance and other requirements.
Which brings us to the question – which one should you go for out of the three?
Onshore outsourcing is where the company outsources their project to a team in their own native country. The new team will not be permanent hires or employees of the company, but will be onboard only during the duration of the project.
Offshore outsourcing where the company delegates a whole project or several parts of the project to a team from a totally different country. The team will already have the skills the company is looking for, so there is no need to train anyone.
Nearshore outsourcing is where the company outsources their work to a neighbouring country. So there will be no change in the timezones, but could be a more expensive option.
In this article, the discussion would be centred around onshore and nearshore outsourcing, and a comparison of the two.
Onshore outsourcing, also known as domestic outsourcing, is the practice of hiring an external team and contracting a project with them. The outsourced team will be located in the same country, mostly. The hiring company will contact a service provider who will provide them with a team and also, all the infrastructure and the resources to get the project done. The hiring company doesn’t have to prepare themselves to accommodate the new team because this would all be provided by the service provider.
The client and the vendor are located in the same country and same region, probably, so there is no need for an ice-breaking meeting. You can get directly into the topic and the project discussion. There is no time wastage and you have better control over the development process.
No language problems – Since the vendor team is located in the same country, language will not be an issue at all. There is no risk of misunderstanding or misinterpreting of terms and phrases.
Improved quality control – Businesses can enjoy better quality control because the team is located in the same country, so they can always ‘see’ what’s happening and steer them in the direction they need.
Reliability with business interactions – The security levels are the highest when you partner with an onshore company. Since the outsourced team works in the same environment as yours, they will be more careful in keeping the cooperation as fluent and positive as possible.
There aren’t many disadvantages to onshore outsourcing because it is so convenient to allocate tasks to a team that’s located in the same country. But cost is a major factor, especially when companies are looking to cut costs. You will have to pay the same rate as you pay your employees, and sometimes more, depending on their skill level. The other disadvantage is that you don’t have access to a large resource pool like with offshore outsourcing. The number of skilled talent will be limited.
Offshore outsourcing is when you outsource IT processes and software development projects to a totally different country. The time zone difference will be really huge, often 8 hours or more.
Low cost of labour – One of the biggest advantages of offshore outsourcing is that you can get a skilled and talented team for cheaper rates when compared to native rates. This means the businesses can control their operational costs significantly.
Huge talent pool at your disposal – When you decide to do offshore outsourcing, you have a lot of options when it comes to choosing the best team. And you have a great option among choosing the outsourced country too – India, China, Philippines, Ukraine, Poland, etc.
Excellent when you need scalability with a global workforce – With a global workforce, you can easily scale your project, using their multiple skills and talents.
When you need round the clock work done – Having an offshore team is a great option when you need round the clock work done for your project, especially during peak seasons. This would make it possible for the team to monitor the project without crashing.
There are some disadvantages to hiring offshore teams. Cultural differences make it mandatory for the teams to communicate and break the ice before they actually start work on the project. The language barrier can also be an issue especially when the outsourced team fails to catch the real meaning of the phrases. And the final thing – if the vendor is not careful in matching the right team with the right project, you might land with a mediocre team. And this might cause you to start the project from the beginning.
While choosing which option to go for would depend on a number of factors. These factors are pretty much the same for all companies, so check them out. Then you can make the decision based on your unique needs and goals.
Required expertise and skill set – When you opt to go for an offshore team, a lot of possibilities open up. You can choose from among multiple talents and skills, making it very easy to find exceptional people for your team.
The cost factor – Obviously, when you are on a tight budget, there is a chance you would go for a team that gives you the best price. With an offshore team that is easily possible. However, you have to keep aside an amount for travel, communication and managing the relationship.
Keeping the communication lines open – One of the biggest concerns when the team is halfway around the globe is how to keep the communication lines open. But now with modern technology and software that is not a matter of concern at all.
Assess the risk tolerance – It is important to weigh the risk tolerance while choosing which option to go for. With onshore, you don’t have to worry about the cultural differences, time zone differences and other barriers that come with it. But if budget is a factor, then you can consider offshore, because that will definitely make it cheaper.
Weigh the pros and cons of each of these outsourcing options before choosing the one that would take your business to the next level of growth.
Hi, my name is Rahil. I work at YUHIRO Global and I help web agencies and software companies from Europe to build developer teams in India.