Nearshoring vs. Offshoring vs. Onshoring (aka “He’s here, he’s there, he’s every-f*cking-where, Roy Kent.”)
In our last (brilliant and informative) blog, we talked about the differences and similarities between Offshoring and Outsourcing. And we introduced the (brilliant and informative) concept of Yourshoring, which is a term we at TurnKey have coined to describe what we do (we make it all about YOUR product, YOUR team, YOUR deliverable, YOU get the picture).
In this post, we’re going to demystify a couple of other means of business process outsourcing in the tech industry. You already know Offshoring—now meet his first cousins, Nearshoring and Onshoring.
Here’s how we break it all down for you:
- What is Nearshoring vs. Offshoring vs. Onshoring?
- What are the pros and cons of Nearshoring?
- What are the pros and cons of Offshoring?
- What are the pros and cons of Onshoring?
- How do IT companies use all three of these options (and why)?
- Which option is more beneficial for your business?
- How can TurnKey and Yourshoring fit your unique business?
- Some final thoughts.
What is Nearshoring vs. Offshoring vs. Onshoring ?
Nearshoring is a more recent term, born when sourcing tech talent in Latin American countries became a thing for U.S.-based companies. Latin America is relatively new on the scene, and utilizes the Nearshoring term to differentiate itself from its Eastern European and Asian-based competitors (though note that places like Ukraine and Romania would be a nearshore option for a Western European company). It’s geographical proximity makes the time zone difference less of a beast to tame, but of course, that depends on where you’re based.
Offshoring is the OG process of sourcing tech talent outside of the United States. Initially India was the shore of choice, not surprisingly because of lower labor costs and because their English-speaking skills were nearly as good as their technical support. India was such a solid go-to that Offshoring became synonymous with building IT capabilities, first in Asia, and eventually in Eastern Europe.
Onshoring is—you guessed it—the process of sourcing talent in the IT industry within domestic borders, ie, right here in the good ol’ US of A. We’ll get into the yays and nays in a minute, but the obvious boxes that are checked for those who choose this route are that the software developers speak the same language, the time zone issue is significantly reduced or eliminated altogether, and there is an inherent cultural familiarity.
What are the pros and cons of Nearshoring ?
- Nearshoring Pro #1: One and done—geographical proximity to the United States. If your team is based in a Latin American country, time zones aren’t as much of a challenge (no 3:30am Zoom calls!). It’s not the same country, but it’s closer, so you and your team can communicate live during the workday with relative ease. Speaking of communication though…
- Nearshoring Con #1: Unless you’ve got a bilingual workforce, this could be a tough go. There is definitely a language barrier to manage as many Latin American countries do not have a very high English proficiency—check out this English proficiency index if you need more proof. Brazil and Mexico offer a large talent pool (and comparative stability) but the language barrier will be a problem.
- Nearshoring Con #2: Let’s talk dinero. Some parts of Latin America are struggling with economic instability. In Argentina, for example, many people do speak English, but they seem to be constantly in the midst of a monetary crisis. In fact, many of the software developers there want to be paid in bitcoin. (Good luck integrating that into your finance operations at scale.)
- Nearshoring Con #3: Nearshoring is relatively new in Latin American countries, which means it’s playing a bit of catch up. There just aren’t that many firms that specialize in transformational technology—they haven’t been around long enough to be on the cutting edge (which we both know is where you do your best work).
What are the pros and cons of Offshoring?
- Offshoring Pro #1: Money, money, money. Your company is going to enjoy cost savings when you hire an Offshore team, especially when compared to hiring a team in the United States.
- Offshoring Pro #2: Tech talent in Eastern European countries offer transformational services—they are often experts at a particular function. They’ve spent time focusing on solving a particular problem, and honed skills on many other clients, which means by the time you get them, they’re ready to offer you a best-practices approach with cost efficiency.
- Offshoring Con #1: Just like in many other industries, in the tech industry, you get what you pay for. That said, reputable Offshoring companies know that clients balk at low quality work, so they work hard to attract a higher level of talent and skill.
- Offshoring Con #2: Two words: Time zones. At one time, the “get work done while you sleep” approach was considered a check in a “pro” box. But with the rise in technology and the ease of distributed collaboration, people don’t want to work in silos anymore. Collaboration is king—the once ingenious email is now an annoyance when you have Zoom calls, Google hangouts, and FaceTime.
- Offshoring Con #3: You have to be strategic with what you (and don’t) give them to handle. For example, you aren’t going to hand your golden goose over to strangers somewhere on the other side of the world. This Offshore crew can do a lot for your company, but when it comes to strategic builds (like core IP), it’s staying in house.
What are the pros and cons of Onshoring?
- Onshoring Pro #1: Let’s grab some of the low-hanging fruit. You’ve got cultural compatibility. No language barriers. And zero time zone issues. These are just a few of the tremendous benefits of using local talent to build your tech company.
- Onshoring Pro #2: Programmers aren’t just experts at coding, they are problem-solvers. And if you don’t have to explain your problem because your Onshore team intuitively understands it, it’s easier for them to create a solution. It’s especially helpful when your outsourced team members are helping build a product for American consumption. Of course, if your product or service has global applications (or is so niche that even local talent has to study up on it) this visceral feel becomes less relevant.
- Onshoring Con #1: Your bottom line might hit rock bottom, quick—your labor costs are going to be very high. Onshore teams not only demand (and receive) higher salaries, they expect benefits, stock options, and quality management structure to ensure a solid working environment. If you’ve got a ton of capital and not a lot of time—you might be tempted to throw money at the problem. (And hey, maybe your talent will even deliver your product before a tech giant flicks $100k at their head to steal them away.)
- Onshoring Con #2: The American talent pool is so picked over that there isn’t enough to go around. Your developer is a needle in a haystack in that kitchen drawer where you can never find anything when you need it. (Honestly, why doesn’t anyone put things back where they belong anymore?)
How do SaaS companies use all three of these options, and why ?
In a perfect world, there would be enough developers to go around and you could hire the perfect talent where you live whenever you needed to. LOL. In the real world, SaaS companies go where the talent is—everywhere.
If you’re well-funded (and super patient), wait until you can find that diamond in the rough a couple of states over. If not, the other options are good ones, too. Based on the pros and cons above, how far you throw your dart is highly dependent on your product, your team, and your comfort level with things like distance, time zone issues, and language barriers. If your hiring manager has had good luck with one or the other before, maybe you go with what you know and find success again. Maybe you don’t.
Which option is more beneficial for your business?
- For development tasks that do NOT require daily collaboration, Offshoring could work.
- For development tasks that DO require frequent collaboration, you probably want to consider Nearshoring or Onshoring.
- Frankly, you can go Near, Off, or On—but Yourshoring is your best option, especially when you have tasks that are critical to your IP. TurnKey has done the hard work of analyzing the deficiencies, filling the gaps, and creating the best of all worlds for you. We’ve nailed down the hiring laws, best practices, and competitive salaries.
Remember, location is just one piece of the puzzle. It should never drive your strategy. Wherever you are, and wherever your tech team is, TurnKey’s model ensures you get a high-functioning development team who fits your needs like a glove.
How can TurnKey and Yourshoring fit your unique business?
TurnKey has your back and knows your pain points: We handle legal & compliance, recruitment, payroll and accounting, and every additional service that is vital to your success:
- Always Custom Recruiting: We aim to fill each new position in under 30 days, and we curate our list so you don’t get buried (we will present the top five candidates per position). We also spread the cost of recruitment over many months giving you ample time to fall in love with the people you’ve hired.
- Hyper Focus on Talent Retention: Our HR team ensures that your retention is as high as 85% per year. This blows the industry average of 60% retention in typical Outsourcing and Offshoring companies out of the water.
- Bulletproof legal shield: TurnKey runs all of your payroll and contracts so they are fully compliant. We assume all liability and we offer a zero legal headache guarantee.
Some final thoughts
We’ve noodled the heck out of this industry. We’ve lived it, worked it, evaluated it…and now, we’re changing it. In this age of global, borderless collaboration, the companies that will win are the ones who can lower their cost while continually raising the bar. You can only do that with teams that embody your values and live your culture. You can only do that with Yourshoring.
To sum it all up, you have options. Think long and hard about what your product needs, what you’re willing to invest, and what frustrations are worth the struggle. We’re happy to help you navigate the waters lapping at every shore: Near, Off, and On. But we think you’ll land with a Yourshore solution—one that allows you to preserve and grow your culture, while being cost-effective, productive, and wildly successful.
If you hire a team in Brazil because the time zone works for your company, you like the cost savings, and your in-house tech manager is bilingual, you’re Nearshoring.
It means just what it says—you’re hiring a team at a shore near you. Latin America is closer to the United States; Ukraine is closer to Britain..
Offshoring is the lower cost solution that is the farthest away from the U.S. (Eastern Europe or Asia). Nearshoring is closer (nearby) in Latin America. Onshoring is hiring on your own “soil” so to speak—that’s when you find a team in your own country.