Offshoring vs Nearshoring. Pros and Cons in IT Services

Building internal IT structures is a solution which, although often chosen by companies, generates vast costs. Obtaining highly qualified IT specialists is very difficult, and the impact that the development of new technologies has on workplaces means that the specialist employed today, tomorrow might no longer be the one, that the company still needs. For […]

Offshoring vs nearshoring – fundamental differences

Offshoring means that the company transfers the process of providing IT services to a far-flung remote location. Such decisions are often chosen based on costs. For example, China and India are the two most popular countries for Western companies that want to outsource their software needs but do not have significant resources to do so.

Offshoring has, of course, some disadvantages that need to be taken into account. These include, above all, different time zones, cultural differences and language barriers. Such factors may affect the quality of work and digital product, although this is not the rule. Therefore, before choosing a company to outsource IT services to, it is worth examining the market thoroughly, learning about its experience and the specialists employed.

The term nearshoring refers, in turn, to situations in which a company outsources part (or all) of its IT services to an external provider located abroad, but in its region. Usually, this cooperation concerns neighbouring countries.

A significant advantage of this type of outsourcing is that these companies are often bound by similar financial and legal restrictions (e.g., Personal Data Protection Law). Distance, minimal time zone and cultural differences are why nearshoring is a solution more and more often chosen by entrepreneurs. By deciding on a business partner from a country located abroad, we can make more frequent and cheaper business trips. We gain greater control over the development process, which is particularly important in critical situations.

Pros and Cons: Offshoring

The key benefits of offshoring include:

Cost savings,
Preferential taxes offered by different countries,
Government subsidies for labour costs (in some countries),
Access to qualified and available staff.

Among the offshoring risks, one should mention:

Potential reduction in the quality of services,
Complications caused by the difference in time,
Travel expenses,
Communication difficulties (language differences),
Security risks due to differing standards.

Pros and Cons: Nearshoring

Among the advantages of nearshoring should be mentioned in turn:

Closeness (face-to-face meetings and faster communication),
No time differences,
Making timely decisions,
Quickly reacting to project changes and risks during operation.

Among the dangers of nearshoring, the higher costs of the whole project should be indicated. However, we should remember that although the hourly valuation of specialists’ work may seem more expensive, due to the lack of time changes or communication problems, the whole project will take less time than in the offshoring model. Then the entire calculation of the project may turn out to be much cheaper than we initially assumed. These issues should also be taken into account already when selecting a company dealing with IT services outsourcing.

Who is worth entrusting the project, time and money to?

Unfortunately, there is no single answer to this question. However, remember that a trustworthy partner should:

Have experience in projects or services similar to those you want to outsource,
Well-known clients should be included in the portfolio of completed projects,
Provide you with references,
Have teams of specialized and qualified specialists and adequate IT equipment resources that can understand your needs and handle your tasks,
Have a stable financial situation so that your project is not interrupted in the middle of the work,
Ensure smooth communication,
Provide after-sale support.