If your current team can't handle your IT workload, it might seem logical to hire more people. But hiring an in-house team is expensive and time-consuming, so you’re looking to outsource development.
Hiring outside developers makes a lot of sense. In fact, 9 out of 10 of the top 2000 companies in the world outsource IT. You can get a team of talented and competent people who build great products without spending a year on interviews. And with an outsourced team, you can part ways when the project is complete—no ongoing overhead or complicated layoffs.
Outsourcing development to a local development shop can be prohibitively expensive, leaving most organizations with two main options: nearshoring and offshoring.
How do these types of outsourcing differ? Which is right for your organization? In this article, we’ll explore nearshoring and offshoring to help you determine which fits your team and projects best. We’ll compare these options across key elements and showcase their advantages and disadvantages.
What is offshoring?
Offshoring is the practice of hiring teams or moving operations to distant locations, often across several time zones. Many organizations offshore to different continents, and with remote work becoming more mainstream, some build fully distributed teams.
Image: CodersLink
For example, a company in New York City might hire a development team in Bangalore, India.
Pros of Offshoring
Lower costs: Offshoring significantly reduces labor expenses by hiring in regions with cheaper wages.
Global talent pool: You gain access to specialized skills not available locally.
24-hour support: Teams in different time zones can offer round-the-clock service without requiring night shifts.
Cons of Offshoring
Communication challenges: Working in different time zones often leads to delayed communication.
Cultural and language barriers: Differences in work culture and language can create misunderstandings.
In-person meetings: Coordinating face-to-face meetings can be difficult due to long distances.
What is nearshoring?
Nearshoring is a middle ground between offshoring and local hiring. It involves moving operations or hiring teams in neighboring countries or regions with similar time zones. For example, a company in New York City might nearshore by hiring developers in Brazil.
At DevSquad, our leadership operates in the U.S., while many of our developers are based in Latin America, combining proximity with top-tier talent.
Nearshoring can help alleviate some of the common problems with outsourcing.
Pros of Nearshoring
Better communication: Similar time zones enable real-time collaboration and easier scheduling of meetings.
Cultural alignment: Teams share more cultural similarities, which improves workflows and reduces misunderstandings.
Easier travel: Face-to-face meetings are more accessible due to the geographical proximity.
Cons of Nearshoring
Higher cost than offshoring: Nearshoring is more expensive than offshoring but still cheaper than hiring in-house.
Holiday overlaps: Shared cultural traditions may cause availability issues during common holidays.
Smaller talent pool: Nearshoring limits you to a smaller talent pool, though there’s still plenty of high-quality talent nearby.
Offshoring VS Nearshoring: Time Zone Alignment
When people compare offshoring versus nearshoring, they’re mostly considering location.
If you live in the United States or Canada, nearshoring refers to talent in Latin America, while offshoring typically refers to talent in Eastern Europe or Asia.
Tired of waiting for a response from your outsourced team? In today’s digital world, the vast majority of productive teams utilize asynchronous communication, meaning that teams write messages to one another via Slack, Asana, Trello, and other project management tools.
If you’re working with an offshored team, you’re going to wait longer for responses. But if timezone only has a few hours difference, you’ll have a lot more overlap in your working hours.
This means, less time waiting for responses and more time getting work done.
Offshoring VS Nearshoring: Cultural Differences
Offshoring teams often come from vastly different cultural backgrounds, leading to communication barriers and mismatched expectations. Nearshoring, on the other hand, minimizes these differences by partnering with regions that share similar work ethics and values. This makes collaboration faster and more straightforward.
In our article on hiring Brazilian developers, we covered how one of the main reasons that makes this collaboration great is the cultural similarities. Brazil and the US are roughly the same size, and both countries have a population that favors a strong worth ethic.
Brazil’s culture of hard work makes their developers a strong choice for US-based projects.
When offshoring, it could be harder to create that culture fit.
Offshoring VS Nearshoring: Quality of Work
When it comes to comparing offshoring and nearshoring, analyzing the difference in the quality of work isn’t as cut and dry.
Nearshoring wins out in most categories, but you can’t just choose a nearby company and expect the quality of work to be higher than what you’d get overseas.
Instead, you’ll need to dig deeper into the specifics of the company you’re vetting.
Look for these key elements to make sure you’re finding the right partner:
A fully managed, dedicated product team
Single point of contact who’s an experienced technical product manager
Proven development processes and agile methodology
Focus on minimizing feature bloat and confusion
Pre-built SaaS features for faster go-to-market
Ongoing discovery sprints to improve and refine the product
Strong emphasis on user-focused development and long-term partnership
If we’re forced to pick a winner, however, we’d still have to say that nearshoring will provide higher quality work. Why? The improvements in communication will lead to better project outcomes.
Offshoring VS Nearshoring: Cost
Offshoring is typically cheaper than nearshoring, largely because of lower labor costs in distant regions like Asia or Eastern Europe. However, that lower price often comes with trade-offs in the other key comparison areas, like communication, time zone differences, and quality consistency.
Better communication can reduce project delays and hidden costs. Nearshoring companies often provide better value because they emphasize quality, collaboration, and quicker iterations. Their proximity allows for better communication, faster feedback loops, and smoother project management.
Nearshoring offers a nice balance between cost and value and reduces the operational challenges that come with offshoring. While offshoring may offer upfront savings, nearshoring can lead to better long-term outcomes with fewer headaches.
Offshoring VS Nearshoring: Communication
The ease of communication is greatly affected by timezone differences and cultural differences. And no, setting 4 a.m. meetings isn’t the solution.
Offshoring typically involves working with teams in distant time zones (e.g., Asia or Eastern Europe). This can lead to long delays in communication, especially when feedback or meetings are needed in real time.
While many offshore teams speak English, language proficiency varies, which can lead to misunderstandings and miscommunications that slow down progress or cause mistakes. Offshore teams may have different work styles, decision-making processes, and communication preferences, which can complicate collaboration and lead to project delays or misalignment.
On the other hand, nearshoring makes scheduling meetings, providing feedback, and resolving issues in real time much easier. Nearshoring companies are often more proficient in the client's language, especially English, reducing the risk of miscommunication. Nearshoring teams tend to have more similar cultural practices, which enhances collaboration, improves workflow, and ensures smoother project management.
Offshoring VS Nearshoring: Speed to Market
Both offshoring and nearshoring can help you get to market faster than if you were to build an internal development team all by yourself. Unless you have product management and software development experience, you’ll waste months (or even years) trying to wrangle your team together and get a product to market.
But if you utilize an expert outsourcing company, you can get to market in anywhere from 3 to 9 months.
However, when comparing offshoring and nearshoring, we have to give the advantage to nearshoring companies. Because of the faster response times, better timezone alignment, and more similar cultures, you’ll be able to communicate with your team easier and get things done.
Offshoring VS Nearshoring: Legal and Compliance Concerns
Nearshoring tends to be safer. It minimizes risks related to cultural differences, time zone gaps, and miscommunication, which can lead to project delays or failure. These benefits often make the slightly higher cost of nearshoring worthwhile.
Here are some important elements to consider:
Data security
Offshoring: Often involves working with countries that have weaker data protection regulations, increasing the risk of data breaches and inadequate security measures.
Nearshoring: Countries typically follow similar data protection laws (e.g., GDPR in Europe or CCPA in the U.S.), providing stronger security standards and better compliance.
Intellectual property protection
Offshoring: IP laws vary widely across countries, and enforcement can be weak in some offshore locations, raising concerns about IP theft or misuse.
Nearshoring: Countries closer to the U.S. or Europe usually have more robust IP laws and enforcement, reducing the risk of intellectual property violations.
Compliance with regulations
Offshoring: Navigating different regulatory landscapes can be difficult, and compliance with international standards (e.g., HIPAA, GDPR) may not be a priority.
Nearshoring: Countries near your region often follow similar regulatory frameworks, making compliance easier and more reliable.
Contract enforcement
Offshoring: Legal systems in offshore countries may be less predictable, making it harder to enforce contracts if disputes arise.
Nearshoring: Stronger, more familiar legal frameworks make contract enforcement more straightforward and trustworthy.
Get top-notch Brazilian developers with DevSquad
When you partner with DevSquad, you're not just getting top-tier Brazilian developers—you’re getting an all-star product team that’s fully managed and ready to deliver. Our developers are carefully selected, highly skilled, and trained to build high-quality SaaS products fast. But we don't stop at coding. You get the full package: a technical product manager, UX/UI designer, and a team of experienced developers working together to turn your vision into reality.
Our nearshore team works in your time zone and understands your culture, so communication is seamless, and real-time collaboration is a breeze. Whether you're launching a new product or leveling up an existing one, we’ve got your back every step of the way with expert advice, agile development, and long-term support.
At DevSquad, it’s not just about outsourcing—it’s about building a true partnership that drives your success for the long haul.
Learn more about our product development squad.
