If you’ve ever searched for ‘outsourcing’ over the internet, you must’ve come across the terms ‘onshoring,’ ‘offshoring,’ and ‘nearshoring.’ All of them are outsourcing models, and they differentiate from each other based on the geographical location of the outsourcing agency.
Wait, did it get a bit confusing? Don’t worry! Here’s correcting the confusion with a detailed comparison so you can decide what fits best with your business needs. Let’s start with the basics.
What is Offshoring?
Offshoring is when you delegate work to a third-party firm outside your home country.
What is Onshoring?
When you contract part of your work to an organization situated in the same country as yours, it is called onshoring.
What is Nearshoring?
It is called nearshoring when you utilize services from a company situated in a nearby country with a similar time zone as yours.
Offshore Vs. Onshore Vs. Nearshore- A Detailed Comparison
Comparing the three outsourcing strategies based on certain key features can give a clearer picture of what can help you steer towards your business goals fast.
- Coordination and Control
- Offshore– In this method of outsourcing, communication mainly takes place through a virtual medium. Face-to-face interaction is scarce or negligible; thus, having a reliable team of remote workers becomes imperative. It will help if you have an efficient communication system and smart remote work procedures to prevent miscoordination among your team members. Recruiting an offshore staffing agency for offshoring is one of the best methods to make the most out of your offshore strategy.
- Onshore– Onshoring offers a significant advantage in communication and supervision. Your in-house employees can interact with them regularly and hold in-person meetings and training whenever required. Being in the same country, the vendor’s team is easily accessible. This reduces the chances of miscoordination and thus the turnaround time for projects.
- Nearshore: The nearshore model falls somewhere between the offshore vs. onshore conflict. Since your nearshore team works from a neighboring country, you have a chance to visit them from time to time, but that depends highly on your commute’s difficulty and distance.
- Availability of a Diverse Talent Pool
- Offshore- Offshoring is the winner regarding the diversity of hiring options. One of the major benefits of this model is that you have access to a global talent pool and the opportunity to recruit the best from among them.
- Onshore- Onshoring offers limited options when looking for and hiring an outsourcing agency. You are limited by geography as you must search only within the borders of your country.
- Nearshore- Almost like a negotiator in the tussle between offshore and onshore, nearshore outsourcing offers you the freedom to move past the borders, but not too far. So, it provides more choice than onshoring but less than offshoring.
- Linguistic, Cultural, and Time zone Differences
- Offshore- Language and cultural barriers are significant in this one as your offshore team resides in a different country or maybe even a different continent. While the time zone difference hampers instant communication, it also serves as an advantage. The latest tech trends in offshoring have helped bridge this gap to a large extent. Alternative shifts of work across borders ensure round-the-clock continuity of business operations. While your team in one continent may be asleep, the other one will be up and working.
- Onshore- There’s little to no language barrier between you and your onshore team since they reside in the same country as yours. The absence of time zone differences makes instant communication possible, thus enhancing work speeds. Moreover, the cultural difference is also negligible, further improving coordination and understanding between your in-house team and the outsourcing agency.
- Notice that the stark difference between onshore and offshore regarding language barriers is due to a significant shift in the location in the latter case.
- Nearshoring- Minimal linguistic and cultural dissimilarities characterize Nearshoring. Because the time zone difference is not that significant, the model offers reasonable convenience of coordination.
- The Cost Factor
- Offshore– A highly cost-effective solution that helps companies cut back on huge expenses without compromising on the quality of work. Offshoring destinations like India, the Philippines, Mexico, and likewise offer skilled professionals at considerably lower salaries than the developed nations due to the lesser cost of living and abundance of talent.
- Onshore- Hiring onshore talent is undoubtedly the most expensive of the three. Domestic talent usually comes at wages higher than what you can find outside.
- Nearshore– Depends entirely on your country of work. If you’re residing near major offshoring destinations like India, Bulgaria, China, Poland, and others, you can enjoy the benefit of low-cost labor, just like offshore. However, if your neighboring countries offer expensive talent, you might have to rework your budget.
|Coordination and Control||Challenging due to communication over virtual means only||Easily possible due to the vendor being accessible||Reasonably convenient depending on the commute frequency, distance & difficulty.|
|Availability of a Diverse Talent Pool||Access to a global pool of talent||Access to a limited pool of talent within the same country||Freedom to move past borders, but not too far.|
|Linguistic, Cultural, and Time zone Differences||Significant barriers. However, time zone difference is an advantage||Zero barriers and instant communication are possible||Minimal dissimilarities, therefore, operate with little to no difficulty.|
|The Cost Factor||Highly cost-effective||Most expensive||Depends on your destination of work.|
Offshore Vs. Onshore Vs. Nearshore- Which is the best?
Well, there’s no single correct answer to that! Each of them is an excellent method of outsourcing that can help businesses save on expenses and improve business efficiency. The trick to finding the one suitable for you is to take a closer look at your business needs and see which serves them the best.
For example, onshoring presents a viable solution when you want to execute projects which require prompt communication and need to monitor your team’s progress and performance closely. However, offshoring is your best bet if you’re looking for a cost-effective solution for jobs that do not require much supervision.
To solve such challenges, Mastech Digital offers a hybrid offshore model that combines both benefits and helps you make the most out of offshoring.
This model helps you factor in all the benefits and risks and evaluate each method’s compatibility with your business goals before making the final decision. Good luck!