People often use the terms software development outsourcing, offshoring and nearshoring interchangeable and often confuse them. Do you wonder what is the actual difference? Below we summarize each term separately.
Software outsourcing is the umbrella term that refers to obtaining certain services from an external company. Most of the time, the main reason to do so is to get access to a talent pool with specific knowledge and skills.
While some people think outsourcing means using a service provider in a foreign country, this is not necessarily the case. You can outsource your work to a company located anywhere, even in the building next to you. Therefore, this is a general term which can be divided into two subterms: offshoring and nearshoring.
Software offshoring and nearshoring
Offshoring usually refers to the relocation of business processes, production or operations in far-away countries, such as India or China. In software development context this means to delegate some or all of your software development to a team overseas. While the costs of working with such companies are attractive, there are some major drawbacks that one should consider such as time zone difference, high visit costs, delivery time, language barriers, and cultural difference.
Nearshoring is the same as offshoring except that the team is in a nearby country with a similar culture and possibly similar language. On top of that, there is not such a big time difference hence the communication is easier. Because of this reasons, nearshoring is generally preferred over offshoring. In software development context this means that if you are located in a country in western Europe, you delegate some or all of your development to a country in central or eastern Europe.
Image Reference – Victoria Mudraya
At Eastsource we exclusively focus on nearshoring when we work with clients from western Europe. Want to hear why? Contact us for more info.
Author: Ronald Klacman