Nearshoring vs. Offshoring: Which, When, and Why?

March 30, 2022

Building a technical business has its challenges, but hiring the right talents for your team should not be one of them. Outsourcing is the modern name of the game and it makes it all so much easier and doable.

Outsourcing is a win-win solution both for entrepreneurs and talents. This practice has a growing popularity among non-tech founders and it comes as no surprise. It is a smart way of building software products and skyrocketing your business. Here is why.

 

Why outsource?

Nowadays businesses are run mostly online, which undoubtedly has its perks. Outsourcing opportunities are on top of this list. It enables non-tech founders to build technical products/businesses while saving their most valuable resources: time and money.

There are different approaches to outsourcing, like offshoring, nearshoring and onshoring. In this article, we are going over nearshoring vs. offshoring, (and just a bit of onshoring), to help entrepreneurs identify which practice works the best for them, when, and why.

But let’s start from the beginning.

 

Outsourcing vs. offshoring

Although similar at their core, these practices still differ from each other.

  • Outsourcing involves hiring outside talents to perform specific tasks or projects. Usually, this kind of collaboration with IT professionals is short-term and task-based. On the other hand,
  • Offshoring implies moving a whole process or part of the business to outside providers. This type of collaboration is ongoing and long-term.

Once you have a clear picture of what outsourcing and offshoring involve, you can particularize your choice even more.

 

Nearshoring vs. offshoring vs. onshoring

The main criteria which differentiate this “golden trio” is the base location of your hired tech talent. Confronting your base location with your team’s results in some (dis)advantages in terms of cost, time zones, and cultural influence.

So let’s dive right into them.

 

1.   Nearshoring

Nearshoring involves hiring talent from nearby countries or at least from the same continent. Think about an American founder who hires a team of software developers from Venezuela. They are just a couple of time zone away and visiting this team periodically is quite doable.

Pros:

+ Increased time zone synchronicity which promotes efficient communication.

+ Increased cultural compatibility which reduces the possibility of misunderstanding.

Cons:

-Increased labor costs since the cost gap is reduced (as it is a country from your proximity).

 

2. Offshoring

As you already know, offshoring means hiring IT teams from overseas. It is usually referred to as the most preferred by founders and the pros make it crystal clear why.

Pros:

+ Reduced labor costs (hiring from countries with the best mix of low cost & IT skills is a combo no founder could resist!)

+ Get work done while you sleep. Yes, different time zones are more of a con but you can always choose to see the good part.

Cons:

– Different time zones can impede real-time communication which sometimes is a pre-condition for business efficiency.

– Cultural gap: more miles, more divergence between you and your team. So make sure you do your homework and look into your team’s cultural background and attitudes.

 

3. Onshoring

Lastly, onshoring means hiring from another city in your country. Although cultural and time zone risks are minimized, this also means giving up on those considerable cuts in labor costs. Think about offshoring vs. onshoring as slightly opposite practices. The former implies external hiring, while the latter means hiring from within your country.

Pros:

+ Absolute cultural and time zone compatibility.

+ Supporting your country’s talents and economy.

Cons:

– Higher talent costs since you are hiring from your own country.

 

Key take-aways

Regardless of which approach to outsourcing you take, this practice opens business opportunities that wouldn’t be accessible otherwise. To make the most of it and chose the best option for you, make sure to carefully weigh the pros and cons outlined above.

In a nutshell, ask yourself:

-How essential is it for you to cut labor costs and to what extent?

-How important is it for you to live in the same time zone with your remote team and have daily live calls?

-How much do you what to personality meet them once in a while?

There are no right or wrong answers to these questions. But there is, however, a golden rule we can give you as a non-tech founder. And that is to focus on YOU.

Therefore, Turnkey Labs have developed the concept of Youshoring, which focuses on building YOUR team, around YOUR vision, and on YOUR terms.

It is a project committed to helping entrepreneurs recruit and onboard IT talents that can serve their particular objectives the best.

You see, to make it big in the tech world, you should start by envisioning your product and hiring a team of talents devoted to bringing it to life.

All it takes is a crystal clear vision and (YOUR) team of make-it-happeners.

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