Onshore or Nearshore IT Outsourcing? When to Use Each or Both

In 2015 70% of the top 100 tech companies outsourced some type of IT services and this number is only expected to increase in the future. Controlling or reducing costs and the need for talent were cited as the primary drivers of IT outsourcing, with 27% of CFO’s surveyed in BDO’s 2015 Technological Outlook citing their ability to attract and retain talent as the largest barrier to growth in 2016. If you have been struggling to find talented and cost effective engineers for your company you aren’t alone. Venture capitalist Marc Andreessen recently told the New Yorker: “Our companies are dying for talent. They’re like lying on the beach gasping because they can’t get enough talented people in for these jobs.” Instead of waiting months (the average hire time is over 3 months now for a permanent engineer) for the right candidate to appear, outsourcing can provide you with the solution you need.

Before making the decision whether to onshore, offshore or nearshore the benefits and risks of each must be assessed for your needs. Due to communication, time zone and cultural differences, we feel as if offshoring is a tertiary alternative to nearshoring and onshoring and, therefore, we will focus on onshoring and nearshoring in this post. If you’d like to know more about offshoring as compared to nearshoring please see Rachel Beisel’s previous post.

Onshore or Nearshore IT Outsourcing? When to Use Each or Both

Onshore

Onshore, or domestic, outsourcing is the closest thing to home because you are working with developers in your own country. If you want an American team on American soil, then your only option is onshore outsourcing. Many companies opt to hire onshore when creating a prototype, branding a new product, designing software architecture, working on high-level languages or innovative products, or venturing out of their own expertise. When looking for “quality” or expert engineering, many see U.S. engineers as their best option.

Proximity, real-time interaction and technically superior skills are often cited as the key reasons onshoring is the best option for these types of projects. Proximity is beneficial as it facilities high amounts of interaction and rapid response time. Far less project management time and “hand-holding” is typically needed when utilizing onshore teams because of time, culture and experience in the needed development area. However, proximity and expertise come at a price. If you have tried to employ software engineers in the U.S. for your own company you have most likely noticed how expensive and hard it is to find quality engineers. Because the pool is so small and the need for senior software engineers is so high, the average engineer in Silicon Valley earns $134,000 a year, while the average starting salary for a Stanford engineering graduate is between $125,000 to $150,000 for large tech firms and can reach as high as $500,000 for financial institutions.

Nearshore

Although the exact definition is up for debate, nearshoring usually refers to a location within 3-4 hours plane flight of the home country without crossing a major ocean. Nearshoring enables companies to tap in and leverage the global talent base at a much cheaper rate, as your choice is no longer limited to one country. For example, hiring a nearshore engineer in Costa Rica can deliver 54% or more savings per engineer without necessarily lowering the quality of work or productivity.

The usual barriers associated with traditional outsourced non-onshore relationships: cost, communication, location, lack of transparency and lack of skills, are resolved when choosing an experienced and reliable nearshore provider that can provide you with the necessary tools to facilitate remote communication and technologically sound engineers. For example, although it is a small country, Costa Rica has a growing pool of talented developers, with high education standards and excellent English skills available to work. Similar to working with an onshore team, time-zone similarities enable real-time updates and Agile execution with nearshore teams that are only a short flight time from the United States (A mere two hours from most U.S. cities, compared with 12-20 hours to India or China).

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Whether onshoring, nearshoring or both are more beneficial to your company depends on your priorities. If lower costs are your biggest priority, then nearshoring will provide you the best returns. If you are unwilling to employ a remote team and an onsite team are your biggest priorities than onshore teams will be the best option. Often times, a combination of both onshore and nearshore provides you with the perfect balance of skill and cost savings.

Gorilla Logic’s team of talented software developers located in Escazu, San Jose, Costa Rica are just a few hours from the United States by plane and in the same time zone as our headquarters in Boulder, Colorado. For companies seeking onshore partners, nearshore partners or a combination of both, we provide the best solution for your needs. Our bilingual developers are proficient in English, trained in agile and scrum and up to date with all of the latest technologies and trends. To find out why Gorilla Logic chose Costa Rica as our nearshore location see Mario Merino’s blog here. Contact us to learn more about our onshore and nearshore staffing services. 


Jay Wallingford
Jay Wallingford
A hands-on technology executive with more than 25 years of software development, architecture and technical leadership experience, Jay has run development in a number of startups in Boulder, CO including Chief Technology Officer at Leopard (acquired by Ogilvy Mather), VP of Engineering at Symplified (acquired by RSA/EMC), VP of Engineering at TapInfluence and Director of Development at Crosswalk. Before that Jay ran and worked in technology services companies including Aarondak and Bolder Heuristics both in Boulder. Jay started his career in a computer aided design firm Intergraph where he worked on 3-D and assembly modeling software. Jay holds a BS in Mathematics/Computer Science and has done post graduate work in Radiation Medicine and Computer Science from the University of Kentucky.

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