Offshore, Onshore & Nearshore

If you’re in the field of IT, you have quite likely heard about this outsourcing terminology. Outsourcing is one of the characteristics of the IT industry and software development because of being easy to deliver. But when opting for outsourcing you are quite likely to make quite common yet overlooked mistakes.

In this post, we shall be going over what exactly is outsourcing and what to be on the lookout for when going for one.

How to create an offshore development center

Understanding Nearshore, Offshore, and Onshore Developments

Before we go over what these means and how companies can leverage these models, let’s see what these terminologies are with the help of a scenario.

Imagine you work in a bank or financial institution. You work in its IT department as Project Manager and are responsible for automating lengthy tiresome critical financial operations. Your days are always busy, and you are always surfing on the wave of a tight hectic schedule. But while the schedule is never getting easy, you keep getting change requirements and new developments daily.

One day you get a development task, say an implementation for AML, and you need that done within the deadline. But looking at the team you realize you are sure to miss the deadline. So, what can you do about it? You look out for others who are doing the same task. After all, if you can pay any other company, they can deliver your job within the specified deadline.

Now looking at the options you realize some companies are located within your city/district/county and can help you with this job. But what if you looked further beyond you might get impressive competent teams that can deliver the same task. However, things don’t stop here. On the other side of the globe, there is a country which can get the job done at a lesser cost than the previous two companies. You must decide since there are many options, but you do not know what the critical points are to ponder over.

To make it simple you have three options:

  1. Go for someone outside your institution but within your territory.
  2. Go for someone outside your institution and near to your territory.
  3. Go for someone outside your institution and miles away from your territory in another country not sharing borders with your country.

So, the first option is called onshoring. The second option is known as nearshoring, while the last option is commonly known as offshore developments. The company you are handing over the project to is known as the vendor in the technical language.

Description of outsourcing termsThese terms gained acknowledgment after the software development began to rise. This is because thanks to video calling software, high-speed internet, and VPN (Virtual Private Network), made it possible for the two teams to work together even when not being in the vicinity. These three options look the same at first glance but can significantly impact the project’s progress if not weighed carefully.

What do you need to look out for?

Before you plan to outsource your project to the offshore and nearshore teams, you need to know the reason why you are going with this option. Having clarity in this regard can save both time and cost that can be unforeseen and can later become the bottleneck.

Software outsourcing key factorsTime zone

Time zone is a challenge that is mostly ignored but becomes trouble later on. Suppose one team sits at GMT-00 and the other one at GMT-05. Now there will be a time difference of five hours, probably only three common hours will be available.


Whether the vendor is going to deliver the task/project at the approved cost or not? If it’s overpriced, is it worth it? Or if the vendor is quoting a cheap price, will they be able to stick to your mentioned quality standards and commitments?

Communication language

Make sure your vendor knows the language you speak well for both verbal and written communication. For instance, suppose if you come from an English language background but for your vendor English is very foreign, it will become a hurdle to convey even the simplest message. When drawing the contract look at this aspect and identify which language is going to be used primarily for all official communications.


Taxation can be a complicated issue when dealing with finances and law. Make sure you understand the laws of the land and have a solicitor for legal issues. Also do go over the contract and terms more than once so that you do not skip or overlook any critical clause.

Skills assessment

Skills and expertise can be a problem when handing over the project to the technical team. Assessment of skills can be different in different parts of the world. A good way to have a proper background check is to validate the world-renowned certifications your vendor has to offer.

Culture and Holidays

This matters if you go international with your project and pick an alien vendor. Every country has its calendar, holiday schedules, weekends and weekdays as well as working hours. Make sure you know when they have annual holidays, fasting, public holidays or any other offs to safeguard your project plan from obvious clashes.

Travelling cost

This is the case critical with offshore development. Does your project require you to travel back and forth to the destination? If you must travel, have you identified the resources for traveling, the cost for travel and accommodation as well as visa rules. Make sure your project plan encompasses all these to have swift uninterrupted progress.

Conclusion: Which model is best?

Make sure you know what you want out of your project. Understand what skills are needed and if the cost, time zone difference, and language can become a barrier or not. Your critical assessment will save a lot of hassle later. I cannot stress enough the importance of communication medium and time zone difference. When handing over the project to the vendor communicate all these terms and make sure you both are on the same page with the expectations.