Nearshore vs. Offshore: How to Select an Extended Software Development Team

Published: January 3, 2022

What are the differences between nearshore and offshore software development teams, and how can you choose the right option for your project?

Software development is a critical factor in the success of companies: not just software companies, but across all industries and in organizations of all sizes. Healthcare, finance, hospitality, manufacturing: whether B2B or B2C, all require software development to satisfy customers and gain a competitive advantage.

However, there are significant challenges associated with software development. A recent study[1] found that the top two challenges of software development are capacity and hiring – together comprising more than 50% of the responses to the challenge question.

This should come as no surprise – anyone that has been involved with recruiting technical talent knows how difficult it is to find, attract and hire for software development jobs. Low unemployment and high demand have made it an extremely competitive market for software developers, driving costs higher and extending time to hire – which in turn make it difficult to bring software projects on time and within budget.

To meet these challenges, and deliver innovative products, more companies are turning to extended development teams. These are teams of talented, experienced individuals that work under the direction of the client company, as an extension of the client’s internal software development team.

Generally, software development teams are categorized as onshore, offshore, and nearshore: the main difference being where they are located.

The term ‘onshore’ refers to a team that is located in the client’s home country. While this can help to ensure language fluency and cultural fit, it also dilutes other benefits: particularly cost savings and accessibility of talent.

‘Offshore’ refers to an extended team with a location that is geographically distant from the client. For U.S. clients, this often refers to teams in India, Eastern Europe, or the Pacific Islands. Due to differences in pay rates, these locations offer the best cost management benefit to clients.

However, clients encounter challenges with offshore extended teams as well. These include:

  1. Language barrier: an extended development team is an extension of your own internal software development team, making language fluency a priority, as it affects the communication required for effective project management.
  2. Time zone difference: in the same vein, a time zone difference creates a barrier to required communication between parties. A time zone issue can also increase the complexity of agile software development, making coordination of duties across continuous integration / continuous deployment difficult or impossible.
  3. Cultural fit: Basic differences, such as celebration of holidays, can affect how a client works with an offshore software development team. However, there are deeper differences that will affect the success[2] of an offshore relationship, including:
  • Hierarchical thinking
  • Risk and uncertainty
  • Conflict tolerance and resolution
  • Learning style
  • Perception of quality

As companies grow more familiar with extended teams, and encounter challenges with outsourcing, a distinction has been created: separating offshore and nearshore options for extended software development teams.

Nearshore extended development teams are sparking the interest of businesses, as they have significant advantages over offshore options, mitigating the challenges of offshore extended teams.

Time zone difference: The primary difference between offshore and nearshore solutions is their geographic location – which reduces or eliminates the barrier created by time zone differences. Communication is facilitated when working hours are similar between client and extended team.

Language barrier: Because an extended team is managed by the client, effective communication is critical to project success. A nearshore team is more likely to have the language skills required for effective communication – although this may vary from one provider to another, and should be a major part of the screening and selection process.

Cultural fit: Geographic location plays a large part in the way that cultural and societal norms are developed, and disseminated to the workplace. Having similar expectations for quality, conflict, risk & uncertainty, and learning and communication style can all affect the working relationship between an extended team and their client company.

How to select an extended development team

When comparing nearshore to offshore, consider the requirements of the project and which solution will best meet your needs. The key differences include:

Cost. If cost savings are your only consideration, an offshoring solution may appear to be a less expensive option than onshoring or nearshoring. However, if there are any differences in expectations for deliverables, or barriers to effective management of the extended team, the work will take longer to complete and negate the apparent cost savings of a lower hourly rate.

Communication. It can be difficult to measure the effect of communication on team management: it’s one of those things that isn’t truly appreciated when working well. But anyone that has encountered a barrier to communication – managing a team in another time zone, or one that isn’t fluent in the same language – understands how badly miscommunication can exhaust time, resources, and patience on both sides of a relationship.

Control: time zone, language, and cultural barriers can all affect the amount of control that a client has over the extended team. If you are looking for a high level of control, and visibility into the project, a nearshoring solution is likely to fit your requirements better than offshoring.

If you are interested in exploring extended software development teams, contact e-Core today. Located in NYC and Brazil, e-Core offers all the benefits of an extended team with the additional benefit of the best in software development talent, available immediately. Access top talent in as little as 10 days, and augment your existing software development team with pre-qualified, proven, experienced developers.

As you may know, IT service management or ITSM is a holistic approach that encapsulates the process of how different IT teams manage the delivery of their services to customers. The goal of ITSM is to deliver IT functionalities as a service. Here at e-Core IT Solutions, we believe that an ITSM approach is the best way to deliver IT services to your clients. 

But ITSM processes can and should be revisited over time to make them more effective and more fruitful. One of the best ways to give your ITSM new life is by implementing an agile transformation.


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