Nearshore vs Offshore Software Development

Nearshore vs Offshore

Nearshore vs Offshore Software Development. That is the decision many Engineering teams are debating as they struggle to scale remote development teams amidst a global shortage of developers. When looking for the best possible fit for your company, it’s not meaningful to simply lump all worldwide software development centers into either Nearshoring vs Offshoring. 

In this article, we examine the pros and cons of offshoring and nearshoring, but with an important distinction: The nearshoring vs offshoring label you give it means very little.

Both Mexico and Argentina are considered Nearshoring, but there are considerable differences between the two.  The same can be said for Central Europe vs Eastern Europe.

To highlight these differences, we compared these 5 regions in several categories:    

Mexico, Latin America, Central Europe, Eastern Europe, and India.

Nearshore vs Offshore Comparison Chart

CriteriaMexicoLatAmCentral
Europe
Eastern
Europe
India
Primary Tech
Centers
MultipleArgentina,
Colombia, 
Costa Rica
Hungary,
Poland
Ukraine
Belarus
Multiple
ModelNearshoreNearshoreOffshoreOffshoreOffshore
Software Dev
Hourly Rates
ModerateModerateLowLowVery
Low
Time Zone
vs USA
0-3 hrs.0-5 hrs.6-9 hrs.7-10 hrs9.5-12.5
hrs.
Size of
Talent Pool
Low/MidLow/MidMidMidHigh
Rapid
Scalability
ModerateModerateModerateModerateHigh
Tech English
Proficiency
HighMediumHighMidMedium
Communication
Culture
Mid
Context
Mid
Context
Low
Context
Low
Context
High
Context
Nearshore vs Offshore Selection Criteria

Global Software Development Hourly Rates

Latin America and Mexico come in at about 50% of the cost of US rates, on average. 

Central and Eastern Europe are next lowest at 40%.

India averages 30% of US rates.

Not included in these calculations are the costs of managing and supporting the remote nearshore vs offshore team, which varies by type of model chosen as well as the capabilities of the dev partner chosen. 

In general, it costs more to manage and support India teams than their counterparts from other regions, due to time zone and cultural communication differences.  

If you want to outsource to India, you will need to allocate more internal engineering resources to manage the Indian dev partner. This cost is often hard to justify for offshore development teams of 25 or less. Nonetheless, India can be a very low-cost option and the best way to scale a large team quickly.

Time Zone Difference vs USA

From a time-zone perspective, a Nearshoring vs Offshoring comparison may not be as straightforward as you think. What may be nearshoring for some may be offshoring for others.  Comparing Argentina and Hungary to EST and PST time zones demonstrates this.   

US Time ZoneGuadalajara,
Mexico
ArgentinaHungaryIndia
PST+2+5+9+13.5
EST-1+2+6+10.5

Latin America spans 6 time zones.  Is it nearshoring or offshoring?  The answer may depend on where your internal developers are located.

If you want to maximize daily real-time collaboration, consider which time zone your teams will be in, rather than focusing on a Nearshore or Offshore label.  Keep in mind, Offshore Development Partners are often willing to skew their working hours to maximize collaboration overlap with your team. 

Integrating a remote software development team into your Agile workflow is difficult with less than 2-3 hours a day minimum workday overlap. Make this your minimum requirement when choosing a partner.

Size of Talent Pool

Mexico, along with several countries in Latin America have been transforming their tech capabilities at an impressive rate.  Their future SW development capabilities seem very bright.  And indeed, you can find many talented developers today from these regions, and the near time zone benefits may be very attractive. 

If you are looking for specific technology SME’s, Eastern/Central Europe may provide attractive options. 

However, the size of the talent pool of Nearshoring regions is not comparable to India’s, and for some technologies, nearshore developers are not yet as experienced as their Eastern/Central European counterparts. If you need to scale a large team quickly, you may need to consider India.  And if you are looking for specific technology SME’s, Eastern/Central Europe may provide attractive options.  In this case, the nearshore vs offshore decision has more to do with the country in question.

Ability to Rapidly Scale

Most Latin American and Central/Eastern European SW development partners will struggle to scale large teams rapidly.  Many simply do not have an adequate pool of available in-house developers, and there are not nearly as many developers in the “hiring pool” as in India.  Universities from these regions are churning out more engineers every year, and this problem may be resolved in the coming years, but the number of new tech graduates is not yet comparable to India.   

If you need to scale to a team of 50+ developers in 90 days, you might need to look towards countries like India.

The “sweet spot” for scaling Latin American and Central/Eastern European Software Development Teams seems to be 5-20 developers within 60-90 days. If you can provide a long-term scaling plan,  larger teams are definitely possible.

Technical English Proficiency

When evaluating Nearshore vs Offshore, you should consider regional differences in Technical English Proficiencies that exist between countries.  Within Nearshoring regions, Mexico outpaces Latin America, owing to proximity to the US and a University system that promotes not only English proficiency but also low-context communication.

Engineering colleges in Hungary teach in English, and students must pass English Proficiency tests to be admitted.

Within Europe, Central European countries tend to be more westernized and have superior technical English proficiency as compared to their Eastern European counterparts.  As an example, engineering colleges in Hungary teach in English and students must first pass English Proficiency tests to be admitted. 

India’s technical English proficiency is high, but cultural communication challenges do exist.

Communication Culture

English proficiency is only one aspect of communication.  Cross-cultural communication differences can and do cause a lot of problems with geographically-dispersed engineering teams. 

Cross-cultural communication challenges are one of the primary sources of outsourcing failure. This is due to low-context vs high context communication differences. 

Summary

We hope we have provided some valuable insights into your Nearshore vs Offshore comparison. As you can see, Nearshoring vs Offshoring isn’t a one-size-fits-all proposition. Look for regional strengths that match your most important requirements. And if you need additional information please visit our Services Page for details on each region covered in this article.


Nearshore vs Offshore Development FAQs

What is nearshore development?

Nearshore development is having services performed by a company from another country with similar time zones as your team. Mexico is an example of this for the USA.

What is offshore development?

Offshore development is having services performed by a company from another country that is typically far away with a large time zone difference. India is an example of this for the USA.


About Cloud App Developers, LLC

With a team of 1,500+ Engineers from 6 countries, we provide multiple options to optimize what’s most important to our customers. Need to scale a large team rapidly? Need same time-zone development? Looking for particular tech skills? We have you covered.

We also offer IT Staff Augmentation Services for Software Development and Data Science Engineers.

Our Architects, Developers, Data Scientists, and Data Engineers are extensively screened and have domain expertise in several industries, including Telecommunications, Financial Services, Insurtech, IoT, Logistics, Industrial Automation, etc.

Global Development Centers

Locations: Argentina, Mexico, Colombia, Peru

Top Rated In Latin America for English Proficiency

Maximum Time Zone Overlap with the USA

Engineering Culture Alignment

Location: Hungary

Top Rated in Central Europe for English Proficiency

Talented Engineering Pool

Strong Engineering Culture Alignment

Location: Cochin, India

Most Westernized Region of India

Very Low Turnover Rate in Region

Ability to Scale Large Teams Rapidly

Interested in Nearshore/Offshore Software Development?

If you’d like to experience “Agile at Speed”, we’d be happy to schedule a brief call to discuss how we can help you.

    Communicate! (with Remote Software Development Teams)

    With remote software development teams, you need to be excellent at communicating “asynchronously”, across time zones. Much of your communication will not happen in real-time, so you can’t afford to play “Question and Answer Ping Pong”.  Here are some proven best practices to follow as you address how to manage a remote development team.


    Set Up a Communication Framework

    It’s too easy to lose valuable information when team members are communicating across multiple platforms like Skype, WhatsApp, Slack, Email, Zoom chat, Google Hangouts, text etc.. 

    As difficult as it might be, insist on limiting your technical communication channels to two or three

    Email can be used for overall communication between managers and other stakeholders, but technical communication channels should be limited. 

    Communication Framework for Remote Software Development Teams:

    • Jira or another project/issue tracking platform can be used for technical documentation and overall project information.  It can also be used to store communication protocol and process information. 
    • Slack could be used for instant communication and to post “group chat and notifications”.  This is particularly helpful if direct communication after hours is used to answer bottleneck questions.  Many delays can be avoided in this way.
    • Video chat platforms like Skype, Zoom or similar can be used for video meetings and to share screens for collaboration.   

    Establish Clear Communication Protocols

    Very early, establish communication protocols and expectations with your remote software development team.  These will cover items such as:

    Daily Collaboration Schedules

    Work schedules between remote and internal development teams should be structured to maximize the number of daily collaboration hours.  This is critical in the early stages but can be relaxed once the teams are up and running.  A minimum of 2 hours of daily workday overlap with your remote team is suggested, more if possible. 

    Meeting Frequency

    • Scrum meeting times and frequency
      • Scrum Masters and relevant Team Leads from both teams
      • Daily at first, less frequently over time.
      • Keep recurring meetings at regularly scheduled times.
    • Monthly Technical Management meetings
      • Attended by Technical Managers from both teams
      • Track key KPIs and manage expectations
    • Quarterly Executive Meetings
      • Executive Engineering Management from both teams
      • Roadmap discussions and executive feedback.

    Low-Context Communication Expectations and Standards

    Set specific standards and expectations for low-context communication from your remote software development team.

     Avoid the “Question and Answer Ping Pong”

    • Each email and direct message should be precise, meaningful and thoughtful.  Short, vague emails usually trigger Q&A Ping Pong.
    • Coach your teams to write emails with as much information as possible.  Nothing should be left to interpretation. 
    • All team members should develop a habit of reviewing and proofreading emails and direct messages before sending.  The simple question to answer before hitting send is; “If I were the recipient of this message, would I understand it without sending another email to clarify something?”

    Once your remote team understands the importance of low-context communication, these improvements become a matter of practice. 

    After Hours Communication (for bottleneck questions)

    Even with the best asynchronous communication between teams, it’s important to have the ability to get quick answers to bottleneck questions.  Without this in place, project schedules often suffer the “death of a thousand cuts”. 

    Project schedules often suffer the “death of a thousand cuts”, waiting for answers to bottleneck questions.

    We highly recommended that you get permission and cooperation from your offshore developers to periodically answer quick bottleneck questions sent to them after hours (on slack or another instant message platform).  Being available (only as needed) just a few hours before and after the remote team’s formal workday can save weeks in schedule.  A good remote team will see the value of this and agree.


    Consider Developing a Glossary of Terms (Wiki)

    Most teams use industry jargon without even realizing it.  In fact, even technical jargon deemed common in the US might be misunderstood by a remote developer.   It’s a good idea to develop a Glossary of Terms or Wiki to define any terms and definitions deemed relevant.  



    About Cloud App Developers, LLC

    With a team of 1,500+ Engineers from 6 countries, we provide multiple options to optimize what’s most important to our customers. Need to scale a large team rapidly? Need same time-zone development? Looking for particular tech skills? We have you covered.

    We also offer IT Staff Augmentation Services for Software Development and Data Science Engineers.

    Our Architects, Developers, Data Scientists, and Data Engineers are extensively screened and have domain expertise in several industries, including Telecommunications, Financial Services, Insurtech, IoT, Logistics, Industrial Automation, etc.

    Developer Screening, Testing & Training

    With the multitude of changes, dependencies & processes within Agile methodologies, a certain velocity of communication, interaction & concurrency is required. Our screening processes ensure our teams can deliver “Agile @ Speed” in your development workflow.

    Technical English Proficiency

    For Agile, “English At Speed” Is The Standard

    Communication Excellence

    Developers Trained For “Low-Context” Communication

    Problem Solving Aptitude

    Our Customers Expect Engineers

    Code Testing

    Code Quality

    Code Reviews For All Developers


    Interested in Agile Remote Development at Speed?

    If you’d like to experience “Agile at Speed”, we’d be happy to schedule a brief call to discuss how we can help you.