Nearshore vs Offshore Software Development

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

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.   

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

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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

Nearshore Software Development (Latin America)

Offshore Software Development (Central Europe)

Offshore Software Development (Southern India)

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.