Onshore vs Offshore Development - Pros & Cons Of Each

Outsourcing - Business Background. Blue Arrow with Outsourcing Slogan on a Grey Background. 3D Render.Onshore vs. Offshore Development: Compare And Contrast

Updating legacy systems or developing new software applications, whether for internal use or customer use, tends to require a lot of resources. While larger organizations have in-house IT departments that can develop and update whatever software they need, most smaller businesses do not have such capabilities. Simply hiring employees with the proper IT experience and expertise can significantly exceed the typical budget of a smaller to mid-sized company. The lack of resources is the main reason why most businesses will outsource their software development. By outsourcing software development to a third party vendor, smaller companies can avoid hiring additional employees to set up an in-house development team. Instead, they can focus their time, effort, and resources on growing their business.

If you’ve decided to outsource your software development, you’ll find that you have two main options: you can outsource to an onshore development service or an offshore development service. Understanding the pros and cons of each type is essential in determining which solution is the best fit for your company’s software development needs.

What Is Onshore Development?

Onshore development is when you outsource your mobile, web, or custom software development to a company or individual that’s in the same country as your business. For many years, this was the only real option for outsourcing software development. It was only until the world became more connected that offshore development became a realistic possibility. Even though offshore development has grown in popularity, onshore development is still commonly used even amongst smaller businesses.

Advantages Of Onshore Development

Many companies still prefer to outsource their software development needs to onshore companies. There are many reasons for this. Some businesses prefer to support their country’s economy by outsourcing locally. Others may not feel comfortable outsourcing to foreign companies who may not have the same regulations and oversight as those in the U.S. There are several other advantages to onshore development to keep in mind as well, including the following:

Ability To Collaborate In Person

It’s much easier to meet in person if you outsource development to an onshore company. Even if the company is located in a different state, traveling to have an in-person meeting is much less challenging than if the company is overseas. Travel time and distance are much shorter, and you also won’t have to deal with the hassle of international travel (such as passport issues and the like), which often makes in-person meetings with offshore developers impossible. Meeting in person makes it easier to build a relationship with the company you’re working with and to communicate your wants and needs.

Clear Communication

Collaborating in person certainly goes a long way towards maintaining clear communication. However, speaking the same language and having the same cultural understanding will contribute significantly to the project’s success. Clear communication is critical to making sure your company is on the same page as your developer and will help ensure that the final project meets all of your requirements.

Fewer Iterations To Achieve Quality Application

Onshore development tends to require fewer iterations since communication will be so much easier. For example, questions, concerns, and information will get across much faster since you’ll be communicating during the same business hours. Design and development teams will be able to work side-by-side without any communication barriers to complete your project on time.  Finally, the application architecture will be a key component of the overall quality of the software.  The architecture must be done correctly early in the project, which requires excellent communication and understanding of the business goals to achieve high quality. 

Disadvantages Of Onshore Development

Arguably the most significant advantages of onshore development are ease of communication and quality control; however, there can be a tradeoff. Some of the disadvantages of onshore development may include:

Higher Bill Rates 

Onshore development will likely cost more as a result of the quality of the software engineers working on your project. You’re essentially paying more for experience and expertise; however, the high bill rates tends to translate to a better quality software solution. Even though offshore development is often cheaper, software often needs reworking due to a lack of quality. Reworking software is costly, and it’s something that you typically won’t have to worry about if you outsource to an onshore company.

Backdoor Offshoring

Don’t just assume that because a developer is onshore that they are more trustworthy than an offshore company. You will need to do your research to identify an onshore service you can rely on. There are onshore companies that will outsource some of their development to offshore companies. Such a practice is known as backdoor offshoring. Some companies will do this to cut costs, but it can lower the quality of your software. If you hire an onshore company to develop your app, you expect them to develop it within your country. After all, if you wanted offshore development, you wouldn’t go through an onshore company to obtain it.

What Is Offshore Development?

Offshore development refers to any mobile, web, or custom software development that you outsource to foreign vendors, such as third party software development services located in India, China, or Ukraine (to name a few examples). Offshore development has become more common over the years as a result of globalization. Software development companies have not only become more common and accessible in foreign countries, but their technology has advanced quickly to the point where it has caught up to what’s currently available in the states.

Lower Bill Rate 

Companies often turn to offshore development as a way to save money. Although the resources many of these offshore development services use have grown more expensive over the years, they typically remain more affordable than the resources available in the States. Many resources are still available for comparatively low prices in places like India, Pakistan, and China. Vendors in these areas still obtain a bulk of the offshore development contracts coming from the U.S. as a result of their access to cheap resources. And certain areas around the world specialize in different aspects of technology that may be needed for the development of your software. It can be easier to find qualified software engineers with specific areas of expertise in certain countries, making their services more affordable.

However, although the cost of development may be lower using offshore development, if you are developing a complex application it may end up having to be refactored multiple times. If this is the case, the final cost of your software will end up being much higher than you initially expected. And if you outsource to a less-than-reputable offshore company, they may not provide you with an accurate estimate. You might find yourself paying for hidden charges as a result.

Fast Turnaround Time

Offshore companies tend to have larger workforces than onshore companies for several reasons. Some countries simply have more qualified software engineers, so software development companies can hire more people to work on your project. Also, workers in many of these countries work for far less money than what software engineers are used to being paid in the U.S. Cheaper labor means that these companies can afford to put together larger software development teams. Finally, many offshore companies will have employees on standby ready to work when they obtain their next project. 

All of these factors result in turnaround time being much faster. An offshore company simply has a more significant workforce to throw at each project they take on, which means they can deliver a finished project more swiftly than an onshore company.

Access To A Wide Range of Skills

The world is a lot bigger than the country your company is in, which means that the talent pool is theoretically a lot bigger as well. Since the talent pool is greater, outsourcing software development to offshore vendors means that you will have access to more resources, including software developers that boast a more extensive range of skills.

Good For Long Term Maintenance Of Applications

In-house software maintenance is often outside the scope of what most businesses can afford. After all, most companies can’t afford to keep software engineers on their payroll just to maintain an application. Outsourcing to an offshore company makes it much easier to maintain your applications over the long term. Maintenance is arguably easier because offshore companies have access to so many different software developers of varying skills who they can bring on to do basic maintenance on your app whenever needed.

Disadvantages Of Offshore Development

While there are some significant benefits to outsourcing your software development and maintenance to an offshore vendor (mostly in regards to your budget), there are some potential drawbacks as well. Here are a few of the disadvantages that you will need to prepare for should you choose offshore development:

Communication Barriers

If you choose an offshore company located in a country where English isn’t the primary language, communication may become a real challenge. Trying to communicate your software development needs, wants, and questions can be tricky if you’re dealing with someone who doesn’t know the language. While many offshore companies will have people in leadership positions that can speak and understand English, there can still be communication issues if it’s not their first language, and especially if they don’t understand the nuances of the language. 

Cultural Differences

Cultural differences can be communication barriers in themselves. For example, you may use particular phrases or terminology commonly accepted within your industry or by businesses in the U.S. which people in other countries aren’t aware of and may misinterpret. Such cultural differences can lead to misunderstandings and confusion and hinder your ability to convey what you need. 

Secondly, cultural differences can influence how a software development project is designed. Different cultures have different interpretations when it comes to solving certain development challenges. For example, an offshore company may come up with a solution to a problem that doesn’t apply to your company’s target audience.

Difference In Time Zones

If communication wasn’t tricky enough already as a result of the language barrier and cultural differences, the fact that many offshore companies are in different time zones could only add to the challenge. If you need to ask a question or raise a concern about your project, getting in touch with the person responsible for communicating with you may be complicated. Your business hours may be the middle of the night for them. You might have to wait an entire day to receive a reply through email or other channels.

Inconsistent Quality

There are a few potential issues that can affect the quality of your software development should you go through an offshore service. You’re not in control of who the software developers are, which means you’re relying on the offshore company to hire individuals who are qualified. If they are hiring the cheapest software engineers available, it could affect the quality of their work. And there’s not nearly as much oversight in foreign countries when it comes to software development. A lack of oversight means that some offshore companies may not bother to adhere fully to copyright and IP laws, which can be incredibly problematic once the software is delivered to you.

Turnover Of Developers 

Even though offshore companies are often able to hire a lot of developers and to keep them on standby, there’s a lot of turnover as well. Developers won’t wait around until they’re needed -- they will take any job that comes along so that they can keep working. Software developers in foreign countries often jump from one company to the next, making it difficult for offshore companies to provide consistency when it comes to your project.

Onshore vs. Offshore Development

Ultimately, the main reason why businesses outsource to offshore companies is to save money. However, you should think twice about doing so. First of all, you’re much more likely to end up with an inferior product if you choose offshore development due to a myriad of reasons. Secondly, you might not save money. If the software is poor, then you will have to rework it, adding costs that can exceed your budget. It’s also worth noting that one of the reasons that offshore development seems cheaper initially is because they don’t pay their software engineers as well. Cheaper labor isn’t just a result of hiring lower quality developers (although it’s one of the reasons), but also because offshore companies often underpay employees due to a lack of fair labor laws in certain countries. You may be indirectly contributing to unethical labor practices depending on where you’re outsourcing your software development. 

Protecting Your Intellectual Property

One of the issues of outsourcing the development of custom-built software to an offshore company is that they may not adhere to your country’s copyright and IP laws. This lack of compliance may be because their own country doesn’t have strict regulations, they don’t know your country’s copyright and IP laws, or because they simply don’t care about adhering to them. And it doesn’t matter that you developed your software outside of your country, you still need to adhere to copyright and IP laws within your country.

Outsourcing to an onshore company is a much safer bet when it comes to ensuring that your software will meet copyright and IP laws; however, this isn’t always the case. When interviewing onshore developers, make sure that you ask about copyright and IP laws and how seriously they take them.

Evaluate Your Options

Generally speaking, onshore development is the best way to go. However, choosing between onshore and offshore development depends greatly on what your company’s development needs are. If you need a complex custom-built app and your budget isn’t too great of a concern, then onshore development is the better bet. However, if you have a simple project, enhancements to well-written existing software, or maintenance work, you might consider offshore development. There are plenty of legitimate onshore and offshore companies that can do an excellent job. Just do your research before choosing who to work with

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