Onshore Outsourcing

Onshore Outsourcing

Considering Onshore Outsourcing as Part of a Product Development or Internal Software Development Resource

Onshore outsourcing in software development is the use of talent located within the same country, but in locations where the cost of technical workers is lower or the availability of needed skills is higher than in the client company’s location. City-based companies can outsource to software companies located in rural areas, for instance. It can be an excellent way to get projects off the ground that otherwise might not fit the company’s current budget or software development resource availability, whether it’s a specialized app for the marketing department or a proof of concept for a startup. As Entrepreneur Magazine notes, “You can’t afford to hire the best of the best, but at the same time, you need people who know what they’re doing.” What companies are realizing is that geography is a part of the mix that can provide reduced costs while still offering serious talent.

Onshore Outsourcing Key benefits of onshore outsourcing include:

  • Reduced costs to produce a given software product over local salaries
  • Availability of skilled labor that may be in short supply locally
  • Likely less mobility of software developers, providing a more coherent team
  • A fairly close cultural and geographic fit, with language and time zone especially

Onshore Outsourcing Do Companies that Employ Onshore Outsourcing Move on to Offshore or Nearshore?

One of the questions that well-informed executives may ask when a company proposes to use regional or national software development organizations is, “if this is good, isn’t international better?” In fact, a successful development project using onshore outsourcing is likely to raise that question as the additional cost savings available with nearshore or offshore software development are explored. So, what would make onshore an attractive choice long term?

Competition for Onshore Outsourcing is Likely to Drive Costs Up

As noted in Forbes Magazine, “advanced technology can help with this staffing dilemma” in post-pandemic hiring, as AI and other technology solutions are being employed to bring whole job sectors like hospitality online. This and other tech-heavy solutions to economic challenges is likely to create even more demand on onshore outsourcing and other technology talent pools in the US, resulting in rising costs and increased demand, even outside of urban centers.

Onshore Outsourcing is A Simpler Choice than Crossing Boundaries

If a company is not fluent in international business, taking the steps to engage a software development firm overseas can seem daunting. Contracts, tax law, payment methods, even business etiquette and expectations all require conscious awareness of pitfalls and requirements. Doing business in the same country is usually straightforward and almost instinctive. If a company is not already active multinationally, a consultant or added team member to guide the decisions and transactions is important, preferably one familiar with the region of the world where business is to be transacted. Of course, cultural and communication issues can arise between the local team and the contracted offshore team as well.

Onshore Outsourcing The Challenges of Interacting with Offshore Resources

While software development processes are similar throughout the world, the way teams operate in following those processes can vary significantly.

Culture Issues

In some countries, a development team may be fairly rigid and formal in the way they operate, whereas other teams may be much less formal. For instance, in the United States many companies provide benefits such as table tennis and coffee bars for team building and relaxing breaks. In another country, that might be seen as frivolous, creating friction if the teams are working together.

Language Issues

In language, software development and business executives both rely on metaphor and idiom as a casual way of communicating. They refer to “getting your ducks in a row” to suggest better organization or “lighting a fire under someone” to express urgency. This kind of talk doesn’t cross boundaries easily. Even simple ambiguities of the English language can be a challenge. When a person from another culture replies, “yes,” do they mean they understand, or they agree? That could be a critical issues in project communication.

Onshore Outsourcing Onshore Teams are a Closer Fit in Many Ways

While there may be some differences between urban and rural organizations, or even East Coast and West Coast cultures in the US, there is enough common ground to allow more instinctive communication. There’s also more understanding of each others’ unspoken communication.

Communication Issues Tend to Be Clearer

If a miscommunication does occur, the cultural signals and courtesies in communicating that something needs to be corrected are fairly straightforward. It’s much easier to avoid a serious misunderstanding that in some cross-cultural situations.

Work Schedule Expectations are Aligned

Other cultural issues such as extending work hours during a “crunch time” are also fairly well understood. Each country has its own view of whether one is dedicated to work, or entitled to arrive and depart at precise times. In some countries, certain times of the year are expected to have vacations or holidays for all workers, much as Thanksgiving and Year-End Holidays virtually shut down many companies in the US.

Onshore in the US Have Pay and Benefits Expectations Similar to the Client Company

Where the comparison takes a turn is the fact that onshore development teams can be lower cost than hiring local urban workers from a competitive job pool, but economics places a limit on the savings available. Workers from a similar culture tend to have a similar cost of living, and so engaging these teams results in much fewer business and management challenges than looking overseas, but at less cost savings than offshoring or nearshoring as well.

Sticking with the Familiar or Learning a New Way to Do Business

The tipping point between onshore outsourcing and international choices is whether it’s within a company’s scope to learn to operate across borders. Many companies, such as those in Europe, have done so naturally for centuries, but for US companies there is a learning curve. Avoiding that challenge can allow a company to focus on other efforts more relevant to their objectives. For companies that are investing in software development, however, learning how to operate with international teams can be a growth opportunity and a competitive advantage.

Trans-Cultural Resources and Connections

Providing a way for HR or hiring managers to become well-informed about working with offshore and nearshore resources can be an important investment. Hiring HR experts or consultants who can provide advice and guidance through the key challenges including contracts and other legal matters can help as well. There’s one other approach that many companies are finding gives them the best of both worlds: working with a US-based company that bridges the gap between available talent in other countries and client companies that can benefit from working with them. Working with companies that provide offshore or nearshore connections and assistance brings the business relationship closer to the benefits of onshore outsourcing, but at a more attractive cost for top software development talent.

Onshore Outsourcing Frequently Asked Questions (FAQ) About Onshore Outsourcing

What is onshore outsourcing?

Onshore outsourcing is engaging software development talent in the same country, but with a difference in location that helps to provide a differential in cost compared to hiring locally in highly competitive urban markets.

What is the difference between onshore and offshore outsourcing?

Cost is usually a big differentiator, as offshore outsourcing reaches out to areas where the cost of engaging highly qualified workers is much less. Onshore, cost savings derive from not having to pay a geographic premium for competitive urban locations.

What are three advantages to onshore outsourcing?

  • Reduced costs to produce a given software product over local salaries
  • Availability of skilled labor that may be in short supply locally
  • Likely less mobility of software developers, providing a more coherent team

What does domestic outsourcing mean?

Since many companies locate their offices in major cities where they then have to actively compete for qualified technical workers, domestic outsourcing provides a way to reach out to teams of workers in less competitive cities or even rural locations.

What is the benefit of outsourcing?

The main benefit is being able to define the cost and the product, and contract to have it done by an entity outside the company.

What are the different types of outsourcing?

The category is expanding, but a basic set of six types is:

  • Professional outsourcing — Accounting, legal, purchasing, administrative support, IT
  • IT outsourcing — Development, maintenance, support, very common
  • Project outsourcing — Tasks that are impractical to accomplish in house, often construction
  • Process outsourcing — Farming out entire processes like delivery, security
  • Operational outsourcing — Contracting for bulk staffing to do a job, like customer service or data processing, but on the company’s own infrastructure.
  • Manufacturing outsourcing — Individual components, such as plastic knobs

 

What do you mean by outsourcing?

Performing a task or completing a project using resources outside the company.

Why do companies outsource?

Companies outsource when they want to produce more with managed costs, or have specific projects that would have to wait for in-house production.

What are the benefits of offshore outsourcing?

Offshore outsourcing can benefit from local economies where desirable skills are available at reduced costs.

What are the benefits of outsourcing abroad?

Overseas outsourcing, whether offshore or nearshore, provides a coherent team at a cost which may be lower due to geography.

What are the pros and cons of outsourcing?

In a nutshell, outsourcing can reduce costs and provide a focused resource to get a job done. It can also add challenges in communication and management.

Is outsourcing good or bad?

Outsourcing is strategic, and is used to connect with talent and providers wherever they are available. It can affect the local employment market, but it can also be in response to a tight hiring situation locally.

What does onshore mean in business?

Within the domestic market, the same country. This offers advantages in simplicity of transactions and communication.

What is inhouse vs outsourcing?

Inhouse implies a location and team managed by the company itself, typically employees. Outsourcing draws a contractual line between the company and those doing the work or providing the product.

What is an example of insourcing?

When a department has the company’s internal IT department staff create a software application that previously was purchased or outsourced. This can be useful for internal utility apps, marketing software, and other custom work.

What are two benefits of outsourcing?

  • Potentially lower costs than local efforts
  • Increased capacity to get the work done

What are the benefits and risks of outsourcing?

  • Lower costs/increased efficiency
  • Capacity to meet your needs, especially when business climate is volatile
  • Provider may be more proficient in the technologies than your in-house staff
  • May be a way to get more help when hiring locally isn’t working
  • Faster time to market when in-company resources are limited

What are the risks of outsourcing?

  • Hidden costs and unexpected contractual issues
  • Communication problems, especially regarding goals
  • Bureaucracy burdens
  • Government issues, local and remote
  • Failure to deliver service or end product

How does outsourcing affect employment?

Employment of the workers is done by the company that provides them as a resource to the outsourcing company. Employing workers across international boundaries is much more complicated than locally staffing, and doesn’t provide as many cost benefits.

Onshore Outsourcing Balancing the Benefits of Onshore and the Cost Reductions of Nearshore Outsourcing

Moving software development activities judiciously offshore can be easier than jumping into the international labor market. Sonatafy provides an impressive range of services provided by skilled professionals located in the same hemisphere and with very similar cultures. With the bridge provided by Sonatafy’s experts, getting projects off the ground and completed successfully can be easier than you expected. With so much riding on your company’s ability to reach out to customers and be present 24/7 online and via mobile technologies, having the ability to get your software done right is essential. It’s time to find out more about the possibilities of nearshoring.

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