Sourcing best practises: Out, On, Off, or Near?

February 3, 2020
Paavo Pauklin

Frequently used to describe types of outsourcing, “out, on, off, and near” have overlapping meanings, however, they apply to different practices. Essentially, “outsourcing” refers to the transfer of non-core business activities to another organization, which can be located in the same country or abroad.

The question becomes: Which method is best for you – offshore, onshore, or nearshore?


An onshore professional works with companies that are located in his or her home country. While a company’s management and leadership are often most comfortable with onshore software developers, they carry the highest costs – which can be 3-4 times what is allocated for the salary of an in-house specialist. Of course, the advantage is that you will have access to a skilled team of professionals (sometimes even located in your office) who typically speak the same language as you.

When you’re building something from the ground up, or if you want to step outside of your comfort zone into a new business territory, you should seriously consider retaining a local software team.


“Offshoring” refers to hiring a team from abroad to work remotely. For example, you hire 3-5 developers located in India. Compared to onshoring this is a much cheaper option, but you will be working with people in different time zones from diverse cultural backgrounds whose English language skills will vary.

Further complicating matters, their coding skills and processes may differ from what you are used to. In fact, customers using offshoring services have noted that they have to expend a lot of effort writing detailed specifications of their project needs. Failing to do so leaves them absorbing the costs.

Offshoring also means you will likely have to fly from 3-12 hours to meet with your team, which could easily turn into a 2-3 day trip. Simply put, offshore software development is affordable, but may be challenging to maintain.

Onshore offshore nearshore

Offshore development is for you if you’re testing products, you’re good at specifying your needs, or you have simple assignments to give to the offshore team. If your product is complex or requires high-quality coding or proactive thinking, then offshoring is not your best option.


Nearshore software development provides the best of both worlds. While this is technically a form of offshoring, the major difference is that the team is located relatively nearby (e.g., in neighboring European countries) and have a similar professional culture and time zone.

Physical proximity, time zones, and cultural similarities foster communication, which is usually the number 1 factor in the success of your project. Good communication also has a direct impact on the cost of any project. What’s more, you can always visit the partner country and meet with your new software development team directly.

The main reason why business owners choose nearshoring is the ability to save a significant amount of money and to streamline daily work and communication with developers.

Nearshoring is the best option for companies who want to save on the costs of software development, but can’t afford to sacrifice the quality of the development or waste energy or time on miscommunication. Nearshoring has the added advantage of linking companies with a partner who is proactive in delivering results and understands the world through a similar lens.

If you want to find a good nearshoring team in Europe, sign up for a free consultation here.

Software Development Services

Meet the authors

Paavo Pauklin
Executive Board Member
+372 6 555 022
Joseph Carson
Ethical Hacker, Cybersecurity Advisor
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