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Buyer's guide

Offshore, nearshore or onshore software development: which fits?

The three words say how far your partner is from you in country and time zone. What each means, what changes with distance, and how to choose on your own needs and not on a slogan.

For companies choosing where to outsource8 min read

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What the three words mean

They say how far your partner is from you, and so what changes: the time zone, the law and the culture of work. They are not grades of quality, and a partner of any kind can be excellent or poor.

Onshore
The partner is in your own country, in your time zone and under your law.
Nearshore
The partner is in a nearby country, usually with a small time zone difference and often a shared working day.
Offshore
The partner is far away, often with a large time zone difference, a different legal system and a different way of doing business.
No fixed line
The words are used loosely. A country that is nearshore for one buyer is offshore for another, so ask what a vendor means and look at the hours and the law.

A word is not a plan

Calling a team nearshore does not make it easy to work with, and calling it offshore does not make it hard. Judge a team by the work it shows and by the hours you share.

The three compared

Use the table to decide what matters for your project, then check each point for the partners on your shortlist.

Onshore, nearshore and offshore compared
Compare Onshore Nearshore Offshore
Time zone The same. A few hours at most. Many hours, so shared hours are short or have to be moved.
Communication Easy to meet, call and walk through a screen together. Daily calls are usually possible. Written updates and recorded demonstrations carry more of the load.
Law and contract Your law and your courts. Another country's law: choose the governing law on purpose. Another country's law: take advice on how a judgment would be enforced.
Visits Easy and cheap to arrange. A short journey. A long journey, so plan visits ahead.
Rates and tax Set by your own market, under your own tax rules. Set by the partner's market. Cross-border tax rules apply. Set by the partner's market. Cross-border tax rules apply.
Check first Whether the skills you need are available at a price you accept. The hours you share, and the law. The hours you share, the law, and the security controls.

Time zones decide more than distance

What matters is shared working time. A partner far away whose working day overlaps with yours can work with you live, and a partner next door cannot if the hours are different.

  • A few shared hours a day are enough for a daily meeting, for questions and for demonstrations.
  • With no shared hours, work moves by written handover: clear tasks, recorded demonstrations and one set of answers a day. It can work well, and it needs discipline on both sides.
  • Countries change their clocks on different dates, and some never do, so the overlap changes during the year. Check the weeks around the changes.
  • One side can shift its hours. A team that starts early or finishes late can create shared time, if you agree it and it is not a burden.
  • Public holidays differ. Ask for the partner's calendar and give yours.

The guide to outsourcing to East Africa works the numbers out for one region.

Law, tax and data

Distance changes who the law is on the side of. These are questions for your lawyer and your accountant, not answers.

  • Contract law: which country's law governs the contract and where a dispute is settled. Choose this on purpose, with advice, and do not accept it by default.
  • Intellectual property: the rules on who owns commissioned software differ between countries, so do not rely on a default. Put ownership in writing.
  • Personal data: if the partner will see personal data, ask your adviser how data protection law applies to sending it to another country. In Europe, for example, the European Commission's own page says that standard contractual clauses can be used as a ground for transfers of personal data from the EU to other countries, and other countries have rules of their own.
  • Tax: ask your accountant how payments to a supplier in another country are treated, including any withholding tax and any VAT or sales tax, and who pays them.
  • Sanctions and export rules: check that the rules of your country and of the partner's allow the work and the payments.

Language, holidays and ways of working

The softer differences cause as many problems as the hard ones.

  • Judge written English, or the language you work in, from the partner's emails, tasks and documents, and not only from a call.
  • Agree how disagreement is voiced. A team that never says no is a risk.
  • Agree the tools: chat, tasks, repository and video, and who owns each account.
  • Agree the rhythm: when the day starts, what is reported and when a problem is raised.

How to choose

Decide by your own needs, in this order.

  1. Start with the overlap you need

    List the meetings that must be live, such as a daily stand-up and a weekly demonstration, and how many hours they need.

  2. Add the limits of law and data

    Some work cannot leave a country, or needs safeguards. Ask your adviser before you shortlist.

  3. List the skills you need

    Find where teams with those skills are, and do not assume that a country has them.

  4. Compare across distances

    Ask for an onshore, a nearshore and an offshore quote for the same brief. The difference in total cost and in risk is what you are choosing between.

  5. Test with a paid pilot

    A small piece of real work shows how the hours, the language and the process work in practice.

You can mix them

The choice is not all or nothing.

  • Keep the product owner and the architect close to you, and build elsewhere.
  • Use a small onshore team for discovery and a larger team elsewhere to build.
  • Use different partners for different work: building and support need not come from the same company.
  • Add a second location only when the first is working, so that you can tell which problems are the distance and which are the team.

Common mistakes

These are made often, and are cheap to avoid.

  • Choosing on the hourly rate alone.
  • Assuming that a small time zone gap means easy communication.
  • Assuming that a large gap means slow work. With a clear process it can work well.
  • Leaving law and data until the contract is on the table.
  • Believing a country's reputation instead of testing the team.

Keep reading

Common questions

What is the difference between offshore and nearshore?

Offshore means the partner is far away, often with a large time zone difference and a different legal system. Nearshore means a nearby country with a small time zone difference. The words are used loosely, so ask what a vendor means and check the hours and the law.

What is onshore software development?

Onshore means the partner is in your own country, in your time zone and under your law. It makes meetings and visits easy. The cost and the choice of skills depend on your own market.

Is nearshore better than offshore?

Not always. Nearshore usually gives more shared working hours, which helps live collaboration. Offshore can work well with a clear process, written handovers and a few shared hours. Compare teams on the work they show, not on the label.

Which country is best for outsourcing software development?

There is no single best country. The best place is where you can find a team with the skills you need, enough shared working hours, a legal and data position you can accept and a way to check the work. Test teams, not countries.

How much time zone overlap do I need?

A few shared hours a day are enough for daily meetings and questions. If you need more, ask a team to shift its hours and agree that in writing. With none, work by written handover and recorded demonstrations.

Can I combine onshore and offshore teams?

Yes. A common shape is a product owner and an architect near you and a larger team elsewhere to build. Add a second location only when the first is working, so that you can tell what is the distance and what is the team.

Not sure which fits?

Tell us where you are, which hours you can share and what you want built. We will say what would work and what to check before you decide.

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