Choosing whether to outsource software development is often a difficult decision. Is it better to hire on-shore, or should you consider offshore software outsourcing and reap the cost savings benefits? To simplify this process, read our guide about outsourcing options for business to understand what could be a best fit for your outsourcing needs. And if you’d like to kick start your project with a reliable outsourcing provider today, you can explore Trustify Technology’s software outsourcing offer.
When it comes to choosing between offshoring vs. on-shoring, most companies make the decision based on cost, which may compromise quality. Thus, the final outsourcing decision usually comes down to a trade-off between cost and quality.
However, other factors like collaboration, time zone alignment, security, and project complexity, etc. also play an important role influencing the final outsourcing choice.
Software Outsourcing: On-shoring vs Offshoring
As per Statista, it is projected that the IT outsourcing market will generate $591.20 billion in revenue by 2025, growing at a compound annual growth rate (CAGR) of 8.28% from 2025 to 2029, and reaching $812.70 billion by 2029. This highlights the growing demand for IT outsourcing in the years ahead.
More than just cost vs. quality, the choice between offshore software outsourcing and on-shore involves a plethora of considerations and challenges. In this article, we look at their pros and cons of both options to help you decide.
The Basics of Onshore Outsourcing
What is onshore outsourcing? Onshore outsourcing means contracting software developers located within the same country as your business to work on your projects. Usually, onshore outsourcing costs more than other outsourcing options, but it likely provides higher development quality levels than other outsourcing options.
Here’s a quick overview of the basics:
Pros:
- Proximity locations and shared standards often result in higher-quality deliverables for your projects.
- Lower risk of security and compliance concerns compared to offshore outsourcing.
- Similar language and work culture reduce the likelihood of miscommunications.
- Being physically closer to your outsourcing team allows for higher levels of oversight and collaboration.
- Similar time zones enable easier and more efficient collaboration between teams.
Cons:
- Onshore outsourcing is typically more expensive than offshore.
- Limited scalability for 24/7 operations: Providing round-the-clock development or support may be harder or costlier.
- Smaller talent pool for specialized needs: Finding bilingual or niche-skilled developers locally can be more challenging and expensive.
As software projects differ from company to company, there’s often no certain rules about whether you need to hire outsourced teams onshore. Some companies tend to opt for on-shoring due to regulatory compliance, security, intellectual property protections, etc.
For example, a US-based fintech start-up may outsource their mobile app development project to a domestic development to ensure adherence to regulatory standards like SOC 2 or PCI-DSS. Onshore outsourcing, therefore, tends to be a more suitable option for companies that operate in industries with high levels of regulation and require strict security and quality.
The Basics of Offshore Outsourcing
On the contrary, many companies find offshore software outsourcing a better solution. To simply explain, offshore software outsourcing involves working with software developers in different countries, usually one located geographically far from the country where your business operates. For many companies in developed countries, offshore software outsourcing usually involves working with software development teams in Vietnam or India.
Offshore Outsourcing Pros & Cons
Pros
- Cost-effectiveness: Offshoring is among the most affordable ways to outsource software development.
- Global availability: Different time zones make it easier to provide round-the-clock development and support or manage projects.
- Scalability: Access to a large pool of skilled overseas development teams in overseas allows for effective scaling of resources, based on project needs.
Cons
- Offshore software outsourcing to an international country may introduce concerns about data security, Intellectual property protection, and compliance with regulations.
- Differences in language and culture might lead to miscommunications.
- Geographical and time-zone distance could make it harder to maintain direct project oversight. And potentially impact productivity as well as collaborations with in-house teams.
Both onshore and offshore software outsourcing provide multiple benefits, but reaping them might not always be easy.
Depending on your specific requirements, outsourcing can be entrusted to an offshore vendor or shared with your onshore software developments provider. Factors such as your software outsourcing goals, budget, technologies requirements, and a variety of other considerations all impact which option is right for you.
Outsourcing Cost: Onshore vs Offshore
Again, many companies make outsourcing decisions based mostly on cost. However, labor costs alone, there are other outsourcing related costs that companies need to pay attention to.
Direct costs
When it comes to software outsourcing, both on-shore and offshore involve direct costs such as wages, infrastructure, software license, and overheads. Offshore outsourcing is usually more affordable due to lower labor, infrastructure, and overhead costs. However, onshore outsourcing can still save costs, as expenses like overhead and software are shared across multiple clients, reducing your share.
Other outsourcing related costs
Other outsourcing costs include hiring, onboarding, communication, and cultural training. Onshore teams are generally more affordable here, as they require less training to integrate with your current operations. However, hiring and staffing costs for onshore teams could be higher than offshore. For example, onboarding a remote software offshore team may involve additional cultural training, while onshore teams may jump into working on the project faster.
Software outsourcing costs also include expenses you can’t directly list, such as low quality of software delivered, turnover, or low performance of an outsourced team etc. All of which are considered to be hidden software outsourcing costs. These can vary projects by projects and aren’t tied to location. For example, hiring an offshore team might save money on wages but face delays due to turnover, while an onshore team might deliver higher efficiency and fewer errors, offsetting higher labor costs.
When evaluating costs, it’s important that you focus on the overall ROI, and not just expenses. The goal for software development outsourcing is to drive profitability and growth, not to be viewed solely as a cost center.
Quality in Software Delivery
As mentioned above, software outsourcing includes hidden costs like low quality of software delivered. Thus, it’s important to ensure that your outsourcing project meets the required standards.
Offshore teams are ideal for offering 24/7 service, thanks to time zone differences and a larger pool of highly skilled IT workers. However, onshore teams often provide more reliable infrastructure and consistent quality. Collaboration is also easier with onshore teams in similar time zones, though this can make round-the-clock service more challenging.
For example, an offshore IT team in Vietnam might support overnight shifts for a U.S. company, and an onshore team would work regular hours, simplifying communication but limiting 24/7 availability.
Back in the days, critical elements such as infrastructure and international certifications (e.g. Azure, AWS, etc.) may prevent offshore vendors from offering the same level of technological ability and support as onshore teams. However, things have improved in recent years, especially when it comes to software and technologies. Offshore vendors have caught up and are now able to offer the latest-and-advanced tech solutions like ML, Blockchain, and Big Data, to name a few. For instance, an offshore team might now handle advanced AI integrations as effectively as an onshore team, thanks to improved global access to technology and certifications.
Cultural and Communication Challenges
Location plays a significant role in cultural and language alignment. Onshore teams typically have a strong understanding of local culture and customer expectations, as developers reside in the same country as you. Offshore teams, however, vary in cultural and English language proficiency.
For instance, Vietnam has become a popular software offshoring destination due to its strong IT skills and ability to deliver high-quality software products to Western clients. However, Vietnamese developers may have less familiarity with Western cultural nuances, potentially affecting communication and project alignment.
Different software outsourcing providers handle communication barriers differently. With our global locations at Trustify Technology, we screen all potential developers early on in the search process with English proficiency tests, ensuring a higher level of fluency. We also have on-site English training and cultural training to ensure high levels of communication and cultural fluency skills.
Risk Management: Security and Compliance
Risk management is critical regardless of where you choose to outsource your software projects. While offshoring is a viable option, especially without onshore industry regulation requirements, it’s essential to ensure the outsourcing maintains strong security safeguarding privacy and customer private data. It’s also worth noting that location alone – whether in the U.S. or offshore – doesn’t guarantee trustworthiness.
Still, offshoring comes with unique security and compliance risks. International software vendors operate under their own cybersecurity and data protection laws, which may differ from U.S. standards. Additionally, U.S. companies may face stricter regulations when storing customer data overseas, requiring careful compliance with U.S. laws, even when working with global outsourcing partners. For instance, outsourcing your software projects to international vendors might involve navigating GDPR in Europe or local cybersecurity rules in Asia.
On-shoring allows you to simplify risk management by eliminating the need to handle international compliance or legal complexities for data processing and storage. While security and compliance concerns still exist, they tend to involve fewer layers of complexity compared to offshoring.
Our teams at Trustify Technology – whether onshore or offshore – adhere to the same strict security and privacy standards. We comply with all major US regulations, such as:
- PCI compliance for any software processing payments or payment data;
- SOC-2 compliance for general data security and privacy;
- HIPAA compliance for any healthcare-related organizations;
Looking for offshore software development outsourcing vendors with these certifications can assure you that your outsourcing partner is doing everything possible to keep your project compliant, and protect your customer data.
Co-sourcing: the Best of Both Worlds
With modern technology and a global remote IT workforce, you don’t have to choose exclusively between offshoring and onshoring. A hybrid outsourcing model allows you to combine the advantages of both by splitting your team between onshore and offshore locations.
For example, you can keep sensitive data and complex tasks, like advanced coding or architecture design, with your onshore developers, while leveraging offshore teams for scalability and cost-effective handling of straightforward or repetitive programming tasks that don’t involve sensitive data. This approach balances security, quality, and affordability, allowing you to optimize resources without inflating costs.
Yet, hybrid models still come with difficulties. Coordinating across multiple time zones and locations can complicate collaboration and workflows. Additionally, regularly visiting teams in multiple locations – or even countries – can quickly become costly and time-consuming. Despite these hurdles, hybrid outsourcing is an excellent way to achieve scalability and maintain high standards for critical components of your projects.
How Do You Choose the Right Software Outsourcing Model and Partner?
Finding the best outsourcing model and partner for your software development needs starts with clearly defining your goals and requirements. Once you’ve established these internally, you can issue Requests for Proposals (RFPs) to potential partners. Narrowing down suitable locations – whether onshore, offshore, or a mix – can help simplify your search for the right software outsourcing partner.
You might want to work with an offshore software partner if:
- You need to scale your development team quickly or handle a large-scale project;
- Budget is a key priority, and cost-effectiveness is essential;
- Your project involves straightforward, repetitive tasks that don’t require constant collaboration;
- The development process is standardized, with minimal customization required;
- Your industry doesn’t have strict compliance or security requirements;
For example, a startup looking to develop a basic SaaS platform might choose an offshore partner to reduce costs while scaling quickly.
You might want to work with an onshore partner if:
- you need a few, highly-specialized software engineers or a smaller team;
- you need or want high levels of proximity or collaboration with your outsourced team;
- you have complex software development tasks that need to be handled;
- you need high levels of compliance or security;
- you are looking for the highest levels of quality, fluency and collaboration available with outsourcing;
Whether you’re looking for onshore or offshore outsourcing partners – or a mix of both – our teams at Trustify Technology are here to help. With several locations across the US, UK as well as development centers in Vietnam, we can help you scale quality service, protect your customer data and create product lasting connections with your customers that drive loyalty and results.
Connect with an Trustify Technology outsourcing expert today to see which of our teams is the best fit for your needs.