However, with time, the problems with total offshoring have become apparent. International teams face language barriers, cultural gaps, and clashing time-zones, which, together, slow down operations and make communication a challenge.
Today, software consultancies are more geographically distributed, giving clients better options for their projects that best suit their needs. Typically, three models prevail: onshore, offshore, and nearshore. Each has its advantages and tradeoffs that clients should consider when deciding which software consultancy is right for them.
Let's take a look at onshore, offshore, and nearshore software development, and the pros and cons of each.
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What is Onshore Software Development?
Onshore software development means an entire development team, from its lowest-rank coders to its project lead, is based in the United States.
What are the Pros and Cons of Onshore Software Development?
While keeping things entirely stateside has its benefits, it isn't perfect.
Pros:
US-based consultancies tend to have the best communication overall. Their developers and team leads speak native English, operate in the same or similar time zones, and understand the cultural nuances that make the development process easier. Additionally, onshore development offers the easiest opportunities for on-site collaboration.
Cons:
Onshore firms are also the most expensive— the riskiest, as a result. Onshore firms typically charge between $115 to $175 per hour, and it's not unusual for projects to burn through six figures in the design and planning stages alone. As a result, onshore development tends to be a better fit for large enterprises with the budget to handle higher costs. However, even for these larger businesses, the cost of onshore software development can be hard to justify when other models offer similar results at a lower price.
What is Offshore Software Development?
Offshore software development means that a software development team is entirely based outside the US— typically in the Eastern Hemisphere.
What are the Pros and Cons of Offshore Software Development?
Offshore software development has some benefits, but it can end up being more trouble than it's worth. Here's a breakdown:
Pros:
Offshore consultancies provide the opposite cost-benefit balance as onshore ones. While onshore firms are the most expensive, those offshore— typically located in the Asian subcontinent— are the cheapest, usually charging clients between $25 to $45 per hour.
Cons:
What clients save in cost, they often lose in quality. Offshore firms are a common source of frustration for teams looking to save money, only to find that the results don't meet their standards. These firms frequently hire inexperienced developers and engineers, many of whom lack formal training. As a result, offshore software solutions typically have worse quality than those produced by their onshore and nearshore counterparts.
Companies working with offshore developers also have to contend with time zone differences, which are often 10 to 12 hours or more. While this already makes timely communication slow and difficult, it's made worse by the fact that many offshore workers speak little English. As a result, teams may lose hours (or days) just clarifying miscommunications. It’s also much harder to meet with the project lead in person, and the cost and effort it takes to do so can cancel out the savings.
What is Nearshore Software Development?
Nearshore software development means your team is based outside the US—but not too far away. Developers are usually located in nearby regions like Latin America, where time zones, language, and culture align more closely with those in the US.
What are the Pros and Cons of Nearshore Software Development?
Nearshoring is often seen as the middle ground between offshoring and onshoring. It offers a blend of both models’ strengths, along with some of their limitations.
Pros:
Nearshoring offers many of the cost-saving benefits of offshoring while reducing the communication and time zone challenges that often come with working across continents. Developers are typically based in countries like Colombia or Mexico, where the cost of living is lower but the talent pool is strong. For example, Brazil has over 500,000 software developers, giving it the largest tech talent pool in LATAM.
Rates generally fall between $40 to $70 per hour— higher than offshore, but lower than onshore. English proficiency tends to be stronger, business customs are more familiar, and being in the same or similar time zones makes collaboration much smoother. Teams are typically more responsive, and while it might require a trip abroad, travel is manageable if you're interested in meeting the product lead in-person.
Cons:
On-site work is still more challenging compared to onshore development. While nearshore rates are more affordable than domestic options, they are usually higher than offshore alternatives.
Average hourly rates for Offshore, Onshore, and Nearshore Software Developers:
Learn more about Software Development pricing and hourly rates here.
Pros and Cons of Offshore, Onshore, and Nearshore Software Developers:
Is There a Better Option?
Yes, clients have one more option that strikes the sweet spot between all of them: the hybrid approach that we use for many projects here at FullStack Labs.
By pairing a US-based Lead Developer with vetted nearshore talent from the FullStack Talent Network, we’re able to offer the security and convenience of onshore development along with the cost-efficiency of nearshore teams. As our onshore and nearshore employees' time zones overlap, collaboration happens in real time— making meetings, feedback cycles, and day-to-day communication smooth and efficient. This hybrid approach also allows us to provide quality service at a much lower average hourly rate of around $85.
Whether you're still weighing your options or you're actively assembling a team, we'd be happy to share more about how our model works in practice. If you're interested in learning more, you should take a look at our team to get a sense of who might work on your project. Alternatively, if you'd like to discuss the details of a potential project, we're always happy to talk.
