Offshore, Onshore or Hybrid–Choosing the Best IT Outsourcing Model

The efficacy of traditional models maintaining physical IT infrastructure and development teams has been present and debated for some time now. Since businesses are increasingly challenged to find more cost-effective, flexible, top-level alternatives for development practices, seeking alternatives is vital to IT resource planning.

Offshore, onshore and hybrid options have been on the table for IT leadership for some time now. However, due to the COVID-19 pandemic, outsourcing is more popular than ever before. According to a recent Clutch report, 80% of small businesses planned to outsource business tasks in 2021, including IT services.

In the past, companies would try to save money by moving their operations offshore. But now, with offshore's rise in automation and the desire to be closer to local markets, companies are starting to reevaluate their strategy and look at staffing their shores efficiently. Interestingly, the same study says more than half of small businesses (56%) weighed their options and decided to onshore in 2021.

Let's review each of these IT outsourcing models.

Onshore and Why Companies Choose It

Onshore outsourcing (also termed onsite) refers to hiring third-party companies or individuals in the same country where the business resides to perform various IT services. Typical solutions include those like Calance offers: software development for mobile, web and IoT; and managed services such as a 24/7 service desk, deskside support, infrastructure and security. Advanced offerings include Business Intelligence, AI, and Robotic Process Automation (RPA).

Businesses previously only had the onshore model choice, and they deployed resources onsite to work on isolated infrastructures through the completion of the project. Once the world became connected, remote work opportunities began to gain influence.

Many companies outsource their software development to onshore companies for the following reasons:

• supporting their country's economy,
• finding the right technical expertise, and
• complying with regulatory or compliance requirements, like when data needs to reside in the country of origin.

Advantages

One of the clear advantages of selecting the onshoring model is face-to-face collaboration, which fosters additional benefits. For instance:

DEVELOPMENT SEEMS TO REQUIRE FEWER ITERATIONS. Working and communicating during the same business hours allow development teams to work side by side without barriers to communication and time zones.

COMPANIES CAN EXPECT AN IMPROVED TIME TO MARKET.  Due to the advantages mentioned above and the centralized nature of working closely together, clients could expect quicker delivery cycles and fewer risks, delays, or quality issues for services provided.

Disadvantages

However, in some cases, the benefits of this model could lead to more costs and, as a result, cost cuts that could mean a lesser quality product.

DEVELOPMENT WILL LIKELY BE MORE EXPENSIVE. Having experienced resources with deep expertise available, whether onsite or on-call, is a costly endeavor. Companies decide on this more expensive option in exchange for greater "eyes on" involvement, assuring them that any rework will be minimal.

COMPANIES CAN USE BACKDOOR OFFSHORING. Onshore companies may turn around and outsource some or all of the development offshore to cut costs. This practice is known as backdoor offshoring.

Offshore and Why Companies Choose It

Offshore outsourcing refers to the same services offered in an onshore model, but instead, the work and workers are in foreign countries. Software development companies have become more common and accessible across the world. Their technical expertise has advanced quickly to the point where it has caught up (and in some cases surpassed) to what's currently available domestically.

Small and medium-sized enterprises can benefit enormously from using offshore resources and services. Due to the price point and access to top-tier talent, smaller organizations can engage and execute IT initiatives previously cost-prohibitive.

An example of how offshoring has allowed SMEs to compete with larger companies is building advanced AI-powered chatbots and other RPA solutions.

The competitive advantage of offshoring lies in the larger talent pool and the ability to attract the best talent. The globalization of software development has made it easier for these firms to find talent abroad. As a result, they've been able to take advantage of foreign teams that would've been too difficult or expensive for them to use domestically.

Advantages

Offshoring options provide many advantages to businesses of all sizes beyond the initial economic gains, and these include:

COMPANIES CAN ACCESS A HIGHLY QUALIFIED TALENT POOL. Certain countries specialize in different aspects of technology and services. This specialization and bulk offerings have meant that highly skilled talent pools have been developed in these countries, making their services more affordable and giving greater access to more resources with extensive skill ranges.

TURNAROUND TIMES CAN BE QUICKER. Armed with deep talent pools, offshore companies can deploy more resources on projects that can swiftly reduce delivery times at a less expensive rate than onshore resources can.

RESOURCES CAN BE SCALED AND MAINTAINED EFFICIENTLY. Many small- and medium-sized companies do not have budgets to support or maintain applications and solutions. Offshore companies can quickly turn on and off their resources as needed. This way, companies avoid the costs of taking on full-time staff.

COMPANIES HAVE MORE TIME TO FOCUS ON THEIR BUSINESS. Partnering with an offshore software development company opens up more time and resources for you to focus on developing and improving other areas of your business so it can grow holistically.

Disadvantages

On the other hand, the potential disadvantages of the offshoring model are concerned with time, cost, and staffing.

OFFSHORING CAN RESULT IN COST AND TIME EFFICIENCY. Offshore outsourcing may not always be the best option for complex software development needs. Solutions may have to be reworked more than once. In this case, the final cost will end up being much higher than initially expected. And if the offshore company is less-than-reputable, they may not provide an accurate estimate, and you might find yourself paying for hidden fees.

CULTURAL AND TIME ZONE DIFFERENCES CAN CAUSE BARRIERS. Different cultures solve problems differently. There can be communication barriers in languages or manner in which to approach problems. An offshore company's solution to a problem may not work for the target audience, leaving you to wait for resolutions for an entire day or weekend. These communication gaps can lead to costly misunderstandings and confusion.

Hybrid Model and Why Companies Choose It

The hybrid shore outsourcing model has emerged as one that combines onshore and offshore concepts for projects with specialized and complex requirements. Both teams work together to customize the approach to complete tasks quicker by distributing workloads efficiently where needed.

Companies use this model to allocate costs and communication for a time-productive development. Data privacy's stringent initiatives for Finance and Health Care companies are a prime example of this. Basic development tasks and foundational coding can be offshored. In contrast, the advanced coding aspects with direct tie-ins to the proprietary customer or patient data and system configuration need to take place onshore or internally.

Advantages

Hybrid models can have customer-facing roles such as architects and senior leadership all residing in their countries, allowing for clear communication, easier collaboration, and alignment of working hours. While at the same time allow for distributed work utilizing offshore resources at a lower cost to maximize the benefit of both models.

Disadvantages

While the Hybrid model is the answer to most of the disadvantages of onshore and offshore, it needs to be planned carefully and have firm project management to ensure efficient execution. Any lack of leadership and administration of this distributed model will cause you to experience all the disadvantages and none of the advantages discussed.

Choosing a Model That Suits Your Business Needs

Choosing the suitable shoring model for your business can be difficult. There are many factors and variables to consider. That's why you need a trusted partner like Calance that has the expertise to guide your company and offer approaches to IT solutions that will help you achieve your goals and, ultimately, success.

We can provide all onshore or all offshore services or a hybrid service specifically for your business that blends the best of both worlds. Unlike many firms that utilize offshore resources for an onshore market, Calance is a global business with high-quality individuals, teams and services. That means Calance delivers cost-effective solutions scaled to your exact needs. Contact Calance today to learn more about how our team can provide the best IT outsourcing model for your company.