Outsourcing Vs Offshoring: Comparison Guide Between Location-Based Types Of Outsourcing

What Is Outsourcing? A Short Definition

What Is Outsourcing? In simple words, outsourcing means transferring some business process outside of the company to a specialized service provider.

This model became a popular response to the IT market situation when the number of specialists isn’t enough to cover a growing need for their skills. As a result, we see an annual increase of IT engineers’ salaries and software product development costs as well. By outsourcing IT processes, companies benefit from access to the global talent pool and expertise unavailable in-house and can hire skilled specialists at reasonable rates.

Based on the location of a service provider, IT outsourcing is usually divided into three different models: nearshoring, offshoring, and onshoring. Let’s take a look at each of them.

Types Of IT Outsourcing

Nearshoring is the most convenient model of location-based outsourcing. According to it, you hire a company located in a neighboring country (usually in the same time zone or within a couple of hours difference). It allows finding the best cost-quality ratio. You will also benefit from cultural similarities and the same business hours.

Offshoring’s main goal is getting work done in faraway countries where the costs are as low as possible. So it means handing over your product development to a service provider located in a country with an emerging economy, where the cost of living and the salaries of IT specialists are lower. And if you choose your service provider correctly, you will get almost the same quality of services as if it were done in your country. Compared to others, offshoring has more disadvantages, such as time zone differences (from 5 to 12 hours), possible cultural and language barriers, etc. 

Onshoring means transferring software development to a lower-cost location inside the national borders. The main goal of this model is to have maximum proximity, communication without any barriers, and control over the process. Although onshoring is the most expensive model, it still allows some cost optimization. Usually, a service provider is located in a small town and charges less than companies in the metropolitan area. 

Comparison chart of each model

Advantages and disadvantages of Nearshoring, Offshoring, and Onshoring

Besides differences, some key advantages and disadvantages are common for offshoring, nearshoring, and onshoring. There is a popular opinion that the language barrier can potentially cause a few cooperation problems. But due to globalization, the post-covid digital transformation, and the spread of English, the risks of miscommunication and cultural issues seem to perish. Apart from the language itself, there is a potential risk relevant for all models regarding the style of work of a particular vendor, their ability to follow deadlines and communicate effectively.

The common advantage of all models is the strong expertise that clients don’t have in-house. Specialization makes it possible for all outsourcing service providers to gain strong expertise in the service field they provide. To stay competitive, they hire top-notch experts who face multiple challenges working on projects of varying complexity. 

On the other hand, you should note that according to some cooperation models you will hire specialists that work for multiple projects simultaneously. Some vendors don’t fully immerse into your project. That’s a huge challenge, especially if your startup is currently in the discovery stage. But that’s a disadvantage of a particular IT outsourcing company, not of IT outsourcing itself. 

All the above paragraphs refer to common features. Now here is more detailed information on their particular advantages and disadvantages.



  • the teams can collaborate and communicate throughout the workday (for example, additional feature development or bug fixing sometimes requires the exchange of information between a service provider and an in-house developer); 
  • geographical closeness makes it possible to organize offline events to increase the effectiveness of teamwork and personal communication;
  • cultural similarity reduces potential issues;
  • tax and financial laws can be similar.


  • there is only one main disadvantage compared to other models: it is more expensive than offshoring.



  • due to intense competition, many offshore outsourcing companies create beneficial conditions for their clients and provide complementary services like short-term support, consulting, free QA services, etc; 
  • access to a larger talent pool; 
  • quicker time to market with the ability to work on projects round the clock (e.g. when an Indian team ends a working day, their US colleagues only start working, as if the second shift); 
  • possible tax holidays, financial incentives, and fewer business regulations.


  • there are chances that your offshore provider follows business and management processes that are very different from yours;
  • sharing information between systems and locations increases the risk of a security breach, data leaks, or loss of data; 
  • some developing countries have not adapted their educational system to modern technological requirements, so you need to double-check the developers’ competence;
  • deadlines and tasks may also be harder to sync due to local national holidays etc. (of course, this can be avoided with proper planning).



  • possibility to meet with your provider and outsourced team offline as often as needed;
  • no need for late-night meetings as you are in the same time zone; 
  • possibility to check a company’s reputation and references on your local market;
  • onshoring guarantees more effective cooperation, because all participants have common cultural and linguistic background;
  • same business approach.


  • onshoring is more expensive than nearshoring and much more expensive than offshoring;
  • hiring locally limits the talent pool you access – there may not be enough candidates with needed skills;
  • very fierce battle for talents on the markets of developed countries.


To sum up, we provided you with comprehensive and objective information to help you make the right choice and maximize benefits. Compared to all models, nearshoring works more effectively in our opinion, so we prefer this model of cooperation with customers.

Feel free to contact us and get answers to all your questions about IT outsourcing from our specialists.


What Is a Dedicated Team Model? Full Guide + Tips

What is a Dedicated Team Model in a nutshell?

A dedicated team is a business model according to which a service company provides software development professionals, who work as a client’s own team extension on a long-term basis. Engineers are hired with specific skills and experience to cover all customer’s needs. The management of a dedicated team and the development process is usually on the client’s side.

Now let’s take a look at some popular questions you might have about hiring a dedicated software development team.

Signs That You Should Hire a Dedicated Team

Early-stage startup

For early-stage startups, time and money are the key factors influencing future success. With the help of dedicated developers, you can build an MVP of your product fast and decrease time to market dramatically. In terms of expenses, it is cheaper to cooperate with a dedicated team provider than hiring and paying salaries to an in-house team of software developers. Also, there is no need to take care of equipment, office supplies, and working space as it is the responsibility of a service provider. 

Specific product domain

If your product is niche-oriented or requires building a complicated system, it is better to hire a dedicated team with relevant domain expertise. So that they can solve complex, industry-specific problems and provide optimized high-quality solutions.

Projects with undefined or changing requirements

Sometimes for a startup it is hard to set a determined scope of work and tasks priority at the discovery stage. As any product idea should go through a validation process to ensure there is a product-market fit, during the customer discovery stage some insights may cause the change of key features. A dedicated team, which is basically your own remote team, provides you with the needed time and resources to make all changes without paying additional costs.

Long-Term Projects

To deliver a complex, lasting product, you need a strong team of developers working with you from the beginning to the end of the project. So that all members are united by a clear vision of a product and have a deep technical understanding. Within a dedicated team model, software developers focus only on your project which means more time on strategic planning and general improvement. And it also allows preserving the product knowledge within one long-term team. On the contrary, with other collaboration models the process can be less productive as developers are usually involved in several projects simultaneously: context switching takes time to get into focus.

What Is the Cost of Hiring a Dedicated Team?

The final cost depends on the team size, level of seniority, and project complexity. For example, the average hourly rate for a software developer in Eastern Europe is $25-45, while in the US you’ll pay as much as $100-150 for the same work done with the same level of competence. The cost is calculated by the formula: members’ salaries + service provider’s fee, which includes administrative overheads such as expenses on renting an office, providing equipment, HR and legal support, paying taxes and bills, etc. In addition, it’s much cheaper and faster to hire a dedicated software development team with the help of a vendor than to search for each professional on your own. 

Where to Find and Hire a Dedicated Team?

To find a reliable software development partner you should go through several steps. We recommend you to start with researching firms on specialized aggregators such as Clutch, GoodFirms, IT Firms etc. You can choose companies based on the minimal project budget they work with, hourly rate, type of services, industry, number of reviews, etc. Then study the reviews of selected companies to get a complete picture of their working process and general customer satisfaction. Study the portfolio to make sure the companies have the needed expertise for your project, also check their management process and data protection measures. And only after that you can move to the final steps such as interviewing and hiring.

Management of a Dedicated Team

With a dedicated team model, there is a possibility for you to decide on how involved in the project management you want to be. A dedicated team is basically your own remote team, so you can fully manage every aspect of the product development process by yourself. Or you can leave it to your service provider and just control the current progress. With the help of time tracking and task management systems, software development became a transparent process.

Dedicated Team Set-Up Process at ImproveIT Solutions

Since 2016 we have set up dedicated development teams in Ukraine for 50+ clients. Here is how we usually start a new dedicated team project:

  1. Evaluation. First of all, we study the needs of your project no matter whether it is new product development or upgrading the existing one. Then we identify your requirements, expectations, and key objectives to match them with the necessary expertise, skill sets, and team structure. 
  1. Team Selection. Once we are aware of the business and technological challenges, we offer you a balanced team structure that will be both productive and cost-effective. Then we shortlist the best candidates and send you the resumes.
  1. Interview & hiring stage. We can provide a developer within a set tech stack in just 1-2 days. If you are looking for another skill set – the whole process takes a couple of weeks, depending on the team size and requirements. 
  1. Onboarding. At this stage, we align the project and business priorities and provide the team with the necessary software and equipment. We create the team’s organizational chart, roadmap, distribute responsibilities, set up all communication and reporting procedures.
  1. Support and advising. Every client has a dedicated account manager as a main point of contact, that takes care of all administrative and organizational matters throughout collaboration. They are in regular communication with customers via video calls and chats, are constantly asking for feedback and areas for improvement during the whole cooperation process to make sure we provide excellent service.

Key Takeaways

All in all, while choosing a reliable service provider you should remember that it’s not enough to hire an expert dedicated development team. Hiring is just the first step. What’s more important is that the provider has well-established internal business processes to make this team productive and work effectively. You can contact us to get and review all our documentation on setting up dedicated teams and internal processes for such type of collaboration.


Vitaliy, CEO And Co-Founder Of ImproveIT Solutions Shares His Plan To Grow The Company Organically: GoodFirms

ImproveIT Solutions is an IT company that provides expert software engineering services and approaches dedicated software development by teams. The company’s portfolio includes software solutions from simple mobile apps to enterprise fintech systems used in 75 countries. Their core focuses are mobile and web SaaS development, mainly for the French, Swiss, Dutch, German, and US markets. The team has managing partners with a combined experience of over 15 years in IT management, creating software products, business scaling, and tech staffing in Ukraine and the EU.

Vitaliy mentions how the company was started with his professional friendship with Taras Chornyi, Co-Founder of ImproveIT Solutions. Working in the industry together, they gathered a profound experience in software development, management, and operations. And from this perspective, they got a solid understanding of how services are rendered at an excellent level. Also, they observed some imperfections in the existing market and wanted to fill this gap and cared to create a company with a different set of values such as transparency and excellence at work.

If the client’s in-house team lacks the expertise, ImproveIT Solutions jumps in to fill the gaps and strategically advises product development and roadmap. The company provides developers and acts as a technical partner who always tries to see the big picture of what they are building. They also provide technical consultation with suggestions and points of improvement. Moreover, the team remains flexible on discussing terms and conditions, engagement model, project sizes, and ability to provide almost any technology present on the market. 

The company has a team of expert professional developers with years of experience developing and designing exclusive tailor-made software solutions for clients worldwide. The group provides services to clients ranging from recently formed startups to a well-established enterprise that needs to upgrade its software according to the changing market needs. Its innovative and engaging software products boost the client’s business rates and quickly resolve their business setbacks.

With vast domain knowledge and expertise, the company satisfies the software development needs of valuable clients. The software solutions developed by the team adhere to specific business problems and are pocket-friendly for small and medium-sized businesses. The experienced team of multi-disciplinary developers leverages the latest trends and technology to provide usable and maintainable solutions. The team at ImproveIT Solutions keeps in mind the client’s requirements and market needs and develops a product that caters to both simultaneously. This encourages the client to select ImproveIT Solutions as its first choice for a development partner. Thus for such noteworthy services provided, the company is ranked among the top software development companies in Ukraine at GoodFirms. 

To provide the end-users an enriching experience, ImproveIT Solutions provides new technologies available in the market that meet the needs of their client and trade simultaneously. They make their client’s online presence grow with their unique, innovative approaches. Their industry-specific web solutions provide a cutting-edge position to their clients to stand out from other competitors in the market. 

A Client reviews the services of the company in web development.

These fantastic web development services from the team are why the company would soon lead among the top web development companies in Ukraine at GoodFirms.

When asked about the company’s future goals, Vitaliy mentions that they don’t plan to grow exponentially but rather organically. The team will continue implementing and adjusting its internal processes for gradual growth and best western business practices. It is more important for them than just growing revenue or headcount. With good strategies and business practices comes success, and with success comes organic growth. So in the next 10 years, they plan to expand widely in the EU and US hi-tech markets and will continue to stay on the verge of the newest and most popular technologies.

Thus, having read the excerpt from Vitaliy’s interview, one can also go through the detailed interview at GoodFirms.

About GoodFirms

Washington, D.C.-based GoodFirms is an innovative B2B Research and Reviews Company that extensively combes the market to find business services agencies amongst many other technology firms that offer the best services to their customers. GoodFirms’ extensive research process ranks the companies, boosts their online reputation, and helps service seekers pick the right technology partner that meets their business needs.

About the Author

Working as a Content Writer at GoodFirms, Anna Stark bridges the gap between service seekers and service providers. Anna’s dominant role is to figure out company achievements and critical attributes and put them into words. She strongly believes in the charm of words and leverages new approaches that work, including new concepts that enhance the firm’s identity.