Key Differences Between Outsourcing and Offshoring When Hiring Software Developers

Outsourcing vs. offshoring, which one to choose? Both are great solutions for finding fresh IT talents Which of these options would work best for you? Here we will see all about outsourcing vs. offshoring, how to set them apart and how to use them to source software developers for your business.

Offshoring (definition) has to do with delegating a particular portion of your organization to a team in another land. Are you headquartered in the USA? Then you might have a software development team working for you in Romania or Bulgaria. In the IT business, software production and software development are mainly offshored. Many big companies such as Microsoft are using offshoring.

Outsourcing – in a nutshell

Outsourcing involves a third-party organization to whom you trust a function you cannot complete within the company. This can be a single-time project based upon a contract. It can be an ongoing relationship as well. Organizations outsource functions that do not have vital importance to the company’s development more often. Sone of the advantages of offshoring coincides with those offered by outsourcing. Some prominent examples of companies that are outsourcing are Apple and Viber.

What sets them apart?

Many times the terms outsourcing and offshoring have been mixed up. Indeed, they are similar in a variety of ways. A lot of the advantages and shortcomings overlap. Here are some key points that set them apart.

Offshoring always happens in a foreign country.

This is implicit in the name itself. You are delegating a function, an IT project, or tasks offshore from your homeland to another country. On the other hand, outsourcing can happen in the same country. Outsourcing is therefore directly connected to globalisation – the natural urge for capitalist countries to develop complex trading arrangements between their economies to take advantage of each other’s comparative advantages.

Outsourcing means there is a third-party

The term outsourcing means you are employing the services of another software agency or organization to do the work for you. On the other hand, with offshoring, the operations in the foreign country represent an extension of your company.

There can be offshoring without outsourcing. This means your organization is opening an office in a foreign country. This involves hiring a team of software engineers locally.

You can be outsourcing without offshoring too. This happens when you hire a company in the same country to produce and develop software.  


Considerably Lower Expenses

There are differences in how employing software specialists by offshoring and outsourcing allows you to cut costs. But the lower prices are a fact. Hiring a third-party team to do the job for you by outsourcing will enable you to rely on their expertise and service, saving you time and making money. Creating a dedicated offshore IT team in another company has its benefits in terms of costs because different economies have lower taxes and labour costs. Both options are budget savers. Hiring full-time in-hour software developers will cost you a fortune in comparison. 

Access to the best Software Developer’s Talents

Outsourcing and offshoring allow you to tap into a more excellent talent pool of IT talents. Working with an outsourcing agency will enable you to rely on a team with established processes and a reputation for hundreds of successful projects. The expertise of such teams allows you to complete the project swiftly and with great results. Offshoring allows you to create a software engineering team for yourself, relying on great talents at an excellent price. Build your offshore development team by hiring the best software developers from CloudEmployee.


Scarcity of communication

With both outsourcing and offshoring, communication problems may arise. With outsourcing, you won’t be able to choose the software developers that work for you. The available ones will get the job. Often they won’t align with your mission, vision, and values. The same situation might occur with offshoring. You can add the issues relating to time zone differences, language, and cultural divergence.

Political correctness

There is specific criticism related to the practices of offshoring or outsourcing. It claims it takes vital jobs away from the homeland. Certain companies have also stained their reputation with unethical things, like avoiding taxes or abusing the workforce.

Why might offshoring seem better?

You have greater control

You can create your team and rely on your employees offshore. This way, you can affirm your control over the working conditions and the operations of the projects. You might spend part of your native staff doing administration and education in the foreign country to assert the company culture and values and make sure the offshoring branch is aligned with your company’s needs. 

Better at retaining information privacy

When you do offshoring, all your Software Development operations remain within the company. Given that the new foreign country branch is an extension of your company. You do not rely on a third-party Software agency. This is why there is less chance of information leakages which is crucial if you produce innovation in the Software industry.

Difficulty relating to offshoring

Work overload

The most significant difficulty comes with the amount of work you need to take care of. Taking care of the operations across the border can be very demanding if you do not have a company that handles it. Turnkey Labs company, for example, is a kind of managed offshoring solution that facilitates much of the processes and takes a lot of weight off your shoulders. You can learn more about Turnkey remote teams on their page.

Monitoring the project progress

The distance makes it difficult to oversee the progress too.

Difficulties related to infrastructure

Handling a company branch in another country makes you subject to different infrastructures and conditions such as poor internet coverage, specific local regulations, and culture.

Pros of outsourcing

Goal-oriented objectives

By employing an external team of software specialists, you can devote more of your time and resources to essential aspects of your business. You do not need to hire new personnel or replace them. And you can achieve the company’s goals at the same time.


Hiring an outsourced team of software developers on a contract basis is perfect if you have ongoing software tasks or a one-off project. You get what you agreed on the contract. If you are not happy with the result, you are not bound by a lot of responsibility, and you can search for another contractor.

A fast solution

Outsourcing software developing companies already have a very efficient team. Their main goal and strength is speed. They need to deliver results fast. They are very result-oriented.

Cons of outsourcing

No tangible control

When you handle a portion of your business to an outside team, you put a lot of trust in them. It is as if you had a baby and handed it to another parent to better care of them. If they do not fulfil the task in unison with your views, your business baby can suffer significant damage in terms of growth and development. 

Quality issues

When you delegate your software project to an outsourced team of developers, you cannot expect they will pour their heart and soul into your project. They might not abide by your company values and vision. Their goal is to get the project ready as soon as possible and move on to the next client. This mercenary approach may lead to not getting exactly what you envisioned.

In conclusion:

Is outsourcing or offshoring the best choice for you when hiring a team of software developers? You need to consider your company’s needs carefully. You may choose to outsource some functions of your software business and offshore others. You need to scrutinize the outsourcing or offshoring company to see if their reputation is good and if you can trust them.