Cost comparison: Nearshore, Offshore and Onshore – The right choice for your IT project

Cost comparison: Nearshore, Offshore and Onshore – The right choice for your IT project

In today's globalised business world, companies face a crucial question in the implementation of IT projects: should they resort to local expertise, shift the development into the distance or choose a central route? The decision between onshore, offshore and nearshore development has far-reaching consequences for costs, quality and efficiency. This article highlights the differences and helps you to find the optimal strategy for your company.

The three outsourcing models at a glance

Before we devote ourselves to the detailed cost comparison, it is important to understand the three basic models of IT outsourcing.

Onshore development: The local solution

At Onshoring, you will commission a developer team in your own country. This promises smooth communication, cultural proximity and simple legal frameworks. Personal cooperation on site is easily possible, which can be particularly advantageous in agile projects.

Offshore development: The global perspective

Offshoring means the outsourcing of development projects in faraway countries, often in Asia or Eastern Europe. The main driver for this model is the considerable cost savings in developer salaries. Companies get access to a huge global talent pool.

Nearshore Development: The Golden Midway

Nearshoring strikes a bridge between the two extremes. The development is moved into a nearby country with a similar time zone, for example within Europe. This model tries to combine the cost advantages of offshoring with the cultural and geographical proximity of onshoring. The comparison Nearshore vs Offshore Development is therefore particularly relevant for many companies.

Detailed cost comparison: More than just the hourly rate

The most obvious cost differences lie in the developer's hourly rates. While a developer in Germany costs an average of 60-120 euros per hour, the rates in Nearshore countries can be 30-55 euros and even lower in offshore destinations. But a pure focus on the hourly rate is too short. Hidden costs and other factors can significantly change the overall picture.

| Factor | Onshore | Nearshore | Offshore | | :-- | :-- | :-- | :-- | :-- | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Hour rates High | Medium | Low | ** Communication effort | Gering | Moderat | High | ** ** Travel costs** | Gering | Moderat | High | | Cultural differences | Minimum | Gering | Significant | | Time zone difference | None | Gering (0-2 hours) | Large (up to 12 hours) | | Project management panel| Gering | Moderat | High | ** ** Hidden costs** | Gering | Moderat | High |

Hidden costs in outsourcing

Regardless of the selected model, additional costs