Most businesses, including everything from multi-national corporations (MNCs) to start-ups, get confused about whether to use onshore software development or offshore software development. Choosing the right one for your project will greatly impact the quality and delivery of your software. In this article, we have explained key considerations about onshore and offshore software development along with their pros and cons.

To understand the concept of onshore and offshore software development, it’s important to have knowledge about onshore and offshore software development companies. So, before delving into the pros and cons of both onshore and offshore development, let’s have a look at what the terms ”onshore and offshore development companies” and “onshore and offshore software development” actually mean.

The onshore software development company

Onshore companies are located in the same country in which they are registered. The majority of their businesses are in the country where they also reside and conduct operations. For instance, you are working with an onshore company if your company is registered in the U.S. and your projects are carried out by your team that is also in the U.S.

Facts about onshore software development companies:

  1. For them, tax policies and laws are the same as for other companies in their country.
  2. Onshore companies are suitable for large enterprises with a swift growth rate that have a large development or designing budget.

Offshore software development company

Unlike onshore companies, offshore companies are registered in another country. For instance, you are working with an offshore company if your company is registered in the U.S. and your projects are carried out by a company that is in India.

Facts about offshore software development companies:

  1. Their tax structure is different from onshore companies.
  2. They still need to  be in full compliance with the law, otherwise they face penalities for noncompliance.

What is offshore software development?

Offshore software development is an approach followed by the companies in which they outsource their software development project (including web or mobile development) to offshore companies (meaning a team in other countries).

With the advancement of technology, it’s now easier to manage business across the world from one location. This idea has originated the concept of offshore software development. Apart from software development, the offshore approach can also be adopted by other fields including business process outsourcing (BPO), knowledge process outsourcing (KPO), data services and more.

Partnering with an offshore software development company is a cost-effective approach if your outsourcing partner is in a developing country. This is because the labor cost in developing countries (including the Phillipines, Ukraine, India, and others) is lower than the developed countries.

Choosing offshore software development will help your company in the following ways:

  • You can minimize the pressure on your internal development team, hence they can focus on other productive work.
  • You don’t need to hire a large number of employees at your premises, hence saving a huge amount of money.

Pros of offshore software development:

  • The global pool of talent

The offshore software development approach provides you the opportunity to have access to the global talent pool across the world.

  • Hire employees as long as you need them

Offshore software development lets you hire people as long as you need them for your project. It’s the responsibility of offshore companies to scale up or scale down the team according to the project requirement.

Offshore companies usually have a larger workforce (especially in countries like the Philippines, India, Ukraine, and Pakistan) because of their low costs. Their turn-around time is also less. Therefore, this approach is well-suited if you need to complete your project on a tight timeline.

  • Low cost

In developing countries, it's easy to find qualified professionals who can develop the software within your budget.  Low labor cost is the main advantage of offshore software development.  The cost of living varies from country to country. This means the money you are paying to the offshore company is low for you, but it may be high for them.

Cons of offshore software development:

  • Communication barrier

Sometimes, real-time communication is the main hurdle with offshore companies, as they often have a different time zone. For instance, if you drop an e-mail, then you may have to wait for a whole day to get a reply from them. This communication gap consumes so much of your time and it becomes frustrating at times. Also, there will be no face-to-face meetings. To discuss project goals and objectives, you have to rely on conference calls. Sometimes, it can impact the level of understanding (meaning you can misinterpret some things) between the two parties.

What is onshore software development?

In the onshore software development approach, you assign the software development project to your internal development team or local contractors who reside in the same region where you run your business. The major benefit of the onshore software development approach is that face-to-face meetings can easily be arranged with the team to drill into the details of the project.

Pros of onshore software development:

  • Smooth flow of communication

Unlike offshore companies, onshore companies have the same time zone, resulting in clearer and smoother communication. You can get quick replies to your messages and emails because office hours of the employees are generally almost the same.

Also, you can easily conduct face-to-face meetings to discuss project initiatives and objectives. Therefore, there will not be any communication gap between the two parties, leading to a good level of understanding.

  • High quality solution

In onshore software development, a collaboration between design and development teams is easy. This, in turn leads to successful delivery of a high-quality project on time.

Cons of onshore software development:

  • High cost

Opting for onshore software development can be expensive because:

  1. The ‘you get what you pay for’ concept: to get high-quality software, you need to invest more.
  2. You may need to hire some extra professionals for your project, bearing the cost of managing a large number of employees.

Helpful tips on how to choose between onshore and offshore

These days, enterprises are outsourcing their projects to offshore companies to deliver high-end solutions. Industry leaders (including IBM, Wipro, Infosys) also rely on offshore software development for some of their projects.

Onshore software development is known for high-quality solutions but it is costly.  While offshore development is inexpensive, choosing the right offshore development partner (who can build a quality solution within a certain deadline) is challenging. If you want to know the useful tips on how to choose the right software development partner, check out this link:

Choosing between onshore and offshore software development is a critical decision for your business. Before deciding between these two, you should estimate the cost of your software project. It will help you to decide which one (between onshore or offshore) is better for your business.

Look at the software project estimation process given below.

(image credit:

Factors to consider before making decision between onshore and offshore software development:

  1. First, plan your budget by estimating the cost of your software project,

2. Then, carefully consider the pros and cons of onshore and offshore development.

3. After weighing out the pros and cons, compare them to your budget and project timeline, and make the decision accordingly.