Many companies in the US and Europe have embraced the idea of outsourcing their software development to nearshore destinations – instead of offshoring to Asia or hiring locally.

This is a great way to find the right talent at affordable rates while maintaining the same levels of quality and productivity with a higher ROI.

But how is nearshore software development different from onshoring and offshoring? What are the benefits?

In this article, we’ll deep-dive into what nearshore software development is and how it differs from onshore and offshore development. We’ll also discuss its pros and cons and how to select the right nearshore software development service provider. 

Bonus: Discover the perfect solution to handle your nearshore software development headaches. 

This Article Contains: 

  • What Is Nearshore Software Development?
  • How Is Nearshore Software Development Different from Onshore and Offshore Software Development?
  • 7 Proven Advantages of Nearshore Software Development
  • 2 Disadvantages of Nearshore Software Development 
  • How to Select the Right Nearshore Software Development Partner
  • Make Nearshoring Hassle-free with Distillery 

Let’s begin!

What Is Nearshore Software Development?

Nearshore software development involves having a distributed development team in countries  in the same or similar time zones. 

If you’re a US-based company, you can hire software development services from Latin American countries, such as Costa Rica or Mexico. Similarly, companies in Western Europe can consider nearshoring to countries in Eastern Europe like Poland, Romania, or the Czech Republic.

So is nearshore software development the right choice for everyone? 

Here are some cases when nearshore software development outsourcing will pay off: 

  • App development requiring real-time collaboration – for example, development of B2B and B2C SaaS solutions
  • A software development project that requires an Agile approach
  • Modernization of complex legacy software solutions
  • Other custom software development

Now let’s look at how nearshore development works. 

How Nearshore Software Development Works

Usually, companies that want to nearshore take the help of a nearshore software development service provider like Distillery

This service provider would do the heavy lifting of hiring the right tech talent for you. You can also expect a good nearshore software development company to:

  • Offer smooth communication protocols
  • Enable efficient workflows
  • Ensure regulatory compliances
  • Foster cultural understanding between you and the nearshore development team

Typically, there would be three standard nearshoring models to choose from. 

1. Integrated Teams 

Also known as staff augmentation, this outsourcing model is for companies looking to fill tech talent gaps within their existing workforce quickly. 

How does this work?

Under this arrangement, specialized nearshore software developers work as a part of your internal team for a specific period or project. You can easily fill skill gaps from app development to Scrum project management.

For example, you can hire Latin American or Mexican developers to work on your software solution alongside your US-based internal team. 

2. Dedicated Teams 

Under the dedicated nearshoring model, you hire a team of professionals to work exclusively for a particular project or on a specific aspect of your software.

How does this work?

The nearshore software development company builds a “turn-key” or “ready-to-use” team based on your project requirements. The team could be composed of a project manager, software engineers, quality analysts, and other roles tailored to your needs.

This model works exceptionally well for an Agile development process. 

3. End-To-End Project Outsourcing 

You can hire end-to-end software development services when you need a custom software solution from start to finish. This model is best for companies that don’t have in-house development capacity. 

End-to-end project outsourcing to a nearshore team involves handing over the entire development life cycle. Right from initial planning and design to development, testing, deployment, and ongoing maintenance.

This model allows for efficient project management, streamlined communication, and a holistic approach to delivering high-quality software solutions.

Now for the big question:

How Is Nearshore Software Development Different from Onshore and Offshore Software Development?

Let’s look at each one and then do a comparison.

A. Onshore Software Development

  • What it is: Onshore development involves hiring software developers in the same country or region as your company. This development process is usually the most expensive option of the three, especially if you are in North America.
  • Projects best suited for onshore development:
    • Projects requiring frequent in-person collaboration
    • Projects that require the collection, storage, processing, and transfer of sensitive or business data 
    • Projects that require the development of physical elements like IoT sensors or smart machines

B. Offshore Software Development

  • What it is: Offshore outsourcing is hiring a development team or a software developer in a distant country that falls under a different time zone. For example, companies usually offshore to Asian countries like India and China for cost benefits. 
  • Projects best suited for offshore development:  
    • Non-automated, recurring tasks
    • IT support 
    • Projects that don’t require high collaboration and agility
    • Projects not significantly impacted by high employee turnover

Now let’s compare the three approaches side by side. 

Nearshore vs. Onshore vs. Offshore Software Development: A Comparison

Key Differentiators Nearshore Software Development  Onshore Software Development Offshore Software Development
Location and Time Zone Geographically close (2-4 time zones away) Within your own country Overseas (4+ time zones away)
Cost More cost-effective than onshore Most expensive  Most cost-effective 
Ease of Communication  Near-instant communication Instant communication Delays in communication 
Cultural Differences Similar cultures Same culture  Different cultures
English Language Proficiency Moderate to low proficiency across Latin America High proficiency  Wide range from very low to high across Europe and Asia
Risks (compliance) Medium Risk No Risk High Risk


There are several benefits of outsourcing software development to a nearshore country. You also need to keep a few drawbacks in mind. 

Let’s see what they are.

7 Proven Advantages of Nearshore Software Development

Here are the biggest perks of hiring a nearshore software development team: 

1. Close Geographic Proximity

A  nearshore team is located close to the hiring company. This facilitates smooth communication and quicker resolution of bottlenecks and issues.

Moreover, if you ever need to meet the project manager and your software development team face-to-face, traveling to a nearshore destination is much easier (usually within 2-5 hours). For example, traveling from Atlanta (Georgia) to San José (Costa Rica) takes just four hours. 

Compare this to offshore locations like India or the Philippines that require 10+ hours of travel in addition to the accommodation expenses.

2. Better Time Zone Alignment

It’s much easier to work with nearshore developers in the same time zone as your business.

Think about it: If you and your nearshore development team share the same workday, you can collaborate with them in real-time. This means no more waiting for responses overnight or dealing with frustrating delays that often come with offshoring. 

3. English Language Proficiency & Collaboration

If you’re a US-based company, nearshore software development in, say, Mexico gives you access to software engineers who can articulate their ideas, express their thoughts, and understand your needs with minimal linguistic barriers. This goes a long way in enhancing the overall productivity and efficiency of the software development team. 

These engineers will also be able to collaborate seamlessly with your clients, stakeholders, and end-users. 

4. More Cost-Effective Than Onshoring

Outsourcing software development to Latin America or South America is generally more cost-effective for US companies than hiring developers in North America. 

For instance, the average salary of an onshore software developer in the US is around $51.54/hour, while for Mexican developers, it’s $45.85/hour. The cost of living in Mexico is also 90% cheaper than in the United States. This means the cost of providing competitive salaries and benefits to employees in Mexico is lower. 

Companies can even save infrastructural costs by relying on their nearshore team’s existing facilities and resources.

The geographical proximity also reduces the need for long-haul flights and extensive travel arrangements.

5. Access to a Larger Talent Pool 

According to a report by the US Chamber of Commerce, there were 9.9 million job openings in the US in May 2023, but only 5.8 million unemployed workers because there aren’t enough skilled people to fill the vacancies.

Naturally, looking for talent in nearby countries is the best way forward.  For example, Latin America (South America) has a larger talent pool of skilled IT developers. 

The collaborations between universities in Latin America, global businesses, and the local government have helped create a conducive environment for professionals to take on any challenging software development project. 

6. Cultural Similarities

Whether you realize it or not, cultural differences and different communication styles can severely impact outsourcing partnerships. 

Subtle cues like gestures, words, or even eye contact, which may be completely normal to you, could be offensive to a developer living in a far-off country. 

Nearshore software outsourcing mitigates such risks. 

When you hire developers from nearby countries, in most cases, you share similar cultures, languages, values, work ethics, and even holidays. This reduces the risk of misunderstandings and uncomfortable situations and fosters better team bonding.     

7. Makes It Easier to Scale Your Operations

Nearshore software outsourcing gives you the agility and adaptability to scale up and down quickly. 


Nearshore teams are usually accustomed to working with international clients and are comfortable with remote collaboration. This enables the developers to onboard quickly, minimizing the time and effort you’ll need to train and integrate them into your business. 

It’s an excellent approach to meet multiple deliverables with shorter lead times without putting an excessive burden on your in-house workforce. 

That said, nearshoring can have some disadvantages too. 

2 Disadvantages of Nearshore Software Development 

Here’s what you need to keep in mind before you opt for nearshore software outsourcing: 

1. Limited Number of Nearshoring Companies

Nearshore software development providers would be way fewer in number compared to the huge number of offshore outsourcing companies available. This can leave you with a smaller pool to choose from. 

The good part is – even within that limited number, you will be able to find a perfect nearshore software development service provider (like Distillery), cutting your search short.  

2. Intellectual Property Risks (If the Vendor Doesn’t Have a US Presence) 

IP theft is still an inherent risk of any software outsourcing setup. However, nearshoring has a slight advantage over onshoring and offshoring. 

Some countries have entered into trade agreements to facilitate better cross-border collaboration. For example, Mexico and the US have signed the United States-Mexico-Canada Agreement (USMCA), which includes provisions on data localization, cross-border data flows, and intellectual property rights. 

This means that nearshore developers in Mexico operate under similar IP regulations as the ones applicable in the United States. 

 In any case, you must carefully vet your nearshore partner to mitigate such complications. 

That brings us to the next question…

How to Select the Right Nearshore Software Development Partner

While every company may have its own process for vetting a nearshore software development partner, here are some common guidelines you can follow: 

1. Define Your Project Scope

Sure, your nearshore developers will do the heavy lifting, but it’s your job to provide them with direction.

You should have a clearly defined project scope — a document specifying your project’s deliverables, objectives, and boundaries like time frame, budget, and resources.

2. Evaluate their Capabilities and Expertise

Here’s how to go about it: 

  • Shortlist software outsourcing companies based on their portfolios (the types of clients they have served, the client company sizes, domains, etc.) 
  • Check their quality assurance processes, communication channels, and data protection measures. 
  • Check the nearshore software development models they offer (integrated teams, dedicated teams, or end-to-end development). Ensure it’s in line with your business needs. 
  • Check the employee retention rates of this nearshore development company. The higher, the better. 
  • Check employee certifications, their work history, and the clients they’ve worked for. Conduct rigorous interviews to gauge their skills, if possible. 

3. Assess Their Reputation

A long history of happy customers shows they’ll do a good job. 

Look for customer testimonials, online reviews, awards and accomplishments, and other social proof that adds to the credibility of their development services. 

4. Double-Check the Contract Clauses 

A good nearshore development company should provide you with a secure work arrangement. 

This includes signing Service-Level agreements that safeguard your Intellectual Property rights and outline the terms of operations. Get the contract reviewed by your legal department.

Some nearshore development partners may also have Errors and Omissions (E&O) insurance that protects companies from claims of negligent actions or inadequate work from clients. This further guarantees that they mean serious business. 

5. Ensure They Fit Your Budget 

While nearshore outsourcing means lower development rates, you’ll usually notice some variations.

The costs could differ based on: 

  • Technology: Some tech stacks are cheap, but your project could require unique tools that may cost more. 
  • Project complexity: Updating an existing product requires fewer development resources than an innovative software solution built from scratch. 
  • Unique talent and project duration: You may require a specialized developer or a bigger team. The rates will depend on the specialist’s seniority too. Likewise, you may need developers to work on a long-term project, adding to the costs. 

Meanwhile, you should also ensure that there are no hidden charges. 

Looking for a nearshore partner that checks off all these points?

We’ve got you covered!

Make Nearshoring Hassle-free with Distillery 

Distillery is an award-winning nearshore software development company that offers nearshore outsourcing solutions for businesses of all sizes. 

Our best-in-class team has the understanding and technical skills to help you build a reliable, high-quality software solution aligned with your vision and business goals.

Development Services We Offer:

  • Staff augmentation: We can vet senior technical developers to fill the talent gaps in your existing development team.
  • Dedicated teams: We offer autonomous, cross-functional development teams. All you need to do is lead, and we’ll help you manage and deliver.
  • Full-cycle, end-to-end custom software development: We help you build a software solution from scratch. You provide the specifications and we deliver the solution.

Here’s How We Make it Happen: 

  • We follow a tailored Service Delivery Approach (SDA) to deliver value at speed consistently.
  • Your team is hired by top-tier technical talent, so you get the same skill sets you would get locally.
  • We help create customized cross-functional teams with skills ranging from DevOps and cloud, UX/UI design, QA, and project management.
  • We ensure scalability and flexibility by providing you with the right team size, the right skills, and at the right time. 
  • We nurture authentic, long-lasting client partnerships through active collaboration and shared objectives. 

Got a nearshore development requirement in mind?

Let’s have a conversation

Enjoy a Higher ROI With the Right Nearshore Software Development Partner

Hiring nearshore development services is the best middle ground for outsourcing your software project to another country yet mitigating the risks of offshoring. 

You can enjoy cost benefits, similar work cultures, access to top-notch talent, and better control over the entire development lifecycle. 

And if you need a best-in-class partner to take care of your nearshore software development needs, get in touch with Distillery!