A lot of business owners are currently debating whether they should hire offshore or onshore for their software engineer positions. It’s a fair question, as improvements in tech and international communication have made the former a serious option now.
To be clear, offshore hiring is when a company recruits talent outside of the country where the company itself is based. Hence, you would be offshoring if you have a Singapore business and hire software engineers in Malaysia for it.
Onshore hiring is the traditional option, of course. It’s when a company recruits talent from the same country where it has its base of operations, e.g. when a Singapore business hires Singapore-based engineers.
To be frank, both recruitment options have their merits. Which one you choose depends largely on your organisation’s needs.
Today, we’ll go over the pros and cons of each option in various areas of concern, from overall cost to points like talent quality. This should make it easier for you to figure out which one suits your company better.
We’ll start with the point that most business owners have at the forefront of their minds: cost.
Offshore vs. Onshore Hiring: Cost
Generally but not always, offshoring costs a business less in terms of wages.
This is because companies hiring offshore typically hire from countries where the cost of living is lower.
That means they can set lower wages for offshore recruits, as wages are typically pegged to the cost of living.
Of course, this means offshoring to certain countries will actually mean the reverse (higher wages). That’s if you recruit from a country where the cost of living is higher than it is domestically.
Costs may also be lowered by offshoring in the sense that you may not be obliged to offer certain benefits or forms of compensation required by your domestic law. But again, this varies from situation to situation.
Another more common source of lowered costs from hiring offshore is actually the lower setup cost. This is applicable if you’re getting remote workers, i.e. not setting up an offshore office or satellite location.
After all, that means you won’t have to pay for extra office space as well as more office furniture or equipment. In most cases, distance-working offshore employees are responsible for their home office equipment.
All of this being said, it would be an oversimplification to say that offshoring is always cheaper than onshoring, though.
You see, costs can go up in other ways when you’re offshoring, due to the challenges and risks that come with this method of recruitment. The extreme distance-working setup is at greater risk of leading to things like these, for example:
- Productivity issues
- Time zone and communication mismatches
- Necessity of developing and installing remote management infrastructure
And all of these incur expenses. So, in the sense that doing onshore recruitment is less likely to lead to these (as you’ll see later), it may even be the more cost-effective option when you consider the big picture.
But this is something you can only figure out by doing a serious assessment of your company’s needs and capabilities.
Before that, it’s actually quite difficult to tell if offshoring or onshoring would be more cost-effective for your organisation or some sectors of it, at least.
Offshore vs. Onshore Hiring: Quality
This is variable, but generally, you can get quality workers from both offshore and onshore recruitment.
Sometimes, it’s just a bit harder to ensure quality if your offshore recruitment process isn’t very well developed.
With workers based in the same country, you can do direct hiring, i.e. interview them and look into their backgrounds or experience more easily. You can tap sources for verification of resumes and look into their backgrounds faster, etc.
It’s usually harder to do that if the person you’re thinking of hiring lives in another country. You may not know how to verify the information offshore recruits put in their resumes then.
Fortunately, this can be solved by hiring a good offshore recruiter to ensure quality for you.
Moreover, if you can actually ensure that your recruiter only finds the best talent, you have the advantage of pulling talent from more than one region. That can massively expand your options: you’ll be fishing in a bigger pond, after all!
Offshore vs. Onshore Hiring: Communication
There are obviously more challenges for offshore workers than onshore workers here.
Time zones differ, as mentioned earlier, and delays in communication or differences in Internet speed may come into play too.
Without a robust communication system, your projects may end up suffering due to such issues when working with offshore employees.
Onshore employees can also actually visit the office or meet you in person, which may matter to some employers or in some projects.
Onshore employees’ proximity to you may also make it easier for you to monitor their progress, particularly if you use traditional methods of supervising employees.
Furthermore, when specific systems or technologies are required, onshore employees are easier to train, again for obvious reasons. You can even oversee their progress in person during the training period.
There are ways of overcoming the communication challenge when offshoring, certainly, but the simplest way is still the best: to hire only engineers with a genuine reputation for dependability.
Trustworthy workers will always do their best to combat problems like communication hurdles, even without their arms being twisted. (And that’s a big part of why non-technical traits are enormously important when hiring offshore!)
Take note, by the way, that language skills may factor into the quality of your communication with an employee as well. Granted, there are no guarantees of onshore employees’ skills in your language, but they’re certainly more likely to be competent in it than offshore ones.
Offshore vs. Onshore Hiring: Legalities
Some legal matters are naturally more complicated when working with offshore employees. You need to hire a lawyer or legal advisor familiar with the laws in their area because they’ll likely differ from those in yours.
This can become particularly thorny when resolution issues arise, e.g. when you have an issue with an offshore worker that involves the courts.
Checking regulatory compliance is also easier for onshoring, as you will be more familiar with the regulations of your area than those in others.
Offshore vs. Onshore Hiring: Culture
Culture refers to the intangible, non-technical elements that govern actions as well as interactions in an organisation. It may cover such things as linguistic foundations, values, and the like.
Culture is also often addressed by recruitment officers’ attempts to screen candidates for a position on things like communication style and personality.
This can be fairly important when hiring employees. Cultural mismatch can make it much harder for new hires to be integrated into an organisation.
This can be a serious problem if they have to work as part of a team. Of course, even if they have to work in a largely individual capacity, the issue persists: they will still have to interact with you or others in the company at some point.
Offshore hires obviously tend to fare worse than onshore hires at cultural matching. The actual degree of cultural difference is variable, though.
Again, the best way to overcome this is to perform extensive screening on culture-related points. At Skilledd, for instance, we even assess applicants’ personalities and traits before recommending them to companies.
Offshore vs. Onshore Hiring: Security
This may be an issue if you’re offshoring software development, particularly on something relatively sensitive. That’s because hiring offshore engineers for such things can make supervision of their work much harder, as noted earlier.
Onshore employees can be monitored more easily as well as sanctioned more quickly if they compromise security (see the section on legalities). As such, they’re technically less of a security threat if you’re worried about such matters.
If you really want to hire offshore, however, there may still be solutions. Hiring reputable engineers as well as investing in an offshore legal representative to draft airtight non-disclosure and exclusivity contracts should help.
Conclusion: Should You Pick Offshore Recruitment or Onshore Recruitment?
Now that you know the core differences between the two, you can make a more informed decision.
Start by assessing your business relative to the points above. What risks does either recruitment method pose for your organisation? What benefits can it offer?
Are the risks ones you can afford to take on? Are the benefits appreciable ones?
You basically have to evaluate which of the two methods would be best at filling your resource gaps while offering more pros than cons for your business.
To that end, it may take more than your discernment to answer that question. As such, you should talk to key stakeholders in your organisation to get input, including managers, team leads, or even other employees who interact with your programmers.
You can also just get in touch with us and let us help you figure out whether offshore or onshore recruitment is better for your software development team. We’ll take a close look at your company and be able to give a personalised opinion as well as recommendations.
Besides helping you figure out if offshore or onshore hiring is for you, we can also help you with either option. To learn more, reach out to us at Skilledd now!