Offshore, nearshore and onshore describe where the company that builds or maintains your software is based, relative to you. For a UK business, onshore means a supplier in the UK. Nearshore means a supplier in a nearby country that shares most of your working day, which in practice means elsewhere in Europe. Offshore means a supplier far enough away that the two working days barely overlap, such as one in South Asia, South East Asia or the Americas.
The difference between them is narrower than the labels suggest. They describe distance and time zone, and say nothing reliable about quality: there are excellent and poor suppliers in all three groups. Location does change a short list of practical things, and those are what this article covers.
What each term means for a UK business
Onshore. The supplier is a UK company working UK hours. Your contract is with a company in your own country, and a meeting in person is a train ride away. The cost of a day’s work is usually the highest of the three.
Nearshore. The supplier is in a country close enough to share most of the working day and to visit without much planning. Portugal keeps the same time as the UK. Most of western and central Europe, including Spain, Poland and the Czech Republic, is one hour ahead. Romania, Bulgaria, Ukraine and the Baltic states are two hours ahead. Day rates are often lower than in the UK, though the gap varies a good deal by country and by seniority.
Offshore. The supplier is several time zones away. India is the best-known destination for UK businesses, and it is five and a half hours ahead of the UK in winter and four and a half in summer, so a UK morning overlaps with an Indian afternoon. Countries further east share less of the day. Suppliers in Latin America are behind the UK, so the overlap falls in the UK afternoon. Many offshore firms move their hours to suit UK clients. Day rates are usually the lowest of the three, which is the main reason businesses look offshore, and a sound one.
| Onshore (UK) | Nearshore (Europe) | Offshore | |
|---|---|---|---|
| Shared working hours | The whole day | Most of the day | A few hours, unless the supplier shifts its day |
| Cost of a day’s work | Usually highest | Usually lower | Usually lowest |
| Law governing the contract | UK | Often the supplier’s country | Often the supplier’s country |
| Personal data | Supplier is subject to UK law | EEA countries are covered by UK adequacy regulations | A transfer safeguard is usually needed |
| Meeting in person | Easy | A short flight | Rare |
What location changes
The hours you share. This matters most while requirements are still being worked out, because that work happens in conversation. With a full shared day, a developer’s question is answered in minutes. With an hour or two of overlap, it often waits until tomorrow, and a week of such waits adds up. Work that is already written down in detail suffers far less, and can even benefit from being done while you are away from your desk.
The contract. Read which country’s law governs the agreement and where a dispute would be heard. A contract under another country’s law can still be a good contract, but enforcing it from the UK may be slow and costly. Some nearshore and offshore firms contract through a UK company, which changes the position. Take legal advice before signing.
Personal data. Under UK data protection law, letting an organisation in another country see personal data counts as a transfer, even when the data never leaves your own servers. The Information Commissioner’s Office guidance is explicit that remote access is included. Transfers to countries in the European Economic Area are covered by UK adequacy regulations, so no extra safeguard is needed. For most other countries you need one, such as the ICO’s International Data Transfer Agreement, together with a risk assessment. This is a summary and not legal advice, so check your own position. It is also worth asking whether the developers need real personal data at all: much development can be done with made-up test data.
The cost. Day rates differ, sometimes widely. The total cost of a project differs less, because it includes the time your own people spend specifying the work, answering questions and checking what comes back. That time goes up as shared hours go down. Compare suppliers on the cost of the finished work, not on the rate alone.
What location does not change
Quality. It depends on the firm and the people. The useful difference between the three models is how easily you can check the work and what you can do if it is poor.
Ownership. Who owns the source code is set by the contract, wherever the supplier is. Our answer on who owns the source code of bespoke software explains what to look for.
Who does the work. The label describes the company you sign with, which is not always where the developers sit. A UK company may employ or subcontract developers abroad. An offshore firm may have a UK office and a UK account manager. Remote working has blurred the picture further, since many teams in every country are now spread across several places. Ask directly where the people who will work on your system are based.
How the work is managed. Where a supplier is based is a separate question from whether it takes responsibility for the result or simply supplies people for you to direct. Our article on outsourcing and outstaffing covers that choice.
Which model fits which situation
Onshore tends to suit a business whose requirements are still forming, which has nobody on staff able to review technical work, or whose system holds sensitive data. It also suits the long-term care of an existing system, where continuity over years matters more than the price of a day.
Nearshore tends to suit a business that wants lower rates without giving up daily conversation, and that is prepared to travel now and then.
Offshore tends to suit a business with a large amount of well-defined work and a technical lead of its own, someone who can write precise specifications and review the code that comes back. Businesses in that position often get very good value. It also suits a need for many developers at short notice.
These are tendencies, and plenty of arrangements work well outside them. CodeFirst is a UK company, so we have an interest in this comparison and have tried to keep it fair. Our page on a UK software company or an offshore team sets the two side by side in more detail, including the cases where offshore is the better choice.
Questions to ask before you choose
Put the same questions to every supplier, whichever group it falls into:
- Where are the people who will do the work, and will the same people stay on it?
- During which hours can we speak to them, and who will we speak to?
- Which country’s law governs the contract?
- Will anyone outside the UK be able to see personal data, and how is that covered?
- Will the code sit in a repository we control from the first day?
- What do we receive if the arrangement ends?
There is a fuller list in our questions to ask a software supplier.
Before comparing quotes, write down two things about your own business: who will review the supplier’s work, and how many hours a day you expect to need to talk to the team. Those two answers usually narrow the choice between offshore, nearshore and onshore more than the day rates do.