Alternatives to nearshore software development outsourcing

Tsiala Jobava

Last updated on September 15, 2025 | 17 min read

IT marketOffshoreOutsourcingSoftware development

Introduction

Outsourcing has become one of the most reliable strategies for scaling efficiently, with the global IT outsourcing market projected to reach $812.70 billion by 2029 (Statista). For years, companies weighed the trade-offs of onshoring, offshoring, and nearshoring, choosing between cost savings, talent access, and collaboration. Nearshoring in particular has gained popularity.

As companies scale, optimizing costs while securing top-tier talent has made outsourcing a cornerstone of growth strategy. Nearshoring has gained popularity in recent years, offering cultural alignment and time zone compatibility at lower costs than onshoring. But for high-growth businesses, nearshoring is no longer enough. Rising salaries in regions like Latin America and Eastern Europe, coupled with growing competition for talent, mean companies must look beyond traditional models.

“The real power of outsourcing going forward is going to be that it increases an organization’s core capacity for change and growth. The companies that weave a powerful network of global partners through outsourcing will be the winners.” – Michael Corbett (IAOP, Outsourcing Thought Leader)

That’s why advanced alternatives such as Yourshoring and dedicated R&D centers are emerging as the superior choice. They combine the global reach and cost efficiency of outsourcing with the control, security, and scalability of in-house teams. Companies adopting these models report 30–40% lower operational costs and significantly faster hiring cycles compared to traditional outsourcing.

This article examines why nearshoring, although valuable, isn’t the ultimate solution – and why forward-thinking businesses are shifting toward alternatives, such as Yourshoring and R&D centers. We’ll compare traditional models, highlight real-world examples, and show how DevsData LLC helps companies implement these strategies for both immediate efficiency and long-term growth.

Understanding outsourcing models

When evaluating outsourcing, the question isn’t what the models are, but when each one makes sense. The right fit depends on your company’s growth stage, priorities, and risk tolerance.

1. Onshoring

Onshoring is rarely about efficiency – it’s about control. Companies choose local teams when projects require frequent in-person collaboration, strict compliance with data privacy laws, or integration with physical components, such as IoT hardware. Onshore talent ensures cultural alignment and legal protection, but at a premium: US developers often command salaries exceeding $120000–$150000 annually, and hiring cycles can drag on due to talent scarcity. For businesses where security, compliance, or physical integration is mission-critical, the higher cost of onshoring can be justified.

2. Nearshoring

Nearshoring has grown in popularity because it balances cost with collaboration. By working with teams in regions like Latin America or Eastern Europe, companies gain overlapping work hours, cultural proximity, and easier travel access – all crucial for agile projects that require daily stand-ups, sprint reviews, and real-time decision-making. Salaries are significantly lower than in the US. Senior Latin American developers earn around $35000-$45000 per year, compared to over $120000 in the US, but competition for top nearshore talent is rising. Strategically, nearshoring is strongest for companies that need rapid iteration without sacrificing quality.

“Nearshoring is often best for US companies because it balances cost savings, talent access, and minimal communication barriers.” – Hayden Cohen & Mariia Vobla, remote-hiring experts

3. Offshoring

Offshoring remains the most cost-effective option for companies that prioritize scale above all else. Developers in India, Vietnam, or Eastern Europe can be hired at a fraction of US salaries, enabling savings of up to 70%. This model works best for process-driven projects, IT support, and maintenance, where work can be clearly defined and executed asynchronously. The trade-off is complexity: cultural differences, high turnover, and significant time zone gaps demand disciplined workflows and strong management. For companies looking to extend budgets and build large teams quickly, offshoring delivers – provided they can handle the oversight challenges.

Choosing the right outsourcing model

The right software development outsourcing approach, onshore, offshore, or nearshore, depends on your project’s requirements, budget, and operational priorities.

• Onshore development ensures quick communication and in-person collaboration, making it ideal for projects requiring high security or physical integration, but it is the most expensive option.
• Offshore development offers cost savings and access to a vast global talent pool, which is best suited for routine tasks that require minimal collaboration. However, time zone challenges and cultural differences can impact productivity.
• Nearshore development offers a middle ground, blending cost-effectiveness with real-time collaboration and seamless integration. It’s a strong choice for agile projects, strategic software initiatives, and businesses looking to optimize efficiency without sacrificing quality.

Pros and cons of each outsourcing model

Breakdown of each outsourcing model

When planning to scale their teams and fill critical software development tasks, US tech businesses often choose one of three models: onshoring, nearshoring, or offshore. Each strategy has unique benefits and drawbacks that can considerably impact a company’s personnel acquisition, cost structure, and overall effectiveness. To clarify, let’s expand these models. We’ll focus on the availability of talent, financial factors, and time zones.

Talent availability

The availability of skilled developers is one of the most decisive factors. In the US, demand still outpaces supply – nearly 4 in 5 employers globally reported difficulty finding skilled talent in 2023, leading many companies to look abroad.

• Nearshoring taps into fast-growing pools in Latin America. Countries like Brazil, Colombia, and Argentina together add over 739000 IT graduates annually.
• Offshoring provides broader access in regions like Eastern Europe (190000 graduates per year) or Asia, which dominates globally with 7.3 million IT graduates annually.
• Onshoring struggles most here, as shortages and long hiring cycles slow growth.

Nearshoring broadens access compared to the US, but offshoring still delivers the largest global talent pools.

Cost efficiency

Onshoring provides the highest level of control and collaboration but comes at a steep price. US developers typically earn $120000–$150000 per year, making large-scale expansion challenging for most companies.

Nearshoring offers a more affordable balance. Senior developers in Latin America, for example, earn between $35000 and $45000 annually – a fraction of US salaries. Some countries, like Argentina, further enhance cost-effectiveness through tax incentives (e.g., up to 60% corporate tax reduction for small tech firms).

Offshoring delivers the most dramatic savings, with Eastern European mid-level developers earning $40000–$55000 annually, and Asian engineers as low as $10–$25 per hour. These differences can reduce labor costs by up to 70% compared to US rates.

Nearshoring reduces costs significantly while retaining collaboration advantages, but offshoring offers the deepest financial savings if a company can manage the complexity.

For companies prioritizing cost reduction, offshoring presents the greatest financial advantage. Developers in Eastern Europe (Poland, Ukraine, Romania) and Asia (India, Vietnam, the Philippines) offer high-quality software development services at a fraction of the cost of US salaries. For instance, a mid-level developer in Eastern Europe earns between $40000 and $55000 annually, whereas their Western European counterpart earns between $70000 and $90000. Meanwhile, offshoring to Eastern Europe or India can result in savings of up to 70% compared to US salaries, allowing businesses to extend their budgets significantly.

Beyond salaries, these regions also offer lower corporate tax rates and operational costs, further enhancing the financial appeal of offshoring. Whether a company opts for onshoring, nearshoring, or offshoring, understanding salary variations is crucial in determining the best outsourcing strategy for long-term growth and sustainability.

Time zones

Time zone alignment is another critical factor in the onshoring vs. nearshoring vs. offshoring debate. While the US spans multiple time zones, onshoring still offers the advantage of cultural alignment, shared work practices, and minimal communication barriers. This helps streamline collaboration and mitigates some challenges posed by time zone differences. However, these benefits often come at a higher cost, particularly in regions with high living expenses.

Nearshoring enables US companies to collaborate within similar time zones, thereby minimizing cross-time zone communication issues. By partnering with teams in nearby countries such as Mexico or Colombia, businesses can facilitate real-time collaboration, which is especially valuable for fast-paced projects that require quick decision-making and seamless coordination.

Offshoring, in contrast, provides access to a global talent pool across diverse time zones. This arrangement enables a continuous work cycle, where teams in different regions can work on projects during their local business hours, accelerating turnaround times. However, while this can enhance productivity, it requires careful planning to ensure smooth communication and project consistency.

Local IT market growth

When evaluating nearshoring, offshoring, and onshoring for your software development needs, it is essential to understand the growth potential of local IT markets in various regions. The strength and prospects of these markets can significantly impact your decision.

The IT services market in Latin America has experienced rapid growth, with the sector expected to reach $74.49 billion by 2029. Countries such as Mexico, Brazil, and Argentina are at the forefront of this boom, driven by growing demand for tech solutions. In particular, Argentina stands out, with a thriving software development sector and robust tax incentives to attract international clients. The country offers a 60% reduction in corporate tax for small companies, making it an appealing nearshoring destination for US companies.

Similarly, Eastern Europe is home to a rapidly growing IT services market, with countries like Poland, Romania, and Ukraine becoming key players in global software development. In Poland, the IT industry generates an estimated $8.7 billion in annual revenue, making it one of Europe’s largest. This growth is further supported by competitive tax rates, with corporate income tax rates ranging from 9% to 16%, compared to the up to 33% tax rate in the US (source: European Commission).

Both Latin America and Eastern Europe continue to attract significant investment in their IT sectors, making these regions prime options for businesses seeking both cost efficiency and long-term scalability.

Alternatives to traditional outsourcing models

Software R&D center, along with an employer of record

For companies aiming for long-term growth and full operational control, traditional outsourcing models are no longer sufficient. The market has evolved to offer superior alternatives that deliver not only cost advantages but also stronger talent pipelines, tighter operational control, and long-term scalability. These models, Software R&D centers, Yourshoring, and even new ownership structures, are not simply variations on outsourcing; they represent the strategic evolution of how ambitious companies build global teams.

Software R&D center with Employer of Record (EoR)

A Software R&D Center allows companies to build a dedicated team that extends their operations. Unlike traditional outsourcing, this approach combines the benefits of in-house culture with the flexibility and cost-effectiveness of working abroad. Integrating Employer of Record (EoR) services simplifies payroll, compliance, and administration, enabling seamless global operations and faster entry into new markets.

EoR services accelerate market entry by eliminating the complexities of navigating foreign labor laws and tax systems.

This model appeals to high-growth companies that need global talent without losing operational control. Tech leaders like Microsoft and Google have set up R&D hubs worldwide to tap into local expertise while keeping costs in check. Studies indicate that firms using this approach cut operational costs by 30–40% and speed up recruitment by nearly 40% compared to traditional outsourcing. By offering Yourshoring, DevsData LLC enables businesses of all sizes to replicate a “Google-style” R&D center – achieving the same control and benefits without the massive upfront investment.

IT Recruitment

Recruiting skilled developers and specialists is a persistent challenge in today’s competitive market. Onshore setups often face a limited talent pool, while nearshore and offshore recruitment come with hidden costs and logistical hurdles.

R&D centers address these challenges by creating tailored recruitment pipelines that tap into untapped talent pools in tech-rich regions. For example, Armenia dubbed the “Silicon Valley of the Caucasus“, has emerged as a hotspot for tech talent, with over 25000 specialists working in the IT sector. This approach ensures a steady supply of skilled professionals and aligns talent acquisition with specific project needs.

Full operational support

Setting up operations in a new region involves more than recruitment. Operational support, encompassing office management, IT infrastructure, and day-to-day administration, is essential for smooth functioning.

R&D centers provide comprehensive operational support, enabling companies to initiate operations smoothly and efficiently. This comprehensive approach includes managing office spaces, procuring equipment, and ensuring uninterrupted IT services. Such support reduces the logistical burden on businesses, allowing the team to focus entirely on delivering results.

Owning your own software development company

For organizations with a clear roadmap and long-term vision, establishing a wholly owned subsidiary provides unmatched control. Unlike outsourcing vendors, this model ensures complete ownership of intellectual property, direct control over culture, and the ability to tailor teams precisely to business goals. While the upfront investment is higher, studies show that companies creating their own centers often achieve 25–30% cost reductions within five years.

Yourshoring

Traditional outsourcing models each solve part of the problem — onshoring provides control but is costly, nearshoring improves collaboration but faces rising salaries, and offshoring maximizes cost savings but creates communication and IP challenges. Yourshoring is DevsData LLC’s answer to these trade-offs – a model designed to combine the best of all worlds.

With Yourshoring, companies establish a dedicated R&D center in a carefully chosen location, but without the complexity of building it alone. DevsData LLC manages recruitment, legal compliance, infrastructure, and administration, while clients retain full cultural alignment, oversight, and long-term scalability. This ensures:

• Cost efficiency comparable to offshoring;
• Real-time collaboration like nearshoring;
• Operational control and IP security are equal to onshoring.

By positioning Yourshoring as its core service, DevsData LLC enables businesses to replicate the success of tech giants like Google or Microsoft, building global innovation hubs without the massive upfront investment.

Crowdsourcing

Crowdsourcing involves using a diverse group of freelancers or remote workers for specific tasks. While this model is cost-effective for short-term projects, it lacks the cohesion and reliability required for long-term initiatives.

Freelancers may not align with the company’s goals or standards, making it challenging to ensure consistent quality across a distributed workforce. Security is another issue, as sensitive data and intellectual property are more complex to protect in crowdsourced environments. This makes Yourshoring or R&D centers a more robust option for businesses seeking sustainable growth.

Challenges in outsourcing models

Challenges when choosing Offshoring

Offshore outsourcing has long been a go-to strategy for cost savings, but it introduces complexities that can hinder project success.

Significant time zone differences reduce collaboration efficiency, while cultural and language barriers often lead to miscommunications.

One of the biggest concerns with offshore outsourcing is intellectual property (IP) protection. According to a study by PwC (2023), 62% of businesses cited IP risks as a major deterrent to offshore outsourcing. These challenges underscore the need for more secure and controlled models, such as research and development (R&D) centers.

While offshoring reduces direct salary expenses, companies often underestimate hidden costs:

• Infrastructure costs – Setting up a remote office or ensuring secure network access.
• Compliance and legal risks – Adhering to data protection laws such as GDPR or CCPA.
• Turnover & talent retention – High attrition rates in offshore locations increase hiring costs.

Challenges when choosing Onshore

Onshore outsourcing offers geographical proximity and cultural alignment, but it also has significant downsides. High salaries, taxes, and infrastructure costs often make onshore models unsustainable for many businesses. Additionally, the limited availability of skilled developers in certain regions further exacerbates the challenge.

For instance, the US Bureau of Labor Statistics predicts a 1.2 million tech worker shortfall by 2026, highlighting talent scarcity in key markets. This limitation prompts businesses to explore alternative models, such as research and development (R&D) centers.

Onshore hiring isn’t just costly; it’s also restrictive and slow-moving due to:

• Complex labor regulations – Strict laws make workforce adjustments and layoffs challenging.
• Heavy tax and compliance obligations – High corporate taxes and regulatory requirements add financial strain.
• Talent scarcity in specialized fields – Finding top-tier tech talent locally can be difficult, delaying hiring and innovation.

Challenges when choosing Nearshore

Nearshore outsourcing balances cost and proximity but comes with its own set of challenges. While it provides better cultural alignment and overlapping work hours compared to offshoring, it still has limitations that affect efficiency and cost-effectiveness.

Key concerns with nearshoring include:

• Higher-than-expected costs – Nearshore rates are often more affordable than onshore options, but can still be significantly higher than offshore alternatives, especially in high-demand markets.
• Management overhead – Nearshore teams require close oversight to ensure alignment with business goals, increasing administrative burdens.
• Growing talent competition – In regions such as Latin America and Eastern Europe, the rising demand for skilled developers drives salaries closer to those in the US and Western Europe.

Decision matrix – choosing the right model

To help businesses determine the best outsourcing approach, the following decision matrix provides a comparative overview of various models based on key business considerations. This matrix is derived from industry reports, including data from Deloitte’s Global Outsourcing Survey and insights from IT market research firms like Gartner and PwC.

For businesses that need maximum control while optimizing cost, Yourshoring or R&D centers offer the best alternative to traditional outsourcing. Unlike conventional outsourcing, Yourshoring allows companies to establish a dedicated offshore team while maintaining complete operational control and compliance with security regulations.

Real-world examples of alternative outsourcing models

Google’s R&D expansion in Poland

Google set up a dedicated research & development center in Poland to tap into Eastern Europe’s tech talent while maintaining control over security and innovation. This approach strikes a balance between cost efficiency and high-quality engineering talent. Poland has become a top destination for global tech companies due to its strong university system, well-trained IT workforce, and business-friendly policies.

By establishing an R&D center in Poland, Google benefits from a deep talent pool specializing in AI, cloud computing, and cybersecurity while ensuring compliance with European data protection regulations. The center works closely with Google’s other global teams, facilitating seamless integration into the company’s broader innovation ecosystem. Poland’s competitive labor costs, compared to those in Western Europe, further enhance Google’s return on investment.

DevsData LLC helps businesses replicate this model by setting up Yourshoring-based R&D centers, handling recruitment, compliance, and infrastructure so clients achieve “Google-level” control and scalability without the enterprise-sized overhead.

Spotify’s nearshoring & hybrid approach

Spotify, one of the world’s leading music streaming platforms, has leveraged a hybrid outsourcing approach to scale its operations effectively. Instead of relying solely on nearshore or offshore outsourcing, Spotify strategically blends in-house development teams, nearshore partnerships in Eastern Europe, and a network of freelancers for specialized projects.

Eastern Europe has become a critical nearshore hub for Spotify due to its abundant skilled software engineers and strong cultural alignment with Western Europe. Spotify’s nearshore teams focus on core software development, AI-driven music recommendations, and backend infrastructure, ensuring high-quality execution and real-time collaboration across time zones.

Additionally, Spotify supplements its workforce with freelance contractors for short-term projects and the development of experimental features, allowing the company to scale flexibly without overcommitting resources.

DevsData LLC enables companies to adopt a similar hybrid model by providing access to vetted nearshore teams, flexible recruitment pipelines, and on-demand specialized talent – ensuring clients get the agility of freelancers with the stability of long-term teams.

Why companies choose DevsData LLC for outsourcing

Website: www.devsdata.com
Company size: ~60 employees
Founding year: 2016
Headquarters: Brooklyn, NY, and Warsaw, Poland

Whether you choose onshore, offshore, or nearshore development, partnering with the right vendor is key to maximizing effectiveness, cost savings, and project success. DevsData LLC is a top-tier outsourcing provider, offering tailored solutions that fit any outsourcing model – from fully managed development teams to flexible staffing and IT outsourcing services.

A versatile partner for any outsourcing approach

• Onshore development: For businesses prioritizing local collaboration and compliance, DevsData LLC provides access to top-tier engineers within your region while handling the complexities of hiring and payroll.
• Offshore development: If cost efficiency and scalability are your main concerns, DevsData LLC connects companies with elite offshore developers while maintaining strict quality control and security standards.
• Nearshore development: If you prefer real-time collaboration without the high costs of onshore teams, their nearshore outsourcing solutions balance affordability with seamless integration into your existing workflows.

DevsData LLC stands out as a trusted nearshore software development partner, combining deep technical expertise with flexible collaboration models. With development centers across Brazil, Argentina, Colombia, Mexico, Poland, Ukraine, and Romania, DevsData LLC offers proximity, cultural alignment, and time-zone compatibility for clients in North America and Europe. The company delivers high-quality software solutions across a wide range of technologies, specializing in backend development (Node.js, Java, Python), frontend development (React, Angular, Vue), mobile development (Flutter, React Native, Swift), big data, and cloud-native development. Whether building custom platforms, scaling existing products, or integrating cutting-edge technologies, DevsData LLC tailors each engagement to meet the specific business and technical needs of its clients. Their engineering teams are known for rapid delivery, strong communication, and deep product ownership, making them ideal for nearshore collaboration.

Beyond software development, DevsData LLC offers flexible outsourcing solutions, including team augmentation, government-licensed IT recruitment, and full-cycle software development. Their client-centric model, backed by a guarantee period, allows businesses to grow effectively while maintaining quality control. DevsData LLC also offers direct BPO solutions, including HR advisory, payroll management, and Employer of Record (EOR) services, helping businesses streamline operations and navigate complex administrative challenges. By evaluating organizational needs and leveraging its extensive network and in-house capabilities, DevsData LLC ensures clients connect with specialized outsourcing partners or benefit from hands-on, expert-led services.

With a global presence and a portfolio of over 100 successful projects, DevsData LLC has helped businesses across industries, from Silicon Valley FinTech firms to AI-driven enterprises. Their success-fee model further minimizes risk, allowing clients to pay only for successful placements.

One standout case involves an international fashion corporation undergoing a $9M digital transformation to compete with players like Zalando. DevsData LLC assembled core tech teams across Machine Learning, Software, and UX/UI, delivering advanced tools such as an NLP-powered BI pricing system and a logistics optimization platform – both of which exceeded first-year business goals. This project followed a Yourshoring approach, with DevsData building a dedicated team in a strategically chosen location to ensure real-time collaboration and cost efficiency. It showcases DevsData’s ability to deliver the control and scalability of an in-house team, while maintaining the flexibility of outsourcing.

DevsData LLC has earned top ratings on platforms like Clutch and GoodFirms by combining technical excellence, security, and flexible engagement models, solidifying its reputation as a trusted outsourcing partner.

Whether you opt for onshore, offshore, or nearshore outsourcing, partnering with DevsData LLC ensures high-quality outcomes, cost efficiency, and seamless collaboration. Their global network, top-tier talent, and flexible engagement models make them the best outsourcing partner, no matter your strategy. For more information, contact DevsData LLC at general@devsdata.com or visit their website at www.devsdata.com.

Conclusion

Traditional outsourcing models – onshore, nearshore, offshore – solve parts of the problem but fall short in the long run. Costs keep rising, talent gaps persist, and companies need more control. The real future lies in advanced models like Yourshoring and R&D centers, which combine cost savings with scalability and full operational oversight.

Regardless of a company’s outsourcing model, partnering with the right vendor is essential for maximizing productivity, cost-effectiveness, and project success. DevsData LLC is a top-tier outsourcing provider, offering tailored solutions that fit any model – from fully managed development teams to flexible staffing and IT outsourcing services. Their global network, elite talent pool, and flexible engagement models make them an ideal partner for businesses looking to balance quality, cost, and seamless collaboration.

For more information, contact DevsData LLC at general@devsdata.com or visit their website at www.devsdata.com.

Discover how IT recruitment and staffing can address your talent needs. Explore trending regions like Poland, Portugal, Mexico, Brazil and more.

🗓️ Schedule a consultation

Read full bio

Tsiala Jobava Copywriter and Marketer

Tsiala Jobava is a talented marketing specialist from Georgia. Tsiala holds a bachelor’s degree in International Relations from Georgian American University and a master’s in Marketing and Communication from Barcelona Business School. She has built a diverse career, working as a copywriter and in marketing and PR, before returning to her first passion – writing. Along the way, she has gained valuable experience in social media management, content creation, and brand development.

Read more about our IT staffing services

IT marketOffshoreOutsourcingSoftware development