For a long time, offshore technology outsourcing was the default outsourcing model for American businesses, as this staffing approach, when implemented correctly, gave companies almost inexhaustible access to skilled overseas talent at a fraction of the cost of domestic IT professionals. Over the last decade or so, the average prevailing rates for offshore engineers have increased substantially in traditional offshore hubs like India and China, where skilled labor can now ask for higher wages, which means these foreign destinations can no longer offer US companies the massive labor cost savings they once provided in the past. Due to this fact, domestic outsourcing, also known as onshore IT outsourcing, has been rapidly increasing in popularity. Domestic outsourcing also offers many advantages offshoring doesn’t, which is another reason why onshore staff augmentation is becoming more viable — and for certain kinds of projects — the most effective outsourcing model for US-based companies to adopt.

Here are 6 domestic outsourcing advantages that American firms can benefit from when hiring remote technical professionals domestically, rather than thoughtlessly selecting the cheapest contractors they can find overseas.

1. Communication Advantages

When US-based team members have to interact with supplemental technical staff abroad, one of the toughest challenges that frequently surface is the time and money lost to project issues caused by language differences. Even when working with a team based in a country like India, with a fairly high English Proficiency Index (EF EPI), miscommunication stemming from different levels of spoken and written English can lead to missteps in the development process. Language communication issues (accents, vocabulary, a less-than-succinct way of expressing a question or request) can also lead to a misalignment of goals and expectations as outlined by in-house managers, and how those goals are interpreted by overseas teams.

When a North American company outsources domestically, the language and communication obstacles associated with offshoring tend to disappear. The skilled onshore technical professionals contracted locally will either be native English speakers, or foreign IT experts living in the United States, who are already well accustomed to how business culture and communication protocols operate stateside.

2. Access to a Larger Domestic Talent Pool

The United States is a global hub for the high-tech industry, including superior technical education, rapid pace of innovation, and ample technology job opportunities. Firms that choose onshore IT outsourcing are able to take advantage of the vast technological know-how available in the US. Access to a larger domestic talent pool, which is not limited by a company’s location, is perfect for organizations that want to work with qualified North American technical professionals. These US-based IT experts not only understand the creative or programming tasks assigned to them but are also intimately familiar with how different types of business environments (biotech, gaming, mobile app development, or enterprise software) function in North America. Many of the “home field” advantages that come with hiring US-based software engineers will be significantly reduced or lost when outsourcing to offshore talent.

3. Reduced Cultural Barriers

Cultural differences can frequently create cultural barriers in the business world. These barriers, often associated with communication, can lead to an increase in project costs or delays in project timelines in several ways. For example, for IT professionals based in East or Southeast Asia, where reporting feedback, offering helpful suggestions, or even providing constructive criticism to team managers or people in positions of authority is frowned upon, communication channels tend to break down at times, or at the very least become less effective. These issues become especially apparent when contractors work with more direct (regarding communication) American clients or managers.

These cultural barriers can result in an inferior product, or lead to costly engineering or design errors during various phases of the development process because problems often aren’t addressed in a timely or efficient manner. With onshore staff augmentation, these cultural barriers are reduced considerably, or avoided altogether, as clients and contractors will be operating inside the same cultural environment.

4. Geographical Benefits

The geographical benefits associated with domestic outsourcing are incredibly advantageous for companies that have to monitor and interact with augmented staff on a daily basis. Time zone differences, when contracting US-based software engineers or IT support personnel will be negligible for North America firms, which gives managers the freedom and opportunity to get real-time updates from onshore staff during regular working hours. Geographical proximity also gives in-house managers the ability to conduct face-to-face meetings via video conferencing services with remote team members throughout the day, along with the capacity to update or alter work parameters on the fly.

Onshore staff augmentation reduces communication issues and development delays caused by the substantial time zone difference and communication lag that come with utilizing offshore talent.

5. Standardized Rules and Regulations

While a trustworthy outsourcing vendor will handle all of the managerial tasks and paperwork associated with contracting augmented staff (onshore, nearshore or offshore), including payroll, hiring expenses, procuring office equipment as needed, and tax forms, the onshore outsourcing paradigm simplifies the legal interactions between all of the parties involved (client, vendor, contractor). By working with domestically-based talent, clients can rest assured that if any legal issues should arise regarding intellectual property (more on that below), contract disputes, or any other legal matters in need of arbitration, every party involved will be covered by and bound to the same laws, rules, and regulations — which might not necessarily be the case when outsourcing offshore.

6. Better Intellectual Property Protection

Safeguarding valuable intellectual property is a principal concern for technology companies. When working with outsourced offsite personnel, IP can become vulnerable to theft or unlawful distribution. No one wants their IP broadcast to the world without their consent or the legal headaches that ensue when a company has to hire a team of lawyers to protect patents and copyright. Dependable outsourcing vendors will always have their contractors sign airtight NDAs, but the strength of the legal systems upholding those NDAs and IP varies from country to country. The United States has a robust legal framework for safeguarding intellectual property, a long tradition of respecting intellectual property, plus formidable legal institutions to enforce intellectual property protection should theft or any other IP-related issues arise. All of these factors, when taken together, make onshore staff augmentation an increasingly attractive option for firms with precious IP to defend.

Onshore Versus Offshore Outsourcing

When a company decides to outsource operational or creative tasks, IT support or software engineering work, the goal is usually to reduce overall costs while freeing up in-house staff and resources to focus on the most pressing business issues that need to be addressed internally — often on a very tight schedule.

Offshore outsourcing is an attractive option for companies trying to take advantage of lower labor costs available overseas, in contrast to North America, where employees and contractors can demand higher salaries. For example, hiring remote engineers and programmers based in South America, Eastern Europe and Asia (rates depend on expertise, education, and experience, naturally) can save companies 70% or more in some instances, especially if managers take into consideration the fully-loaded US-based employee payroll costs.

Businesses that are looking to acquire skilled technical labor at a reduced cost, or require standardized or repetitive IT services, often select the offshore outsourcing model. This model is also a practical option for companies that utilize a software development lifecycle that lets them delegate specific tasks to capable (and affordable) remote professionals, which then allows managers to direct valuable in-house resources toward the most complex and demanding tasks the company has to tackle to remain competitive.

Onshore outsourcing is an excellent option for companies that need to cooperate continually with technical personnel who are familiar with the North American business environment. Another factor to consider here is that while US-based software engineers and onshore development teams usually command higher rates compared to their overseas counterparts, in many situations domestic outsourcing ends up being more cost-effective than offshoring, as onshore outsourcing comes with fewer hidden costs. Here are a few examples of why:

  • In-house managers and senior staff don’t need to communicate with and manage overseas teams outside of their regular working hours or via overtime.
  • Onshore staffing arrangement generally facilitates better and more timely communication between clients and contractors, which reduces costly delays or errors that can be caused by too much time difference or miscommunication.
  • Managers and full-time employees don't have to visit distant foreign locations or struggle with language barriers when dealing with project issues that require face-to-face meetings.
  • Project managers won't have to waste valuable time onboarding overseas contractors in company procedures and protocols, as these procedures would likely be already familiar to most US-based software engineers and creative professionals.
  • Managers won’t have to worry about paying for or providing additional technical support to offshore personnel that is not readily available in certain foreign markets because onshore contractors will likely have better access to the technology they need to do their job effectively.

What's the Best Outsourcing Approach?

A reliable vendor can offer their clients a wide range of staffing options related to onshore staff augmentation, or building an onshore development team. In some cases, it might actually make more sense for a technical staffing vendor to help a client implement a hybrid approach that utilizes the best features that domestic outsourcing offers with some of the cost-reducing benefits that offshore teams provide for non-critical, yet essential aspects of managing a business, building a product, or developing software.

An experienced staff augmentation vendor, like BXGI, can recommend a variety of outsourcing models, walk a client through the advantages and disadvantages of different staffing approaches based on a company’s specific resource requirements, and then recommend an option that fits the client’s needs the best.