What are the advantages of software outsourcing in LATAM?
More than ever before, the whole world is looking for tech talent. As technology evolves and more organizations and people move from analogical services and processes to digital ones, the need for software development increases as well. And though the United States is the country with more opportunities for tech talent, it’s also the country that suffers the most from talent shortage. But this is not a problem with no solution: Latin America is ready to support all of the US software development needs.
Software outsourcing is the way to go
Nowadays, there are more tech job opportunities in the US than professionals to tackle them. By 2030, there could be a global shortage of more than 85 million workers, which translates to USD 8.5 trillion in lost annual revenue. The US alone is expected to be short 6 million workers. The National Foundation for American Policy (NFAP) conducted a Lightcast Job Posting data pull from in 2022 and found more than 804,000 tech-related jobs remain vacant in the US. To give you an even more in-depth idea, in 2021 software engineers in the United States faced a low unemployment rate of just 1.5%, leaving at least 500 thousand positions unfilled.
Outsourcing allows businesses to expand their operations by delegating part or all of their development projects to experts from another company and, sometimes, country. Software outsourcing in particular allows companies to speed up their development processes by bringing in foreign engineers and other tech roles to their teams, or even build whole products from scratch with an end-to-end outsourced dev team that contains all the necessary roles.
Besides finding high-level talent in untapped regions, outsourcing also allows companies to avoid all the recruiting, onboarding, and administrative overheads. It’s a cost-effective solution that matches local talent, among other advantages.
In this post, we want to explore the Latin America outsourcing market and the unique benefits this region offers to businesses looking for the right outsourcing partner.
Latin America outsourcing numbers
According to Business Wire, Latin America has the highest projected growth in IT revenue in the world. IDC notes a 5.3% increase from 2021, largely due to the Americas’ ability to economically bounce back after pertinent worldwide events, such as COVID-19, that impact markets and inflation. Latin America has also become one of the most popular outsourcing destinations globally. A study by Capgemini states that 25% of foreign companies currently outsource various business processes to Latin American countries, while another report from Evans Data Corp says that the nearshore services outsourcing market in South America is expected to grow by USD 33.68 billion from 2020 to 2025.
Outsourcing to Latin America makes sense to many businesses – especially to those located in the US. Let’s see why.
1. Closer time zones
Between Latin America and the United States there is generally a one to four-hour time difference. Buenos Aires, Argentina, is only two hours ahead of New York City. While folks in Austin are getting ready to start work at 8am, it’s 11am in Montevideo, Uruguay. These examples highlight the time overlap between Latin countries and US regions, which is very conducive for being in constant contact with the outsourced team to answer questions, discuss next steps, and, overall, work together. When you shift your outsourcing destination to countries in other regions, such as Eastern Europe and Asia, there can be more than a full day’s time difference, which doesn’t make communication and collaboration any easier.
2. Geographic proximity
Our near time zones are an obvious result of the geographic proximity. After all, we’re all part of the same continent. That means that if you need to jump on a plane to visit your outsourced team (or the other way around), it will take you only a few hours to get there. It’s less costly and tiring than flying to countries located in other regions. Also, there are daily direct flights or flights with one short layover that can take you directly from the US to Latin America. Also, many Latin American countries, such as Uruguay, Argentina, and Colombia, do not require a visa for travel time under 90 days.
3. Growing infrastructure
As Latin American nations started to realize the opportunities of providing outsourcing services, they have begun to invest on infrastructure to raise the tech game. The expansion of the middle class in many Latin American countries, as well as the pandemic’s effect on digital interactions, helped countries such as Brazil, Chile, and Colombia triple their tech endeavors in the last 5 years.
Also, governments across the region have launched many initiatives to support the industry’s growth and attract more international companies. Some examples are the Argentinian software law, that offers a promotional regime for the knowledge-based economy companies, which includes software development. Additionally, the tax reduction programs in Uruguay make it easier for foreign companies to start operations in the country.
4. High talent (and in quantity)
There were over 1 million developers in Latin America ready to offer outsourcing services.
More than 30% of Colombian college students are graduating in science and technology, mathematics, and other IT education-related fields. Argentina charts slightly above with 41%, but many other Latin countries present similar numbers. According to QS’ University Rankings, Colombia and Argentina host some of the best Latin American tech colleges in the world.
In Uruguay, around 11% of all college students enroll in Engineering programs. Overall, the country produces 1 engineer per 8,000 inhabitants. Uruguayans frequently start working while still in college, receiving an advantage in the job market. Also, tech education starts at an early age in Uruguay. The government has increased access to computer science education, provided laptops to students, and offered broadband internet to over 85% of the population.
It is also helpful to note the more accessible and affordable tuition rates in many Latin American countries as opposed to other countries such as the US. As of 2022, the average cost of tuition in the US ranges from $37k to $159k, depending on the type of school. Compare this with an average $2k to $15k in countries like Brazil and Argentina.
5. Innovation pool
Where there are talented people, there’s an innovative mindset. As of 2022, Latin America has a population of around 664 million people, which undoubtedly strengthens the consumer market as well as the potentiality for outreach. Engineers and product experts in Latin America are not only helping other businesses to grow, they are also creating their own startups and providing fresh solutions to their current realities.
Since 2009, $16B has been invested across nearly 2,800 deals to tech startups in Latin America and the Caribbean. 2020 marked a record year for the region, with tech companies raising a record $4.2B in funding across more than 370 projects. In 2019, Y Combinator invited a record 10 Latin American startups into their organization. In addition, 500 Global has invested in over 240 Latin American tech companies in the past ten years. Per the Association for Private Capital Investment in Latin America (LAVCA), $15B has come only from venture capital initiatives, which is higher than the past 10 years.
The results can be seen in the first unicorns from Latin America, such as the ecommerce marketplace Mercado Libre (Argentina), the fintech D-Local (Uruguay), and services and products delivery platform Rappi (Colombia). Talent attracts talent, as innovation fosters innovation. If you are looking for highly trained professionals that are also willing to provide you with ideas and suggestions on how to make things better, this is the place.
6. English proficiency
If you don’t speak Spanish or Portuguese, don’t worry. The majority of Latin American countries have developed education standards for learning a second language, especially English. During their school years, children and adolescents are in touch with the language. After joining the tech labor market, many companies like Octobot offer their employees the chance of continuing to tune their English skills by taking classes or creating initiatives to practice and improve.
According to the 2022 EF English Proficiency Index, Argentinians score the highest in English in the South American region in academics, followed by Brazil, Colombia, Uruguay, and others.
How can you afford such great talent, right? Truthfully, it will probably cost you less than hiring in-house or even outsourcing to a US company. According to Glassdoor, a software developer in the US makes more than $95k per year in general, while in Latin America an engineer with the same experience can earn about half as much. This is related to the cost of living in Latin America being lower than the US, which reflects upon wages. IT-related salaries in the US also tend to be higher because of, as previously mentioned, the worker shortage / job vacancies.
Besides, when you don’t have to personally invest in recruiting, it saves you a lot of bucks in ramp-up costs, as well as in guaranteeing the employees’ motivation and training. Outsourcing gives companies more flexibility and a chance to operate faster in this sense, since the outsourcing partner is the one responsible for onboarding, preparing, and retaining the people.
8. Cultural fit
Circling back to proximity, the fact we are essentially neighbors is not only positive for travel or overlapping time, it also means our cultural visions, practices, and interests are similar as well. We share many western values, including workplace ones, allowing teams to seamlessly collaborate. Expectations of deadlines, communication styles, remote work policies and quality standards are very similar, making it easier for the teams to adapt to each other.
At a personal level, there’s also a shared affinity in terms of entertainment and habits, which allows people to connect more easily and, why not, become friends.
9. One-stop shop agencies
As the demand for skills in software development grows, Latin American outsourcing companies have evolved their set of services to be able to offer their partners with all the capabilities they need. We’re talking about software developers, yes, but also UX/UI designers, Product Managers, Scrum Masters, testers, DevOps, architects and engineers specialized in technologies or dev practices, among others.
Latin American agencies want to establish long-term, valuable relationships with their partners. It’s important to offer all kinds of software development services in a single place, making the processes for US business as smooth and high-quality as possible.
BONUS! 10th reason: don’t take our word for it
As we mentioned in the beginning of this article, Latin America being a sweet spot in the outsourcing world is nothing new. Many businesses, including multinationals and huge tech players, are already collecting the fruits of hiring away from home.
Major corporations like Itaú, Roche, and TCS have already expressed their interest in Uruguay. In Colombia, Medellín was selected as headquarters for the center for the fourth industrial revolution along with cities in Israel and Norway. Argentina has attracted many global IT companies like Oracle, Dell, and SAP. And these are just a few examples to note.
If you are still on the fence, their case studies can be useful to learn more about the outsourcing experience in Latam and find out if it’s the right solution for your company.