Offshore Software Development in Latin America

What risks might await you when outsourcing to Latin American countries?

Outsourcing software development remains one of the main trends on the IT market during the last years. There are many reasons why companies, organizations, and businesses decide to maintain software development teams overseas, but one of the most crucial ones is an opportunity to reduce the expenses.

Over the past decade, the interest in outsourcing shifted from countries such as India and China to the south. Latin America has managed to grow its reputation in the IT field and become the top choice destination when it comes to offshore software development. North America has entrusted top tech professionals from Latin America with their IT routine instead of in-house US teams, not by accident.

Companies consider offshore software development in Mexico, Chile, Argentina, Colombia, Brazil, and other countries within the region due to multiple reasons that have helped Latin America gain a leading role in outsourcing. The main assets include skilled professionals with fluent English, real-time collaboration, travel proximity, cultural similarity, which are all beneficial for a business.

However, despite all the advantages of outsourcing to Latin America also has some pitfalls that can take a serious toll on a project or working process. In this article, we will showcase all the pros and cons of outsourcing to Latin America as well as provide you with an alternative of increasing popularity.

Why businesses opt for outsourcing software development to Latin America

Geographic proximity and time zone alignment

Latin America is much more convenient for outsourcing in terms of time zone alignment. The biggest disadvantage of collaboration with Chinese or Indian developers is the large time zone difference (approximately 13-hour difference). In this regard, South America is much more favorable environment as the time difference is minimal. Latin American time zones allow to have a team close by, communicate effectively with them and get a faster response from developers during the regular business hours. It will be much easier and faster to resolve any occurring issues with no delay. It goes without saying that it’s crucial to check on a team or contact them to discuss project details. Therefore, having a face-to-face meeting will be easier to handle with similar time zones. Moreover, business travels are more affordable with non-stop flights to major cities such as New York, Houston, Chicago.

Language proficiency

According to the latest research, some countries in South America have surpassed China’s level of English proficiency. These countries include Peru, Ecuador, Chile, Brazil, and Mexico. With the growing importance of English language in the world, the tendency to invest more money in developing a good command of spoken and written English is common for Latin America. Therefore, establishing successful communication won’t be a problem at all. Today the number of fluent speakers in the region have attained the enormous numbers thanks to diverse educational programs and initiatives. English fluency helped the countries to become the hub of IT outsourcing.

Education

It’s worth noticing, that Latin America is overflowing with IT programmers that have a solid educational foundation. Therefore, it’s easy for industry professionals to maintain their outsourcing commitments. The workforce is highly skilled and they provide clients with a wide range of services. Major tech giants like Microsoft and Hewlett-Packard have launched educational programs to assist Latin America in developing their skill set in the IT field and start a career.

Why outsourcing to Latin America is not the best choice

Despite all the advantages mentioned before, outsourcing software development  to Latin America might be risky and here is why.

Tech talent number

It is true that there are plenty of accomplished developers in Latin America and the number of IT professionals keeps significantly rising. However, due to the large numbers, it becomes very difficult to select candidates thoroughly and accurately determine their level of expertise. For example, in Peru, there are approximately 25,000 developers ready to tackle a new outsourcing order. Colombia comprises over 21,000 programmers, Chili (18,000),  Argentina (16,000). As a consequence, you could make a mistake and hire a wrong candidate that would provide you with a low-quality code that can impact the overall working process of an organization or a business.

Costs

Companies and businesses are willing to hire developers from Latin America to save their expenses. It requires from $80 to $150 per hour to hire a qualified developer in the US. In comparison, in Latin America costs are more reasonable, so companies can hire a professional here for $40 to $70 per hour. But the price keeps rising fast. And as long as many companies and startups in the US want to cut down their expenses and save the budget, this price might not the best option. In comparison, it’s possible to find professionals from India or China for $20-$50 per hour. The difference is striking.

Tax policies

Over the past years, Latin America has introduced a series of reforms to strengthen and modernize its tax system. Different tax policies, double taxation treaties, and free trades zones can significantly hinder the process of outsourcing to Latin America. And thus, become a major challenge for companies willing to outsource to one of the countries in the region. For example, if you consider permanent collaboration with Latin American outsourcing team you are fully taxed as if your company had a branch there. Despite the fact that Brazil doesn’t have permanent establishment taxes, the country imposes foreign companies with an indirect taxation. As we can see, the taxation regulations of each Latin America country are very complex, so you should learn all the specifics in order to make the right final decision.  

Slow process

Some customers who have turned to services in Latin America also reported the lack of punctuality and significant delays in project performance and delivery. A lot of American customers expressed frustration in this regard. Also, IT professionals in the region lack discipline and can often reject the job offer from a company. Consequently, it can negatively influence the overall development process, especially if you are restricted with the tight deadlines.

Political instability of a region

It is worth to mention that the political situation is rather unstable in Latin America. Governments in Venezuela, Ecuador, Nicaragua, and Bolivia turned to be anti-business and anti-American. This can be a substantial hindrance for American companies. Also, recent acts of violence in the region can have a significant impact on IT services delivery.

Is there any alternative?

Luckily, it is possible to avoid all the above-mentioned risks and make the best out of outsourcing to Latin America as well as to the other popular offshore destinations. The answer lies within tech marketplaces for offshore development talents which function as a two-sided platform for hiring developers. As an example, a fast-growing company YouTeam is a new-generation marketplace which can make building a distributed team way easier and less time-consuming.

Hundreds of top-notch IT professionals, full stack teams, back end, and front-end developers, mobile development professionals are at your disposal. You can choose the best team that suits your business objectives. YouTeam also offers one of the best benefits on the IT outsourcing market – no fees for recruiting candidates. In addition, before you assign a team for a project, you can meet professionals in order to assure you make a right decision.

All professional are thoroughly selected by a team so you shouldn’t worry about your order quality and have a chance to channel your efforts to something more meaningful. The price range is between $20-$50 per hour which is convenient for any company. On the website, you can only find top qualified talents.

So if you want to opt for the best quality, minimize all the risks and get all the job done fast and professionally, that’s the best cost-effective solution to search for accomplished developers.

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YouTeam Editorial Team

YouTeam Editorial Team

We love featuring verified solutions to outsourcing problems and coverage of remote work trends. We want our blog to be a source of inspiration for tech entrepreneurs and product people who are looking to build distributed development teams across continents.

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