Today, most US companies recognize the importance of developing long-term partnerships with regional outsourcing IT providers to help them meet their software goals while saving costs. This kind of cooperation, known as nearshoring, is a type of outsourcing where IT processes are transferred to a software partner in a nearby country with similar cultural traits. It’s much different than offshoring, a form of outsourcing that occurs when you partner with a faraway country, both in terms of geography and culture. Latin American Countries (LATAM) are a natural software partner to unlock the potential of US companies.
US companies are increasingly outsourcing software development to Latin American Countries. By 2023, the Latin America IT Outsourcing market is expected to generate $8.09 billion USD in revenue, with an annual growth rate (CAGR 2023-2028) of 12.69%. If the data presented by Statista is correct, this will result in a market volume of $14.70 billion USD by 2028.
Over the past three decades, Latin American countries have made significant strides in building macroeconomic resilience, thereby making them more resistant to shocks such as rising inflationary pressures, global uncertainty, and increased debt. According to a report by The World Bank, the region’s Gross Domestic Product (GDP) is expected to grow by 2 percent in 2023, followed by growth rates of 2.3 percent in 2024 and 2.6 percent in 2025, proving that LATAM countries are and will be a stable and trustworthy partner for outsourcing software development.
Reasons why Latin America is great for nearshore outsourcing development
According to data provided by IT Skills & Salary Report 2022, the average yearly overall base salary for people working in the IT industry equaled around $48,771 USD in Latin America compared to $108,165 USD in North America. The difference in cost-efficiency is apparent, with the cost-efficiency in Latin America being twice as high.
This fact becomes even more apparent when we examine the top two highest-paid IT functions in 2022 by region. In North America, the person responsible for IT architecture and design earns, on average, $138,310 USD per year, while a DevOps specialist can have an annual salary of, on average, $134,215 USD. On the other hand, in Latin America, the wage for the person responsible for IT architecture and design is $50,165 USD, while the DevOps specialist earns $57,337 USD annually.
Experience, education and skills
Saving costs used to be the main reason companies turned to outsourcing providers from other countries, especially since onshore providers have become more expensive than before. Today, developing a nearshoring partnership is more than just about being cost savvy. Turns out 96% of IT staff members in Latin America are certified, compared to 87% in North America – as noted by the IT Skills & Salary Report 2022. A staggering 59% of IT professionals in Latin America have over 10 years of experience in their respective fields, only 4% less than in North America. LATAM’s IT professionals provide the technical expertise US companies seek, as STEM (science, technology, engineering, mathematics) education standards are modeled after North American systems. Along with these competencies comes investment, as Latin American companies, as broken down in IT Skills & Salary Report 2022, firmly fund cloud computing, cybersecurity, machine learning and infrastructure projects.
Compatible time zones
While time-zone gaps with traditional offshore locations make it easier to hold frequent online meetings, sharing the same or a similar time zone allows for real-time communication. Although this benefit is crucial at every step of the development process, it is particularly valued when dealing with problems that require real-time solutions.
With almost no time difference between the United States and Latin America, you cannot argue that the continent isn’t an excellent destination for growing your team. Whereas Eastern Time (ET) is only one hour behind UTC-3, Central Time (CT) is just two hours behind, Mountain Time (MT) is only 3 hours apart, and Pacific Time (PT) has the most significant difference at 4 hours behind. However, some places in Latin America (UTC-5) only have a 2-hour difference with PT, for instance. Knowing that your team is working while you are working is a significant advantage, especially in contrast with other common outsourcing destinations, which can have a difference of 12 hours.
According to the 2023 EF English Proficiency Index, 70% of LATAM countries have very high to moderate English proficiency. In Latin America, children learn the language from a young age, and being bilingual is a must when working in the IT industry, which makes it much easier to communicate with their North American partners, who do not need to rely on translations or be worried about misunderstandings.
Many software development teams have members who have studied, received training or even worked at US companies, meaning they are familiar with the language, US workplace culture and American approach to software development. With teams experienced at working on several different projects, they can not only offer solutions for your current software needs but also drive innovation in your own company, while helping you introduce new technologies, processes and best practices.
There needs to be more than online meetings and real-time problem-solving to ensure good communication with a partner. Forging an excellent software partnership requires commitment and synergy, and it demands both your team and your partners to have the ability to merge into one joint force. Your partner should be able to grasp the essence of your company to develop a deep understanding of your main goals and values. You can only achieve it with a shared cultural mindset. This is where, once again, nearshoring stands out as compared to offshoring. Latin American countries have a much more European way of working and thinking. They have been strongly influenced by American culture in the last decades, which creates a common ground they can both profit from.
For companies in the US, Latin America is a place with a workplace culture much akin to theirs. Proactiveness, a proneness for innovation and creativity and the importance of relationships based on mutual trust are some of the most relevant and common traits of Latin American software engineering teams. In addition, with direct flights from most LATAM cities to major US airline hubs, it is easy to travel from one place to another and meet face-to-face if required.
Becoming a proven US nearshore software development services partner
Such a clear depiction confirms that software development centers in Latin America possess the necessary resources to partner with and assist North American businesses in expanding their operations. Although the decision to establish a collaboration with a nearshoring development team may seem daunting, it provides access to exceptional talent, expertise, and innovative problem-solving techniques. Moreover, the shared cultural mindset and a focus on maximizing value demonstrate that partnering with LATAM software companies can help businesses achieve the necessary competitiveness.
If you’re a US-based company seeking an experienced LATAM nearshore software development partner to boost your business, get in touch using this form.
About the authorJavier Minsky
CEO at Software Mind LATAM
Javier, an accomplished Systems Engineer with a bachelor’s degree from Universidad Tecnológica Nacional and a master’s degree from Universidad de Belgrano, co-founded Virtualmind in 2005 and served as its visionary CEO. Under his leadership, Virtualmind, now operating as Software Mind LATAM, has grown significantly and become a leading software industry player known for cutting-edge solutions and high-quality staff augmentation services for North American companies. Javier is passionate about innovation and is committed to continuous professional development, for everyone at Software Mind LATAM.