India Created IT Outsourcing, but LATAM Made it Worth it
India has had the IT outsourcing world locked in since the dawn of the Internet. Offering wider margins due to huge cost savings, India was a no-brainer for many US companies. Now, around 15 years later, US-based corporations are looking in a new direction: South.
The friendlier, practical time-zone alignment and less drastic cultural differences (understandable English, similar educational backgrounds, and more) translate to better cooperation, lower employee turnover, and more success at meeting key performance indicators than traditional outsourcing options.
Companies in the midst of an expansion of technological capabilities – or any growth initiative for that matter – are faced with many moving parts. Sadly, many executives looking to the east have come to accept the dysfunction of those moving parts as the status quo.
In South America, the desire to capitalize on the proximity with the US has always been there for IT – and now the infrastructure is as well. South America’s 400-million strong population has seen internet usage grow by 1644.3 percent over the last 15 years, with an internet penetration rate of 61 percent in 2015 (the global average is 45 percent).
The cultures of the United States and Latin America are both grounded in Western values. Latin America is buzzing with entrepreneurial spirit. Low living costs, accessible transportation, and affordable cost of doing business are perfect for the 20-something grinder or C-suite exec. While there are certain cultural differences, many similarities do extend into the work styles and business approaches across the continents – making it very easy to collaborate.
Latin American developers seem to be more assertive and creative, viewing the relationship as one of partnership rather than a hierarchy between client and worker. The result is a much more practical and mutually beneficial working relationship. For example, Latin American developers are more likely to give important feedback like “actually, that can’t be completed by your desired deadline” despite the risk of conflict, while in places like India, developers may have a more difficult time voicing important concerns early on.
One of the biggest challenges of working with personnel in India or China has been the unforgiving time zone difference. There’s a 13.5-hour difference between the U.S. and Bangalore. By comparison, time zone differences between the U.S. and Latin America are negligible: Colombia is on Eastern Time, while Argentina is only two hours later. When face-to-face meetings are a must, travel within similar time zones is less painful. I have dealt first-hand with the challenges of working across distant time zones while communicating with clients in India. I had to wake up at 3 AM just to attend a conference call – not a pleasant experience. I sounded groggy, felt scrambled in preparation, and my productivity for the whole day was affected. By contrast, when doing business in South America, we can chat on Slack or hop on a Skype call whenever the need arises.
Hiring quality developers in the US costs anywhere from $80 to $150 per hour, with Latin America and India ranging from $40 to $70 per hour and $20 to $50 per hour respectively. Hiring costs for developers in Latin America, although higher on average than places like India, are still less that half that of of developers in the United States, without all of the aforementioned hidden costs.
4) Start-ups, Government Support, and “Chilecon Valley”
Over the past decade, the start-up world has kept the United States at the forefront of technological innovation. This gave the whole world an understanding of the start-up landscape as an indicator of ‘the next best thing’. In historically sluggish and unadaptable economies in remote parts of the world, start-ups can help lay the foundation for a new direction and create more stability and certainty. In fact, opportunities in South America are so large, the government is even taking notice. Most administrations are taking action to make sure that their cities are innovation leaders by providing subsidies and other incentives. With so much state-backed investment, premier tech talent is following closely behind.
The countries seeing the most drastic growth include: Chile, Costa Rica, Colombia, Argentina, and Uruguay.
Much like San Francisco, these countries’ tech cities have mild climates and are relatively small in size – giving it the ‘campus’ feel that propel start-ups to take flight. It comes as no surprise that Santiago, Chile has been dubbed “Chilecon Valley”.