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Why do US-based companies prefer outsourcing to LATAM?

The importance of technology in the modern business environment cannot be overstated. Nowadays, digital systems drive nearly every business process, from resource management to sales and marketing. The proliferation of innovative technologies, such as artificial intelligence, machine learning, business analytics, and cloud computing, makes it possible for robust IT systems to run entire companies.

However, the ever-growing business IT demand far outpaces the labor supply needed to develop and run technical business solutions, especially in the US. Many US companies have resorted to outsourcing some of their IT services and labor instead of hiring new workers to fill this gap. A pre-pandemic Clutch survey shows that 37 percent of small businesses in the US outsource at least one business process, and many more plan to outsource in the future. Also, IT services ranks as the most outsourced professional field after accounting.

In the post-pandemic world, outsourcing has become a strategic way to drive innovation and strengthen business resilience amid accelerated digitization.

How do US companies outsource IT talent?

Outsourcing labor is pretty straightforward. For instance, you can hire a team of remote workers, individual freelancers, or a handful of talented individuals to augment your staff with new skills. Employers choose the approach that best suits their labor needs, staffing model, and outsourcing scope. But the one thing that makes the biggest difference in the outsourcing process and outcome is the talent source.

For a long time, offshore countries such as India, China, the Philippines, Ukraine, and Poland have been the go-to outsourcing destinations. But this is changing as new players enter the outsourcing market. More and more US-based companies are looking for outsourcing destinations closer to home, particularly in the LATAM region. In 2019, the outsourcing penetration rate in Argentina hit 100 percent, and other Latin American countries such as Brazil, Chile, Mexico, and Colombia posted impressive figures, too.

Why outsource to LATAM?

The LATAM region is a fast-growing IT talent outsourcing hotspot for US-based employers. This is because nearshoring to Latin America presents many conveniences that you wouldn’t get anywhere else. Here are the main reasons you should consider LATAM nearshoring destinations for software and web development, IT infrastructure maintenance, help desk support, or any other IT service or labor outsourcing need.

Thriving pool of IT talent

The sheer abundance of highly skilled and experienced IT talent is one of LATAM’s biggest selling points as a nearshore outsourcing hub.

First of all, Latin America is a highly populated area with over 664 million residents. Second, education standards and enrollment figures in most LATAM countries such as Argentina, Peru, Colombia, Chile, and Brazil have risen drastically over the last few decades. World-class universities, such as the UBA in Argentina, the Pontifical Catholic University of Chile, Mexico’s Tecnológico de Monterrey, and countless others, churn out thousands of highly qualified job seekers every year.

LATAM countries harbor a vast pool of technical labor force, which is only growing. Some LATAM governments and non-profit organizations have even sponsored programs to facilitate the adoption and utilization of professional technical skills among LATAM citizens. For instance, Chicas en Tecnología (CET) (translates to “girls in technology”) is a non-profit organization that’s successfully inspiring young women in Argentina and the surrounding countries to pursue professional careers in IT. The Argentine government is also keen on driving national growth through science and technology.

In a nutshell, high population, quality education, and growth motivators are the main reasons behind LATAM’s increasingly flourishing IT talent pool. We can’t say for sure how many developers or engineers we have in Latin America. But according to the Global Developer Population and Demographic Study, Vol-1, the LATAM region has the second strongest growth in developer population.

Low-cost labor

Cutting costs is one of the main reasons most employers outsource labor in the first place. Traditional hires have so far proven costly and unsustainable. So, many companies prefer to source labor elsewhere. According to Zippia, it costs, on average, $4,425 to hire a new employee in the US. As much as 15 percent of all HR expenses go toward talent recruitment. And that’s not all — it takes an average of 12 weeks for a new hire to become productive. Yet employee loyalty is never guaranteed, and a bad hire might end up costing you 300 percent of the employee’s salary.

Such stats do not paint an attractive picture for in-house talent acquisition. Fortunately, there is a much better alternative to this. Nearshoring to LATAM saves you the uncertainty, time, and high costs associated with traditional hires. The cost of living in LATAM is much lower than in the US, so labor also costs less. Plus, you don’t have to pay for employee upkeep or benefits when outsourcing.

Admittedly, outsourcing labor to Latin America is not as cheap as offshoring to India or China. But it more than makes up for it in quality work and the incredible benefits of nearshoring.

Negligible time zone difference

The time zone difference between an employer and an outsourced team on the other side of the globe can be a big problem. Just imagine all the trouble you have to go through to arrange a meeting with a workforce that’s 12 hours away. Getting everyone on a synchronous schedule would be a major headache, let alone holding virtual or in-person meetings.

On the other hand, the time zone difference between Latin America and the US is negligible. For instance, New York is only one short hour ahead of Bueno Aires. This means that the working hours between the two regions conveniently overlap. So, you won’t have to make calls or arrange meetings during odd hours just to accommodate participants.

Highly proficient English speakers

LATAM is generally regarded as a Spanish-speaking region. Although Spanish is the most widely spoken language, a good portion of the LATAM population also speaks English as a second or even first language. In fact, Latin America is ahead of other popular outsourcing destinations in Asia and Europe when it comes to English proficiency. Argentina, Bolivia, Cuba, Costa Rica, Chile, Paraguay, and the Dominican Republic all hold top-50 spots on the global English Proficiency Index.

When dealing with sensitive technical jobs or projects, a language barrier can not only break down communications but also garble collaborations, progress, and expectations. Crucial details can get lost in translation, resulting in the wrong end product or service. But this is not a problem you’ll encounter when outsourcing within your geographical neighborhood.

Cultural similarities

Similarities between the US and Latin America transcend geographical proximity. Both Latin America and the US cultures are largely shaped by roughly the same European, political, and pop culture influences. And although the two have rather distinct cultures, there are key similarities that extend to mutually relatable business approaches, professional conduct, and work styles. From a business standpoint, most rules, notions, and practices fit perfectly well on either side of the border.

Like US workers, the LATAM workforce is creative, driven, innovative, and clearly understands the business-employee relationship. This overlap in business and social culture fosters a deep mutual understanding between both parties and lays a solid foundation for meaningful long-term collaborations.

Favorable business environment

The LATAM region has all the essential hallmarks of a business and outsourcing-friendly destination. These include:

  • Stable social-political atmosphere
  • Growing economies
  • Well-established business infrastructures (telecom networks, internet penetration, physical amenities, etc.)
  • Business-friendly legislation

The 2021 Kearney Global Services Location Index reinforces this point even further. In 2021, Kearney tracked and ranked 60 outsourcing destinations using 47 distinct metrics, including financial attractiveness, digital resonance, business environment, and people skills and availability. The final report showcases Latin America as a strong digital outsourcing hub, with Brazil, Mexico, and Colombia taking 5th, 11th, and 13th places, respectively.

Simple outsourcing processes

The LATAM region may be an up-and-coming labor and technology hub, but outsourcing is actually not a new thing here. Companies in the US and all over the globe have been outsourcing various business processes to LATAM for years. It’s only now that the region is taking the spotlight as more and more US-based entrepreneurs realize and appreciate the value of nearshoring.

This means that outsourcing is a well-established trade, and the LATAM-based outsourcing agencies and labor force have worked and simplified all the processes down to a proven system. So, you won’t have to start from scratch (source and vet talent, recruit individuals, build teams, etc.) when outsourcing. Even in the US, there are staffing agencies that can make the entire outsourcing journey on your behalf. These companies have a tried-and-true outsourcing or staffing strategy that eliminates risks and speeds up talent acquisition.

Outsourcing to LATAM with WeDevelop

Outsourcing to Latin America is a convenient, low-cost way to access professional IT talent or complete a technical project. Unlike offshoring, leveraging LATAM’s talent pools from the US is much easier, thanks to the close geographical proximity, similarities in language and cultures, and economic maturity factors favoring foreign trade and investments.

If you’re looking to leverage LATAM outsourcing destinations, partnering with a reputable staffing and outsourcing agency is the best way to do it. WeDevelop is a staffing agency with a deep reach in Latin America’s labor pools. We can augment your staff or build dedicated teams with some of LATAM’s finest tech-savvy minds for any IT niche. And if you want to take a different direction, we also offer professional software and web development services ideal for one-off and long-term projects.

Enjoy hassle-free outsourcing to the best nearshore tech labor hub with WeDevelop. Schedule a 15-minute free consultation call or email us to get started.

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