Five Things To Know About Outsourcing to Latin America

September 01, 2016
By Chris Cali Feb 25, 2015

Latin America has become a hotspot for outsourced software development, business process outsourcing and IT services. But with the global outsourcing environment in constant shift, the risks and rewards of outsourcing to Latin America are multiplying and transforming.

Is nearshoring to Latin America the right move for your business and, if so, where should you look for partnerships? There are few better resources to answer this question than the Nearshore Executive Alliance (NEA), a nonprofit organization founded with the objective of creating awareness of the capabilities of Latin America and increasing the use of the nearshore delivery model.

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A recent NEA panel, “Global Sourcing 2015: Latin America Pulse Check,” led by Christine Ferrusi Ross, Senior Vice President of Neo Group, and featuring Anthony F. Porter, Director Strategic Vendor Services of Humana, Inc., and Greg Reynolds, a Managing Director of Neoris, offered a number of insights into the Latin American outsourcing market. The panel discussed a wide range of topics, from defining risk to agile best practices and regional tax incentives.

Check out the five most interesting insights from the panel’s discussion that define Latin America’s outsourcing landscape:

1. Latin America is extremely diverse – As a region, Latin America is huge, extremely socially, politically and culturally diverse, and changing rapidly. Diversity is not merely a factor country to country; the difference province to province and even city to city can have a huge impact in terms of its outsourcing climate. While it can seem overwhelming at first, regional diversity does not have to be a hindrance to identifying compatible outsourcing partners. Instead, it can be a way to narrow down a list of potential partners. For more insight into the diversity of the Latin American outsourcing landscape, check out our white paper on development hotspots of Latin America.

2. National economic and social growth is a double-edged blade – Conventional wisdom tells us that it is better to have business providers and vendors in regions with healthy economic conditions. And while this is true for many reasons, there are also risks that come with outsourcing to a provider in a growing economy, namely increasing vendor prices and attrition. Attrition rates skyrocket in the tech sector of a burgeoning economy. On the other side of the coin, however, low-cost locations face the threat of social and political upheaval, and carry the associated risks.

3. Innovative thinking is the hallmark of Latin American outsourced operations – Latin America has long been known as a hub for agile development. The time zone alignment with North American clients made it ideal for agile partnerships with many different staff solutions. But time zone alignment is complemented and enhanced by the strengths of the Latin American workforce. The panelists attested that Latin American employees, from managers to engineers, tend to communicate more directly and openly, problem-solve more creatively, and collaborate more effectively.

4. Process Maturity is not much of a concern anymore – Maybe five to ten years ago, companies that were thinking of outsourcing to Latin America faced a serious dilemma–for all the benefits that came with outsourcing to nearshore locations, it was difficult to find vendors with the same level of processing maturity (CMMI) at traditional offshore locations like India that had decades of experience. This competitive disadvantage has largely dissipated with the rise of nearshoring, and most North American clients can easily find vendors matched to their maturity-level needs.

5. South America has the edge over Central America – With the exception of Mexico and perhaps Costa Rica, Central America lacks many of the competitive advantages of South American countries like Brazil, Chile, Argentina and Colombia. Specifically, Central America has a significantly smaller engineering pool with lower English fluency levels, and more serious socio-political factors such as corruption and violent crime that jeopardize the stability of this region.

Latin America is growing up and finding its place in the outsourcing landscape, but with any change comes turbulence. Finding the right development location–country and region–means finding one with a track record of low risk. You can view the complete “Global Sourcing 2015: Latin America Pulse Check” presentation here.

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