Why do you outsource IT services and software development to India, Russia, Vietnam and the Ukraine, to name a few? Because it’s cheaper there?
Good reason. You’re trying to cut development costs for your company.
But what are the hidden costs? What about “you get what you pay for”?
Some people have told me “I’ve looked at outsourcing development in Argentina or Mexico, but it’s more expensive there.”
I don’t mean to disrespect those countries mentioned at the start of this post, but by outsourcing development to the “usual suspects” as a knee-jerk reaction, you could end up shooting yourself in the foot, and excuse the leg and foot clichés.
Is the price worth the cost?
Is outsourcing to countries 9-18 hours away worth it just to pay a little less? How about those midnight calls to your dev team in Bangalore? How about trying to coordinate your stateside dev team with dev teams in Eastern Europe? What about trying to get somebody to provide you with creative suggestions instead of just agreeing with you all the time?
I’m not making this stuff up. I’ve talked to Fortune 500 Software Product Directors and Internet Start-up COOs who have complained precisely about these issues. People have told me about the nightmares they have experienced when entire project teams have changed due to high turnover. Does the popularity of outsourcing to South Asia maybe have something to do with that?
Am I saying you won’t experience this in Latin America? Not at all. What I am saying is that it is still an untapped outsourcing market that offers the following advantages:
The undeniable facts about Latin America
- No more late nights: Mexico is a true nearshore location, as is Costa Rica, Guatemala, Nicaragua and Panama; Argentina, Brazil and Chile are within our relative time-zome comfort zone.
- You get to meet your dev team: Flights to Mexico take about 2 hours; to Central America about 3 hours. How about meeting the dev team in the morning in Costa Rica, and in the afternoon drinking a daiquiri on the beach?
- Somebody who will disagree with you and provide you with creative ideas: The cultural scene in Buenos Aires, Mexico City, and Santiago are actually closer to U.S. and European culture. These are not “yes” cultures; the word “no!” does exist. That’s a breath of fresh air when you’re not sure if a nod of the head means yes or no way.
- They speak English! This group is highly educated, and most of them speak English very well.
- You gain a whole market, not just developers and designers. Internet penetration in the Latin American countries is exploding, with an 854% growth from 2000-2008 vs. 316% for the rest of the world. When you hire a team of web developers and designers from Brazil, you also gain Portuguese expertise who can localize your product or website to the Brazilian market. That’s a market with a 200 million population. Did you know that?
No such thing as cultural neutrality
This last point I think is the kicker. The Latin American market is still relatively untapped by most American companies, except for Coke, GM, Ford, Microsoft, Oracle…well you get the picture. Everybody’s falling all over each other trying to beat the door down to the Chinese and Indian markets, and Latin America is almost an afterthought.
They haven’t read Blue Ocean Strategy or extrapolated it to a geographic scenario. They also believe that their stuff will just sell in Latin America without any effort. Well, the Chinese are making an effort
Hiring developers, web designers, and technical writers in Brazil and Spanish-speaking Latin America is not only a smart alternative to hiring development teams in India and Russia, but it also opens up a whole market.
As my friend Jason Stoddard told me: the developers ARE the market.
Who are these people?
Meet some of the various, friendly and extremely capable outsourcers that could be your next provider. Companies like Zacsoft, a software factory in Zacatecas, Mexico that trains young raw talent with high potential, straight out of school, in various software development languages and methodologies.
Companies such as CentralDev, out of Buenos Aires, Argentina, who do hardcare software development as well as beautiful website design.
Or groups such as Tequila Valley, Palermo Valley and Valdez Valley in Mexico, Argentina, and Colombia, to name a few, Web 2.0 communities where hundreds of freelancers gather together to network and share development ideas and project leads.
And many many more, including full-fledged IT firms with 100s of employees, loose networks of freelancers, LinkedIn groups, Facebook groups, Twitter communities, etc.
So the next time you decide you are going to outsource, think twice before you fly to Bucharest or Mumbai, and instead think about the market in our own continent!
To find out how to find a quality software or web programming team, or web design and graphic design team, call me at 979-212-8033 or email me at fernando@labastida.com.
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{ 10 comments… read them below or add one }
Rock on Fernando! We recently started a nearsourcing company in Guadalajara and was surprised how much local talent is available. I'm puzzled by the comment (here and elsewhere) about Mexico's labor rates being higher (but worth it). I've been involved in outsourcing stuff to Bangalore and the labor rates were the same or higher than our corner of the word. We charge our clients LESS than the rates we were getting in India, we pay our workers MORE than the local market rate, and we make an okay profit. Maybe things are different in other parts of Mexico but, here in Guadalajara, we're having a ball!
That's awesome to hear that about costs. Some of the people I've talked to have had some misconceptions of the Latin American market, hence the out-of-whack cost comment. Good job starting a company in Guadalara – great music, great food, and great Tequila!
Interesting read,
I do business development for Estrasol (estrasol.com.mx) in Guadalajara, Mexico and my main focus is to get the message out to customers in the US that Mexico is a much better alternative than Eastern Europe and/or Asia. I think you did a good job expressing the benefits of outsourcing in Mexico.
Thanks for your comment. I really think 2009 is the year where outsourcing to Latin America is gaining mainstream recognition after years of building momentum and buzz, kind of like Twitter!
I think you are right about that, while it may have been a slow start it is finally being recongized, by many. This is visibile in the number of outsourcing companies setting up herer now. Latin America is booming with call centers right now. Why? Same time zone, cheaper prices, easily integrated western culture, etc etc. In Buenos Aires, there is a huge amount of people from all over the world for many different reasons – but they all share one thing in common, they need a job! Call centers attract them because often they can speak to clients / customers in their own language. Companies like http://www.5ca.com are owned by people from the netherlands but headquartered in Buenos Aires.
You definitely have a good point. I have just moved to Argentina and I can tell you just from going to job interviews how many companies are handling outsourcing from the US. You can check out another article similar to the advantages that I came across… http://www.creative-outsourcing.com/outsourcing-o...
Enjoy!
I agree with Andy, I dont think it is cheaper to outsource to India than it is Latin America. I think you'll find that these days its actually cheaper in Argentina and other countries in Latin America, the low incomes in these parts helps to bring those costs down. 5CA a Dutch call center based in Buenos Aires offers amazing rates to its clients for customer service, technical support and more in multiple languages. http://www.5ca.com
Excellent article Fernando! Also you have the benefits of Nearshoring in other countries like Bolivia, where costs are much lower than Mexico, Argentina, etc.