The Remarkable Rise of Nearshore Software Development Firms in LATAM
As per a 2023 CEO survey, more than half of the corporate leaders surveyed said that investing in digital and technology capabilities remained their top priority. However, for most companies, finding top tech talent has been a constant challenge.
In this context, nearshore software outsourcing in Latin America has emerged as a long-term strategy for a large number of businesses in the USA. It delivers strategic risk management and sustainable growth, with some cities in the region transforming into valuable tech ecosystems with favorable talent density.
This model existed even before the COVID-19 pandemic. However, its adoption has become a permanent solution post-2020 for companies looking for agility, cultural alignment, control, and cost-efficiency. Research from 2020 pointed out that 90% of the IT leaders already looked to expand their cloud environments to Latin America.
Talent Clusters and Hubs
Deliberate investments by the respective governments and innovation in the region have positioned it as the premier nearshore partner for organizations based in North America. As Mexico, Colombia, Costa Rica, and Brazil produce world-class engineers, the nearshoring model allows global enterprises to benefit from real-time collaboration through time zone overlap.
This ensures faster iteration and seamless teamwork, which makes nearshore software development in LATAM a strategic advantage. Here’s more on why these regions are so attractive:
Mexico
The country boasts of the largest talent pool in Latin America, with more than 700,000 software professionals. Some of the top tech hubs in the country include Mexico City, Guadalajara, and Monterrey.
Colombia
It is rapidly rising as an outsourcing hotspot, centred on Bogotá, Medellín, and Cali. As of 2021, the country boasted over 62,000 IT professionals and 11,000 technology companies.
Costa Rica
Key locations in the region include San José, Heredia, Alajuela, and Cartago. It is home to more than 45,000 tech specialists. With modern business infrastructure and strong connectivity, the IT outsourcing market in the country is expected to grow over 9% annually.
Collaboration and Time Zones
Nearshore software development in LATAM enables real-time collaboration with a time zone proximity of just one to two hours. This reduces delays in communication and ensures quicker decision-making. Furthermore, cultural alignment and language proficiency in Latin America enhance seamless collaboration.
This time overlap also enables faster feedback loops and a shared sense of ownership throughout the development cycle. In this way, LATAM nearshore teams help in effective and agile development through regular sprint planning and retrospectives, which require consistent and synchronous communication with full participation across the enterprise.
Cost of Talent Acquisition
One of the crucial reasons why companies are eager to adopt software outsourcing in Latin America is the ability of these markets to deliver high-quality results at significantly lower costs. Costs of talent acquisition are typically 30% to 50% lower than comparable rates in the USA.
Due to significantly lower cost of living, a senior software engineer in Mexico or Colombia is usually available for $35 to $50 per hour. The same level of talent in the onshore market will cost over $100. These savings can reduce overall project expenses by up to 46% while maintaining top technical standards.
Delivery Models
Nearshore software development in LATAM offers flexibility to enterprise to choose between dedicated teams and pod-based models.
Pods vs Dedicated Teams
Dedicated teams involve a group of professionals working exclusively on a client’s projects, which provides deep focus and cohesion. They foster deep domain expertise and long-term engagement. They encourage delivering complex and large-scale projects with sustained focus and accountability.
On the other hand, pod-based models assemble multifunctional and agile teams. They are tailored to specific tasks or phases within larger initiatives and support scalable collaboration. The latter approach allows companies to adapt quickly to changing business needs while maintaining strong control over processes and quality.
They are cross-functional and self-managing units that accelerate innovation and responsiveness. They achieve this by bringing together developers, testers, and product owners in a team working on shared objectives. This approach encourages closer communication and is ideal for projects requiring continuous feedback.
Capability Focus
Latin America’s nearshore software firms specialize in a range of cutting-edge capabilities in web and SaaS development. LATAM teams excel in building scalable, secure, and user-friendly applications in these domains to serve diverse industries. Leveraging modern technologies, such as cloud-native architectures, API integrations, and microservices, they deliver flexible solutions for changing market demands.
Nearshore teams focus on providing clients with accelerated product launches by engaging in ongoing innovation to drive lasting business value. They bring expertise in full-stack development, combining frontend technologies with backend platforms. Moreover, by adopting agile practices and DevOps automation, these teams streamline releases and enhance software quality.
The rise of nearshore software development in Latin America has offered several strategic benefits to businesses in the USA. Apart from cost-efficiency, agility, and cultural synergy, LATAM countries are home to thriving talent clusters with modern delivery models.
In recent times, however, an increase in operational costs, risk, and uncertainty has led to shifting interest of global enterprises who are looking to scale innovation and focus on cost optimization. Setting up a Global Capability Center or a Center of Excellence in India has now become attractive thanks to cost competitiveness, stable infrastructure and governance, as well as a ready talent pool.
ANSR has helped a wide range of organizations set up a shared services unit in India. Schedule a consultation to see how we can help you accelerate your organization’s digital transformation with trusted expertise.
