Delivery Centers Are Becoming Popular in Latin America for IT Companies...Here is why

One of the issues with offshore software development is always the delivery. Development talent (especially high level) in Asia is not necessarily keen to stay up overnight to supervise the delivery of software. The back and forth required makes it a time consuming task and working on the other side of the clock makes it an unattractive job for talent in Asia.

Conversely...US personnel involved in the delivery has limited desire, for the most part, to work well into the night to ensure a smooth delivery.

One solution to the problem which has been gaining popularity by globally operating IT organization is establishing delivery centers in South/Latin America. (LATAM) Latin America is considered "Nearshore" such it offers some of the advantages of a true offshore operation while at the same time eliminating the disadvantages of offshore providers.

The most commonly cited advantages cited as a reason to establish an Nearshore Delivery Center are as follows:

  • Cost Arbitrage: LATAM does offer substantial cost savings over US based operations
  • Quality IT Talent: Depending upon in which country the delivery center is established Quality IT personnel are easy to come by. The education system is generally considered good and a steady flow of new graduates in Computer and Science related fields ensures that new supply is available.
  • Close Alignment in Time Zones: Working throughout the US business day is a breeze. Most LATAM countries are only 1 or 2 hours off CST such the work schedules are aligned.
  • Good Business Climate: Generally speaking the LATAM countries which are a natural fit for a Development Center offer a good business climate. Countries like Mexico, Costa Rica, Brazil, Colombia and Argentina are well established democracies with little political risk.
  • Easy Travel: Most of the popular LATAM destinations centers are easy to reach via plane from the US. 
  • Language Capabilities: The dominant languages in the LATAM countries are Spanish, Portuguese and English. Therefor language barriers are usually limited and can be overcome relatively easy. 
  • Access to Local Markets: Some of the LATAM countries (Brazil) have rather draconian taxes and laws restricting the import of goods and services. Establishing a local delivery center (beachhead) often times circumvents these rather restrictive policies, thus enabling globally operating companies to access local markets more easily.

Executives in charge of ITO have been looking at Asia for the longest time as the solutions provider for all things IT related. A more balanced view has been emerging which suggests that certain aspects of the ITO value chain can be better accomplished by mixing Offshore and Nearshore solutions into one comprehensive package.

It might be to early to tell...but there is a good chance that LATAM will become the go to destination for Delivery Centers...the advantages are striking and might justify the higher expense (compared to offshore). 

Assuming favorable currency rates and no political changes it seems safe to assume that the trend of setting up delivery centers in LATAM countries will continue.