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Offshore Software Development: Asia vs Latin America

A constantly growing IT market has made offshore software development practically a necessity for any company that wants to be competitive. As the appetite and budget for software solutions increases, businesses that want to thrive must be ready to deliver what customers want quickly and effectively.

Global IT Market Growth Drives Offshore Software Development Expansion

Despite economic and political uncertainty, the global expenditure on IT is expected to grow by 3.2 percent to $3.76 trillion in 2019, according to Gartner. It is expected that spending will shift away from segments like PCs, mobile phones, and on-site infrastructure to Internet of Things devices and cloud services.

IT has become far more than a platform for the business to run on. Instead, it has become an essential business driver. Furthermore, as more businesses shift to the cloud, it is expected that enterprise software will grow as much as 8.5 percent in 2019 and another 8.2 percent in 2020 to reach a total market of $466 billion. This increased spending is likely to be funneled mainly towards SaaS solutions.

Of course, as the market grows and budgets expand, the competition also grows. To keep pace, the IT outsourcing market is also growing rapidly as an increasing number of companies turn to this solution to not only deliver to market quickly but also to more easily create advanced solutions and innovate faster.

Software Development Outsourcing: Where to Go?

India has long been one of the best countries for IT outsourcing, with China not far behind. Both countries offer a great business environment and are financially attractive due to lower labor costs. Most importantly, both countries have a seemingly limitless supply of skilled and experienced developers.

However, Latin America has been gaining steam, with an increasing number of companies choosing to outsource their projects to this area, in large part due to cost-effectiveness, efficiency, and time-zone compatibility.

Looking Beyond Direct Costs

If you analyze cost solely based on absolute figures, then your first choice will probably be Asia as you will often receive more attractive quotes.

On average, a developer in India will cost you between $20 and $50 per hour, whereas a developer in Latin America will set you back between $40 to $70 per hour.

However, when determining cost efficiency, you need to look at much more than just the direct cost of the project. We can’t stress this enough as far too often our clients come to us with large amounts of technical debt after only looking at cost savings.

The hourly cost of a developer might be cheaper in India, but you will often find that fewer hours are required to get the same work completed in Latin America. This is not because developers in Latin America are smarter, but because of things like culture, time zones, and distance.

Impact of Time Zones on Cost

It might seem surprising until you’ve actually tried working with a team on the other side of the world, but time zones can pose a massive challenge.

Bangalore, for example, is 13.5 hours ahead of the U.S., which means that there is no overlap of working hours. While you’re in the office, your outsourcing team is asleep and vice versa. If you want to schedule a Skype call, one side will have to make serious compromises to be available.

It certainly won’t be possible to exchange messages in real time without scheduling a meeting, which is problematic. If a problem arises, the developers can’t just jump on Slack and have their questions answered right away.

Instead, they will have to send you an email, which you will answer the following morning. Even if you answer at 9 AM, it’s already 10:30 PM in Bangalore and everyone will be home. So, they’ll see your reply the following morning. All in all, you lose 24 hours for a simple question.

While it won’t always hold up the entire project, it’s not unusual for significant delays to occur precisely because of these time differences. When you add up the delays, you’ll find that the final cost of the project will be much higher, even if you don’t have to pay more. Delaying delivery to market can cost you a lot in customer confidence, which is the one thing you cannot afford to take lightly.

By comparison, Colombia is on Eastern Time half the year and Central time the other half (due to US daylights savings changes), meaning that you can work in real-time with your team. If a problem arises, they can receive an answer immediately, meaning delays are far less likely to happen.

Distance and Cost

Considering that everything happens online nowadays, you might think that distance shouldn’t be an issue beyond the time difference problem.

However, at PSL, we strongly advocate building a powerful relationship with your offshore software development team. The best way to do that is to meet in person, at least at the beginning, through regular face-to-face meetings are ideal.

This is much easier to achieve when your IT outsourcing team is located in Colombia. Flying from New York to Bangalore, for example, will set you back around $1,000 per person and it will take you around 20 hours to get there, at the very least. You also have to factor in other costs, such as accommodation and food.

Conversely, flying to Bogota will set you back around $600 and takes around 6 hours. Since there are over 1,250 international flights in and out of El Dorado Airport, you’ll even be able to return relatively quickly. It might mean spending a lot of time on a plane, but your few-day trip will only take a small amount of travel time from your busy schedule, and you’ll save on hotel costs.

It also means that you’ll be able to visit your team more frequently, which will result in a stronger bond and greater efficiency.

Better Intercultural Communication

Cultural differences can pose a significant challenge to cost and efficiency. Proximity and a long history of trade and interaction mean that people in Latin American countries understand U.S. culture far better than someone from Asia.

This means that misunderstandings are far less likely to occur. A Colombian development team, for example, will know that you expect them to be proactive, whereas a development team from India will expect you to give precise instructions for every step. If you don’t, they won’t go beyond your instructions because they’ll assume it’s not what you want.

Cultural issues might seem small and inconsequential, at first. However, once you start working with a team whose culture is vastly different from your own – and you aren’t aware of those differences – the whole project could turn into a disaster.

In conclusion, choosing to work with an offshore software development team from Latin America is far more cost-effective and efficient than working with a team from Asia. In absolute figures, you might have to pay more, but the value you receive will be exponentially greater. 

 

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Friday, 19 July 2019

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