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Offshore: the model of contracting IT services to face the pandemic

Laura Villa Méndez
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In the technology and software development industry, the strategy of working remotely has been increasing along with the implementation of overseas contracts, allowing many companies to save on expenses, without leaving aside the quality of projects and the efficiency of work.

Offshore is an Outsourcing or subcontracting model,  which refers to an agreement in which one company hires another to handle a planned or existing activity that is performed or could be carried out internally, which sometimes involves the transfer of employees and assets from one company to another. Doing this Offshore process also known as "off the coast" consists of outsourcing in another region or country. A globalization trend that allows many interested companies not only to look for ways to save money but also to be more competitive elsewhere. It also exists the Nearshore model, which seeks organizations that work with teams in countries located closer to their own, with a similar time zone, offering greater affinity and cultural alignment among collaborators.

This outsourcing is used more and more by companies when hiring custom managed IT services because it can provide different benefits.

If a company is located in the United States, one of the main advantages of working with a development team in Latin America is the similarities of the time zone. Sometimes, when real-time collaboration with the team is needed, the minimum differences makes it easier and more convenient to work. Cities such as Dallas, New Orleans, or Houston in the United States or Winnipeg and Baker Lake in Canada have exactly the same time zone as the entirety of Colombia, Peru, and Ecuador. 

When there is a wide time difference, there may be delays in the progress and deliveries of a project, or it can disrupt the workflow. Although depending on the company's objective, this can be beneficial, if what is required is that the service provider can work, while others rest.

The truth is that when facing the situation of a global pandemic, it is indispensable to have agility and speed in the development of projects, which can be obtained by hiring abroad.

On another hand, there is high profit when outsourcing in Latin America, since a company can afford to work with talented developers who have specialized experience in different areas and depending on the budget and the continent you can find development companies that adapt to a project, ensuring high levels of quality. A foreign supplier will meet cost reduction compared to a domestic supplier, also another advantage is being able to form a team in other regions,  where the professional potential is visible. 

According to Accelerate's 2020 Global Outsourcing FeeGuide, working with offshore or nearshore software development providers can save the company between 40% and 75%  of its overall costs.

Also, in the guide, we can find a range of rates by region. While in North America a major developer can charge between  $78 and 125 USD, in Latin America prices range from $32 to 65 USD per hour of work. A junior developer is between $65 and 90 USD, while in Latin America: $27 to 60 USD. Finally, the rate of a junior developer is between  $55 and 88 USD in North America, and in Latin America, the rate varies between $28 and 55 USD.

Finding a team nearby allows you to broaden the horizon of the company's possibilities, and the task of finding well-qualified teams is not very difficult when the region has so much talent and potential in engineering, development, and programming issues.

The key factors influencing the determination of global outsourcing rates and the level of value offered are location, high demand skills, experience,  duration of commitment, U.S. dollar value, and English proficiency.

This last one is usually a concern for companies, however, in the case of Latin America, according to the average presented by Education First in 2019, the English proficiency index (EPI)  is 50.34 points, and the European average is 56.71, a percentage difference of 6 points. According to the Education First record, English proficiency is gaining momentum in the region. In the last year, 12 out of 19 Latin American countries included in the report, improved language proficiency, and five improved significantly, a more positive trend than in any other region. 

On the other hand, according to data from Statista, Brazil, Mexico, Colombia, and Peru are among the leading countries in offshore business services worldwide (2019), by factors such as financial appeal, professional skills and availability, business environment, and digital resonance.

Image: www.statista.com - Leading countries in offshore business services worldwide in 2019.

A company that hires IT services abroad will be able to open itself to new perspectives, create value, and develop increasingly agile and responsive business models, which leads to business growth. Being one of the biggest challenges faced by the company during the pandemic, they need to expand their borders and re-evaluate operating models that offer them greater benefits. 

The crisis drives companies to innovate and seek services that help their financial and commercial stability. Seeking talent in other nearby countries will also allow you to create multicultural teams that can positively contribute to the software development experience, constantly improving professional skills, and creating effective business solutions.

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