Outsourcing is anything but new. The US has been outsourcing since the 80’s and there are no indications of the trend slowing down. The reason for its heavy adoption is that companies can hire someone else to execute on some task or project while they focus on whatever it is they’re good at. So if everyone’s doing it, you’ve got to be asking yourself, “Where’s all this work going?” We’ll show you the top countries for outsourcing and what makes them so popular.
When talking about software development outsourcing, we usually think of well-known outsourcing regions like the Republic of India. A lot has been already said about the economic growth of this country in the 20th and 21st century – according to some, India has skipped the industrialization phase, transforming its agriculture-based economy straight to one based on services. Almost overnight, the country became one of the biggest outsourcing centers in the world, the IT industry itself employing circa 10 million people. There is at least one reason for this spectacular success – labor costs. As stated by AT Kearney principal Johan Gott, companies outsourcing software to India can save up to 75%. For many enterprises around the world, the opportunity was too good to miss.
Top Countries for Outsourcing
The 2017 A.T. Kearny Global Services Location Index lists the top outsourcing destinations as:
|Country||Average Annual Salary|
In terms of cost effectiveness, India is still the world leader. India has a blend of skilled, English-speaking workers at a lower overall cost than most other countries. But saving costs isn’t just about paying lower wages. There are other factors in outsourcing that contribute towards saving money.
Factors besides Cost
The cost benefits of outsourcing go beyond direct dollar amounts. They include the amount of time spent working on projects, the quality of the work, and the ease of working with developers.
The longer it takes to complete a project, the more it costs.
Besides workers’ salaries, you also need to consider lost opportunity. The longer a project spends in development, the less time it spends on the market, and the less revenue you earn.
Quality developers can successfully complete their tasks on time. If they miss a deadline, they should be able to justify why. Otherwise, you’re paying them more for the same amount of work.
The same goes for outsourcing vendors. By hiring a reputable vendor, you can rest assured knowing that your project won’t go over budget due to time. Fixed price projects are designed for scenarios like this, as they ensure the cost doesn’t change even if the project is delayed.
Your product is a reflection of your company.
If your product is slow, buggy, or hard to use, your customers will look for something better. Hiring the cheapest vendor may save you money today, but will cost you customers later.
Even if a quality vendor costs twice as much as the cheapest vendor, it’s worth the extra expense to know you’re getting a quality product. Not only does this keep your customers satisfied, but it makes the product easier to maintain in the future. Also, it’s still less expensive than hiring your own developers.
Working with your team should be a straightforward process.
Remember how more time means more money? The same goes for your relationship with your developers, whether they’re in-house or outsourced. The more time you spend planning, communicating, and explaining ideas, the longer it takes to get your product to market and the more revenue you miss out on.
This process is more difficult for outsourced teams than it is for in-house teams. This is because your outsourced team could be located anywhere in the world. When outsourcing, companies need to consider:
- The geographic distance between clients and providers
- Language barriers
- Cultural differences
- Differences in intellectual property laws
For these reasons, many companies prefer outsourcing to South American or European vendors rather than Indian or Chinese vendors. Hiring a vendor that understands and is aligned with your goals makes working with them much easier. And without significant time zone differences, it’s easier for companies to collaborate with vendors throughout the work day.
Local or nearshore?
It seems that the next big thing is nearshoring. Instead of looking for software developers on the other side of the globe, more and more companies decide to outsource to countries that are located not too far away, hence the term nearshoring – in opposition to traditional offshoring. And there is one particular region which seems to challenge India’s outsourcing supremacy: Brazil.
When your company is located – whether it be in Brazil or in the United States – there is a good chance that local software houses can provide you with everything mentioned above. So is there a reason to outsource the development abroad? Yes, and the reason is quite simple: money. As we have noticed before, the top-notch software houses from Brazil are more expensive than those from traditional outsourcing regions like India but they are still significantly cheaper than those from Western countries.
Why? What are the perks of going to Brazil?
The U.S. and Brazil, share many of the same cultural values, this is why the emerging outsourcing regions of South America became so competitive. According to a research, “the level of misunderstandings that clients and managers experience when working with Brazilian companies is much lower. Clients know exactly what to expect”. You should expect to have good relationships with Brazilian development firms, a country where many people dominate English as a second language.
If you need skilled management to help your project succeed, you will have an easier time finding it in Brazil. South America continues to be a top outsourcing destination, with Sao Paulo being the best region. The combination of quality, price, management and stability is simply fantastic.
There is yet another important factor worth considering when talking about effective communication: time zone differences. All South American countries belong to a closer time zone from the USA (especially when compared to India, this could be a big problem for some).
It means that working with developers from this region is not a problem – Let’s say for example that your company is based in Miami, there is one-hour time difference between you and Sao Paulo, so you can arrange a call without having to amend your whole schedule.
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