How Nearshoring in Colombia Helps Businesses Address IT and Software Development Shortages

Published: January 12, 2023
Nearshoring in Colombia

In the age of digital transformation, businesses must keep up with emerging technologies to remain competitive in the continuously evolving global market. According to a 2022 KPMG report, over two-thirds of companies want to embrace innovation and invest in technologies like Web3, the Metaverse, NFTs, and virtual reality.

However, one significant hurdle in their digital acceleration is the ongoing tech talent shortage. The same survey found that many business leaders believe that their in-house team needs to gain the skills and knowledge to implement new systems and technological advancements.

The good news is that there is a way for companies to expand their technological capabilities while reducing costs: nearshoring in Colombia.

Colombia: The Booming BPO Destination for IT Services

When people think of outsourcing, nearshore solutions are only sometimes the first ideas that come to mind. American companies often see outsourcing as only being available to faraway places like China, India, the Philippines, or other nations in Asia.

However, in recent years, more and more enterprises are discovering the advantages of bringing their business processes closer to home, particularly to countries in Latin America like Mexico or Colombia. This outsourcing solution is known as nearshoring or nearshore outsourcing.

Colombia is emerging as an attractive software development hub for businesses considering nearshoring.

With nearshoring, companies can achieve the best of both worlds: enjoy relatively low costs compared to onshore operations while allowing for the greater collaboration and control that may be missing from offshoring.

In the past, Mexico was the go-to nearshoring location for many North American companies. Still, Colombia is quickly outpacing the former as an attractive BPO destination, especially in information technology.

Meet the Top IT Provider in Latin America

Since the 1980s, Latin American countries have become top providers of high-tech IT solutions, attracting companies and foreign investors to establish their regional operations. And when it comes to nearshoring, Colombia, in particular, is seen as a critical outsourcing location for tech companies.

Colombia’s IT sector accounts for more than 10% of its economy, with Bogotá, Medellín, and Cali – its three largest cities – serving as its main technological epicenters. The country has been dubbed the third-largest and fastest-growing tech talent hub in Latin America, boasting over 100,000 skilled engineers.

Read more: How Offshoring and Onshoring Services Can Be a Viable Staffing Solution for Companies of All Sizes

Access Colombia’s Rapidly Growing Tech Workforce

There are currently more than 10,800 workers in the country’s IT and software services sector, but industry experts predict that this number will continue growing in the coming years.

Colombia’s biggest cities are home to several prestigious universities and tech boot camps.

With help from non-profit organizations, more skilled Colombian students are being given access to educational opportunities and training so they can join the specialized IT field, pursuing careers in software development and engineering.

In addition to the growing number of data analyst and engineer positions, the country also boasts a rich talent pool of workers who can handle IT support and other back-office services, which help keep business processes running smoothly.

Why Should US Companies Choose Nearshoring in Colombia for Software Development?

There’s a reason why Colombia bagged the top spot on the 2021 Offshore BPO Confidence Index, boasting a whopping 90.9% rating and beating 12 of the main BPO markets in the world. Colombia offers many opportunities for businesses willing to take a chance on this emerging technology hub.

Here are just a few of the reasons why you should consider outsourcing IT services to the so-called “Silicon Valley of South America:”

Massive Bilingual Workforce

According to the 2022 IMD World Talent Report, Colombia has one of the largest workforces in Latin America, ranking third in available qualified labor. The country surpasses Argentina, Brazil, and Chile due to its massive working population.

American businesses interested in tapping into this large talent pool will enjoy fewer communication barriers and closer cultural affinities, making collaboration more manageable and seamless.

Most Colombian workers are bilingual, learning Spanish and English in their primary education curriculum. English is considered one of the official languages in San Andrés, Providencia, Santa Catalina Islands, and other parts of the country.

Read more: Numbers Have Spoken: 38 Statistics Proving the Benefits of Multilingual Solutions for Businesses

Favorable Regulations From the Colombian Government

To encourage foreign direct investment, the Colombian government has created regulations that incentivize global businesses to choose the country as their primary outsourcing location. Some of these policies include free trade zones for foreign investors, featuring non-taxable goods, deductible research and development taxes, and a 20% income tax rate.

Additionally, the government supports foreign investment by upgrading the country’s technology and infrastructure. Colombia has the highest number of cables in the Latin American region, allowing optimal Internet access, connectivity, and speedy data transmission.

Strategic Location

Geographically speaking, Colombia is an excellent strategic location for businesses, given its proximity to the US and its well-connected port. Companies that choose this country as their outsourcing destination can minimize supply chain disruptions, cross-border trade issues, and commerce problems.

When necessary, you could even travel to and from the South American nation without hassle. From Miami, Florida, you can hop onto a 3.5-hour flight to Medellin, a key city in Colombia, and visit your chosen BPO company in person. If you’re traveling from New York, a 4.5-hour flight can bring you to Medellin, and a 6-hour flight can get you straight to Bogota.

Closely Aligned Time Zones

One of the main concerns many enterprises have about outsourcing is that they often do not share a time zone with their chosen offshore location, which may make remote collaboration more complex and challenging. Thankfully, this won’t be a problem when working with a Colombia nearshoring partner.

Unlike farther countries like China, Colombia shares the same time zone as the US. This time advantage allows companies to easily schedule meetings or calls during their regular working hours.

Significant Cost Savings for Business

For companies still needing to be convinced about the benefits of nearshoring services to Colombia, here’s a significant advantage you might not know: outsourcing allows you to access tech expertise you may not possess in-house and reduce costs simultaneously.

For example, the average annual salary of a software engineer in the US (in 2022) is $112,000, depending on the worker’s experience level and location. Salaries can rise as high as $141,706 for senior-level tech positions. Meanwhile, in Latin America, the median annual wage for software developers ranges between $4,000 and $50,000.

Healthy Economy

Colombia is the fourth largest IT market in Latin America, with its software and IT services market exceeding $8.2 billion. Even while recovering from the pandemic, the Colombian economy was projected to rise by 5.5% in 2022 and continue to grow to 3.1% throughout 2023.

Steady Political Climate

According to the World Bank, the country has the third most stable economy in the region, behind only Chile and Mexico. Despite facing similar challenges endured by other developing economies, Colombia boasts more excellent political stability and generally more transparent legal and regulatory systems.

Cultural Similarities and Advantages

The US and Colombia have close cultural and economic ties, with a diplomatic relationship dating back to 1822. They share similar business cultures, which may help foster a more seamless working relationship.

Additionally, Colombian people are known for being naturally friendly and hospitable, making them ideally suited for IT support and customer service positions.

Read more: Why Nearshoring to Colombia Is an Excellent Strategic Option for US Businesses

Nearshoring in Colombia with a BPO Partner

Today’s tech companies face the unenviable task of navigating labor shortages while also trying to meet continually growing consumer and market demand.

Understanding how nearshoring in Colombia benefits your company may be the key that opens the door to your business success. This outsourcing investment can empower your tech business to adapt alongside constantly changing markets, foster innovation, and digital acceleration, and live up to the expectations of your clients, all while saving on costs.

With the right BPO partner, your company can tap into the sizable Colombian talent pool, assist your core, in-house team, and elevate the quality of your services with ease.

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