Spotlight on the Next Major IT Labor Pool: Latin America

Friday, October 15, 2021

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Since roughly the 1980s, Asia-Pacific, most notably India, has been a favored destination for global companies to source lower-cost technology talent. This led to the rise of many of the world’s largest IT service providers today, including Tata Consulting Services, Cognizant Infosys, and Wipro. As the search for tech talent expanded, the value proposition from nearshore IT service providers became apparent, and Central and Eastern European service providers (like EPAM, Luxoft, and Endava) provided enterprises with an attractive blend of high-quality IT professionals with deep computer science and digital engineer capabilities while also providing cost savings for customers.

More recently, the pandemic has increased demand for technology services, particularly those focused on enabling work from home, virtualization, and digitization. This has put additional strain on the technology workforce. Employees with skills and expertise in technology are in high demand from both enterprises and IT services providers scaling up their workforces. On a global scale, IT roles are some of the most sought-after positions for companies to fill, but 49% of employers cannot find the right person for the job due to the lack of necessary IT skills. The United Sates alone is facing a 1 million job deficit in its technology sector. IT services analyst Maggie Nolan believe that enterprises’ struggles to adequately staff technology teams are a catalyst for the outsourcing industry, but recognizes that outsourcers are also looking for adequate talent to meet rising demand for their services.

This dynamic opens the door for Latin America to continue establishing a reputation as a strong IT talent hub. For the scope of her report, Nolan defined Latin America as Central America, South America, the Caribbean, and Mexico, but excluding Puerto Rico. Nolan believes Latin America is becoming the most recent destination of choice for sourcing technology talent for several reasons; in this report, she focuses on these key characteristics that make Latin America a promising IT outsourcing hotspot. First, Latin America is an attractive delivery location given the proximity to key client markets and the cost point for talent in the region that creates a value proposition. Latin America offers a cost-efficient option with pricing about 25% to 30% lower than that of the United States and Western Europe. Further, language proficiency, cultural similarities, and close geographic proximity make integration into U.S.-based business models easy.

Second, the region’s emphasis on education and broadband infrastructure empowers the employee base there, creating a strong talent pool to pull from. Governments and companies have been investing in and leading initiatives in education to equip the population with technology skills needed to stay competitive on the world stage. Mexico, Brazil, Argentina, and Colombia have invested in integrating technology skills into the basic curriculum and making higher education more accessible. In the past decade, education pushes from both the private and public sector have led to the digital upskilling of the Latin America population and resulting in the region climbing in the ranks of amount of skilled programmers and developers. Further, foreign governments and entities are increasing investment in the region.

Third, there is a large talent pool that should allow for continued growth in the region, and the competitive environment for that talent is less intense than in other locations such as India. Latin American countries account for some of the largest populations and have a low median age of 27.

The rise of Latin American-centric outsourcing firms demonstrates the potential of this market and growing consensus around Latin America’s ability to help ease strains on the technology labor market.

For a copy of the “Spotlight on the Next Major IT Labor Pool: Latin America” report mentioned in this article or information on any of the companies in Maggie Nolan’s research coverage list, please contact your William Blair salesperson.

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