CEO Guide to Emerging Outsourcing Hubs

IT Offshoring South of the Border

Changing economics are making U.S. companies consider Latin America for their outsourcing needs

by Rachael King

The economics of outsourcing to India are changing. Wages for high-tech jobs rose 12% over the past year, a trend exacerbated by a falling U.S. dollar, which has declined about 7% against the Indian rupee over the same period. Since Indian outsourcing providers write up contracts in U.S. dollars but incur costs in Indian rupees, they've been boosting rates and renegotiating master service agreements with their U.S. clients, according to Forrester Research (FORR).

As a result, U.S. companies are starting to shift some work to Latin America, says Ben Trowbridge, CEO of outsourcing and offshoring advisor Alsbridge. To be sure, India still has a larger IT labor pool, and salaries are lower there compared with Latin America. "You're going to save 25% to 30% (on labor costs) by moving to Latin America and save 50% by moving to India," says Trowbridge. Yet some U.S. companies find that the similar time zones and shorter travel times make it much easier to collaborate with Latin American providers.

India's Tata Consultancy Services has opened offices in Uruguay. Pictured here is senior computer engineer Charanjit Pabla at Tata's secondary building in downtown Montevideo.

Click on for a look at Latin American cities that are rising centers for IT offshoring.