Mobile app development outsourcing: Has Chile’s nearshoring train been derailed?

From a time when offshoring was the only means of outsourcing, it is now a situation where nearshoring is the preferred means no matter which part of the world one is based out of. Nearshoring is the option available to organizations that aren’t completely comfortable with the traditional offshoring practice. With resources that are geographically closer, hailing from similar time zones and cultures that are easier to relate to, nearshoring is certainly more convenient.

Global competitiveness has increased manifold which has resulted in the existence of many more contenders in the outsourcing market. Conventional champions of outsourced work are now displaced by countries that are bulking up on competencies, honing their government policies for outsourcing and delivering greater quality for similar rates. Where a handful of Southeast Asian countries ruled the outsourcing roost, now nations across the globe are competing in the same space with better results.

Chile is one such destination that organizations, particularly the ones based in the US, have been considering keenly. Organizations like Start-Up Chile provided impetus to the growth of technological ecosystems. Started in 2010, the Chilean government began the pilot program of Startup Chile which provided a launchpad for entrepreneurs to set up shop in Chile. Promising local support, office space and $40,000, the program encouraged entrepreneurs to move to Chile for 6 monts. In return, the country benefits from the social capital of these startups. The program has seen 80% increase in applications since its inception and the percentage of Chileans in those applications has increased 10 to 37%.

The technological sector in Chile has also cheered up courtesy Startup Chile with a growth rate of 13%-15% per year. The potential for the mobile technology sector is particularly great considering that 91.6% of Chilean population over the age of 15 possesses mobile phones.

With a strong telecom infrastructure, favorable government policies and minimal drug-related violence Chile has been on the nearshoring radar of multiple American organizations. High literacy rates, high R&D investments and high levels of business transparency also work as attracting factors for such organizations.

Initially buoyed by the copper boom, Chile decided a decade and a half ago that it wanted to march into the outsourcing realm. With policies and plans in place to support the same, the country saw not only the establishment of many major brand offices but also multiple service providers who served the burgeoning needs of the North American IT industry. It also began to up the ante on education in order to create a competitive workforce. Keenly backed by the government, the entire prospect seemed like the stuff of dreams. In time, however, it became clear that there are a few aspects to be ironed out before reaching the ideal.

Considering that Chile is a relatively small country, it is not a surprise that the talent pool there is also limited. The result being that offshoring or nearshoring teams there are smaller. Chile has also chosen to invest in a workforce that delivers specialized outsourcing services rather than cater to volume-centric requirements. So it wouldn’t be out of the ordinary if your nearshoring team in Chile outsourced some of your work to another team in another location.

A major handicap that the nation faces is the fact that only a part of its workforce is fluent in English. While measures are being taken to produce English-speaking graduates, the impact is still not significant enough. In comparison, the development teams are not as process driven as other countries such as India, which sometimes works against them. Competitive labor costs are no more an advantage with Chile prices are rising. Also, in terms of work culture, it is a general opinion that developing teams from Chile lack the drive for achievement.

Analysts of Chile’s outsourcing capabilities feel that the current government is leaning towards copper mining which could lead to a compromise in ensuring that the nearshoring business flourishes. They also believe that country has grown past the stage where outsourcing revenues could solely make a significant impact.

Despite the existing challenges, Chile is still a tempting nearshoring destination for the North American businesses that require mobile application development. According to AT Kearney Global Services Location Index 2011, Chile was among the top 10 outsourcing destinations in the world. The shortcomings are relatively easier to resolve than with some other countries (such as ones with political and economical instability) and a few years could really see Chile make great strides towards its ideal.

Image courtesy:

“Mundo a vapor – Canela” by Arqueos Weiss from Santa catarina, Brasil – Trem. Licensed under Creative Commons Attribution 2.0 via Wikimedia Commons –