While American managers argue about whether nearshore countries can effectively take on tier 1 technical support, your competition has been unlocking Latin America for the most advanced data engineering and AI tasks - at 30% of the price of US labor...really.
I'll start this with a "no Googling" challenge that only 3/100 people in the tech industry successfully completed. Microsoft has only three global AI and IoT innovation labs in the world. One is in Shanghai, the other in Munich, Germany. Can you name the third?
Some of you may have guessed Tokyo, Japan, Montreal, Canada, Dubai, New Delhi, India, or even Sydney, Australia. Very few guessed the actual location -- Montevideo.
Let's be uncomfortably honest. These US leaders think "Americans are smarter, Americans are better leaders, and Americans have little tolerance for the inefficiency of overcoming communication barriers." And they're mostly wrong, especially on the first point.
Here's the second challenge - what country is home to Montevideo? For those bold enough to venture the right answer, Uruguay, here's the third part of the "no Googling" challenge. Point to Uruguay on a map. If you passed, you're in the top 3%.
In 2023 recognizing the superior technical and critical thinking aptitude of the Uruguayan (and Argentinian workforce just across the river), Microsoft invested in its 3rd global AI and IoT innovation lab, a beautiful waterfront facility in Montevideo.
Just last week, Sparq, a US leader in custom software development and data engineering, announced the acquisition of Octobot, a Uruguayan leader in Product Design, Advanced Data Engineering, and Product Delivery.
Here's another challenge for you. Where was the 2023 U.N. Summit on Artificial Intelligence in Computing? While obviously Silicon Valley, Boston, or London would make sense, the U.N. opted for Santiago, Chile, where the Millenium Project has based its AI pledge for the future around AGI, or Artificial General Intelligence.
ShadowHornet Consulting, a firm that specializes in nearshore site selection and M&A for private equity companies has seen substantial interest from the PE sector, advising 5 US companies over the past 12 months on strategic considerations around entering and expanding operations into Latin America. The firm has successfully enabled 46 nearshore IT/development engagements. Despite this rash of activity around Latin America, I've been in countless discussions with US managers that sound like this:
"We know we need to lower costs, so maybe we shift our L1 support to Argentina. I'm worried about the language barrier, so support might not be the right fit. The costs are great, but not sure we want to cross that bridge. We'd never consider sending anything other than support or low-risk work down there. And we might as well explore if AI can take that work on anyway."
They might also say, "we can't use nearshore labor, because it will cannibalize our US business and margins. Once we sell at those low prices, we can't charge our US-centric rates."
The Price of American Managerial Ignorance
I'd suggest that the majority of US senior management is still viewing Latin America with a bias - and this is killing the future of their technology businesses.
Let's be uncomfortably honest. These US leaders think "Americans are smarter, Americans are better leaders, and Americans have little tolerance for the inefficiency of overcoming communication barriers." The "smart ones" are saying these things. The "less refined" managers I speak to still think of Latin America as a source of unwanted immigrants, and a crude third world in which crime and poverty are rampant.
While US leaders wallow in these incorrect perceptions, the really bright and visionary companies and leaders have already invested in building relationships in Latin America.
As of August 2022, 40% of the hottest development and engineering sourcing hubs are in Latin America according to Gartner’s Talent Neuron. The FAANGs and their fast-moving Silicon Valley peers discovered a secret years ago, and have been keeping quiet about their powerful new source of development and engineering firepower.
Anticipating a sector-specific business downturn, Microsoft began ramping up nearshoring efforts for their engineering practice in Latin America in 2019. This early investment gave credibility to Argentina, Mexico, and Colombia, specifically as reliable sources of nearshore software development and engineering talent. Amazon and Google made nearly simultaneous investments in late 2019, and by 2020, strategic advisors like Zinnov were active in guiding established sourcing players like Perficient into strategic acquisitions and investments in Latin American-based engineering firms.
What Does all This Mean to You?
Latin American personnel are taking on some of the most complex challenges in the market and thriving, at an unbelievable price point. Think you need to pay north of $150/hour for machine learning and AI help? Think again. Need guidance on scalable integration architecture, leveraging LLM and traditional structured data at $200/hour - how about $60? These are not myths - the fastest moving, biggest, and most innovative have been outcompeting US-only firms since at least 2019, and that effect is taking hold as US tech sector layoffs accelerate. Perhaps the tech sector is not consolidating as quickly as it seems - maybe the US-based jobs aren't disappearing, they're being fulfilled not through AI, but through development activities in places like Colombia, Argentina, Peru, Chile, and Uruguay.
If you're staking your businesses future on US-only technical talent, and still under the perception that Latin American resources are only good for L1 support, what are you going to do when the market changes around you. There's a price of ignorance right now, a price that it seems many American companies and workers are paying deeply.
I'll be in Buenos Aires, Argentina, and Montevideo March 10-15, trying to expand my horizons as I meet with Argentian business leaders and Uruguayan officials, trying to broaden my horizons, well conscious of my own ignorance of the Spanish language. This is my point of view, and may be inflammatory, but I'm calling it like I see it right now as a proud American. We, as Americans, need to "just look up", right now.