"Near-shoring" is a term which simply means off-shoring to locations that are geographically closer than traditional technology off-shoring locations. For the United States, "near-shoring" applies to regions like Latin America, which is gaining more and more attention as major economic observers like Forbes become increasingly pessimistic about far-off locations like India and Eastern Europe.
The most compelling advantages to near-shoring software development to Latin American are partly coincidental in that these advantages are mostly side effects of progressive technology policies led by countries like Brazil, Ecuador and Venezuela that have absolutely nothing to do with attracting dot-com start-ups from San Francisco, Los Angeles or New York City to hire their programmers.
There are some basic advantages to Latin America as an attractive off-shoring alternative to India or Eastern Europe. For example, the time zone difference between San Francisco and locations in Latin America is 1 - 3 hours, compared to 12+ hours for India. Most Latin Americans grow up learning English, which is linguistically more similar to Spanish/Portuguese than languages which don't even share the same alphabet. Culturally, Latin America feels closer to the the United States for historical reasons as well as contemporary reasons, as our countries become more integrated (Latinos continue to become the majority population in parts of California and that trend will only continue to increase).
But aside from all of those advantages, the most overwhelming reason to off-shore development to Latin America is the phenomenal open source and free software movement that has been happening there for the past 7-8 years and the huge and relatively inexpensive labor pool that this movement provides.
Take, for example, Brazil -- the eighth largest economy in the world and, measured by a purchasing power parity of $1.9 trillion, second only to the United States in the Americas. After decades of living under a military dictatorship that economically mis-managed Brazil into borrowing heavily from multinational lending institutions that led to years of rotating, collapsing currencies, inflation and shortages (policies that were enforced through harsh repression of human rights), democratic Brazil is emerging as one of the strongest economies in the world, while at the same time adopting progressive social policies (they are, after all, ruled in the presidency by the "Workers Party of Brazil").
These progressive policies extend into the world of technology, especially in Brazil. In 2005, Brazil made news with President "Lula" da Silva's decision to migrate all government and state-owned firms to open source software like Linux, PHP, Python, Apache, etc. At the same time, Brazil pursued an aggressive initiative (Inclusão Digital, or "Digital Inclusion") which set out to bridge the digital divide by providing Linux-based computer labs and training across the country, from the most poverty-stricken urban areas to parts of the Amazon which are accessible to humans only by boat and accessible to the internet only by satellite. These government policies bolstered an already-existing movement dedicated to free software, which has an underlying philosophy of open-ness and collaboration that coincides with this generation's reaction to decades of secrecy and repression in society-at-large.
Years later, this movement is stronger than ever. North by South, our open source near-shoring company, just returned from CONSEGI 2008, a conference with 2,000 participants that brought together people working on community- and government-based open source initiatives all over Latin America, including Argentina, Paraguay, Ecuador, Venezuela, Chile, Uruguay, Mexico and Caribbean countries. CONSEGI also attracted people from areas of the world eager to learn from Latin America's amazing open source adventure, including South Africa and India. In Ecuador and Venezuela, the governments have followed Brazil's lead in mandating a shift to open source and free software. In other countries, large popular movements of, well, nerds are pushing their governments in that direction.
For parts of the United States like the San Francisco Bay Area, where capital continues to flow into new companies who largely rely on open source and free software to bring their web-based innovations to market, Latin America provides a near-by labor pool of open source geeks who embody all the characteristics of free software enthusiasts: passion for technology, meticulous attention to source code and, most importantly, an interest in leveraging their knowledge for the benefits of dot-com start-ups (given the right circumstances). This skilled labor pool is still just a side effect of progressive social policies that, upon examination, make one question what the heck we're doing here in the US.
For example, I recently visited an old friend of mine who became a teacher at the high school we went to together in industrial, northeast Ohio. I was shocked and appalled at the state of their computer lab: dirty, old machines running Windows 95/98 which are so clogged with spyware, viruses and pop-up advertising that they are barely usable. Meanwhile, Brazil announced this year that they are opening 52,000 new educational computer labs serving 52 million students, with 29,000 of these labs operational by the end of the year. These labs will all run a custom-built education-based derivative of Debian Linux, allowing students to learn as much about the technology as their potential and motivation drives them -- ultimately, these students can begin learning how to program an operating system kernel in high school, if they really want to (something that US students only start to do well into a computer science university track).
This incredible difference seems like it will eventually catch up to us in the future. But, for now, US companies in search of seasoned open source programmers are feeling the squeeze of a labor market where programmers still call the shots. Finding someone who really knows what they're doing will not only cost a company a lot of time and effort but once a programmer is found, they don't come cheap. They live in overpriced San Francisco apartments and they buy overpriced organic food and overpriced lattes, one after another. Meanwhile, Latin America is overflowing with open source programmers who have a considerably lower cost-of-living and a currency exchange which still makes earning US dollars worthwhile (and, every forecast indicates that the dollar will upswing against Latin American currencies in the coming months).
This free software culture that exists right next door to us is a unique phenomenon that is unparalleled anywhere else in the world. That isn't to say that there aren't barriers to accessing this labor pool. For instance, there is a deep mistrust of exploitation by US companies (based on history that every Latin American knows about, even if your average American is clueless about it). On top of that, managing geographically-distributed development isn't something that your average engineering manager can necessarily do with success. For example, North by South only became a viable business after 10+ years of collaboration with Latin America on open source projects, ironing out the problems of remote, collaborative engineering.
However, to ignore the availability of this labor pool will create opportunity loss costs in every dot-com business that doesn't evaluate whether this path is right for them or not. In the meantime, the competition is leveraging this opportunity and making it work for their software development projects.
To learn more about the topics discussed in this article, please refer to:
- Free Software in Latin America: The only English-language blog that consistently covers the open source revolution south of the border.
- CONSEGI 2008 Summary: From the same site, an English-language summary of the events that took place at CONSEGI 2008.
- CONSEGI 2008: The official website for CONSEGI 2008, in Portuguese.
- Free Software Portal: The official "software livre" portal of the Brazilian government.
- FS Daily's Latin America Cloud: The tag cloud at Free Software Daily for Latin America.
- FLISOL In-Depth: An article about FLISOL, a continent-wide event where user groups help non-geeks install free software on their desktop computers and laptops.