Colombia is the fourth-largest IT market in the region and its substantial growth indicates the potential to move up to third place. It is unlikely for Colombian IT market to reach the same size as Brazil and Mexico due to their immense size and population. However, increased foreign capital and the growing amount of IT companies in the country provide an opportunity for North American businesses to benefit from the value of software development outsourcing in Colombia.
Colombia’s smaller size compared to larger LATAM countries like Brazil and Mexico gives it more room for growth while making an emphasis on the quality rather than quantity of technology services. Today, we are going to take a look at how software development outsourcing in Colombia makes the country an attractive investment destination for American capital and how you can benefit from working with custom software development companies in Colombia.
Why do foreign tech companies choose outsourcing in Colombia?
Oil and mining are two of the country’s most prominent industries, and you would expect those to be of significant interest to foreign investors. Notwithstanding, in the first half of 2022, the investment in industries not related to oil and mining constituted more than 70% of the total Foreign Direct Investment (FDI). The most prominent foreign investors have been companies from the US, Spain, Panama, Switzerland, and the UK.
The increasing influx of foreign money into the Colombian economy can be attributed to several factors, such as the growing attractiveness of the local business environment, the maturity of governmental institutions, the growing human capital, market and business sophistication, and more. That points to Colombia quickly becoming a sophisticated technology-driven economy that actively cooperates with foreign partners. Let us take a closer look at the factors that make outsourcing in Colombia a good idea for foreign businesses.
Read more: Outsourcing to Latin America: benefits, destinations, market overview
In the past decade, Colombia has doubled the number of its tech graduates. In addition, the IT industry has grown by 38% within the past five years. The Colombian Ministry of Education estimates that each year, more than 13,000 students graduate with engineering and IT degrees. Moreover, 24.7% of college students in the country graduate in fields such as engineering, mathematics, science, and technology. Furthermore, computer engineering is one of the most popular majors in Colombia.
To boost tech education among students, the government invested $6.5B into science, technology, and innovation education over the past four years. All of the numbers above show the country’s commitment to further expansion of its innovative potential. For foreign businesses planning to invest in software development outsourcing in Colombia, this means a constant and stable influx of tech talent in the foreseeable future. With this knowledge, many international tech giants like IBM, Amazon, Oracle, SAP, and more have already expanded their operations to LATAM through Colombia.
As a developing country, Colombia has been seeing rapid growth and expansion of its infrastructure. From new highways, airports, and seaports to the emergence of new technology and economy hubs - all of those are the telltale signs of a developing and rapidly growing infrastructure. These factors strengthen the country’s ties to the global community and improve cooperation with international partners.
For businesses that consider outsourcing, a developed infrastructure means ease of travel, communication, and cooperation with local partners. It is also relatively easy to do business in Colombia and/or with Colombian companies. The government has special tax reduction initiatives for foreign businesses that create jobs in the country, which attracts more tech businesses to the country.
Increasing technological and innovative sophistication
There also are benefits for companies that do not plan to expand their operations to the country and just want to partner up with the providers of software outsourcing in Colombia. According to the Global Innovation Index, Colombia is ranked 66th among the world countries in terms of business sophistication and maturity. This ranking might not be as high compared to the world’s leading economies, but reflects a strong position of Colombian business in the region.
The quality of the country’s business network and the quality of individual companies is growing steadily as Colombian business becomes more and more integrated into the global economy. With the Free Trade Zone initiative, foreign businesses and local talent cooperate on much more profound levels, sharing their experience and best practices. All of that contributes to the further development of local business practices and the country’s economy.
Emerging technology export
Colombia rapidly expands its technology services, exporting them all around the world. The US is the biggest importer of digital services from the country, being responsible for 33% of the IT exports in Colombia. Ecuador follows in the second place, receiving 14.1%, and Mexico in the third with 8.3% of IT export. The software development sector in Colombia is an established industry, with partnerships and developed practices that extend beyond just the country's borders. Companies from Europe and Asia also collaborate with Colombian software development firms. In particular, Spanish tech enterprises are drawn to offshore software development in Colombia. Nevertheless, the US companies are still the main consumers of IT services in Colombia.
Colombian government pushes strongly for the digitalization of the country and the widespread adoption of digital technologies by the population. Apart from the development of the country’s infrastructure and the efforts to bring Internet connectivity to 70% of Colombian households, the technology minister launched a Mision TIC plan to train additional 100,000 programmers.
The government sees potential in software development outsourcing and makes a conscious effort to support it. Such programs as Mision TIC further expand the local talent pool allowing American companies to hire more qualified talent in the country. The increasing popularity of outsourcing Colombia currently goes through can be compared to the industrial revolution. This trend attracts new investment and further expands the economic and technological potential of the country.
Growing number of IT vendors across the country
With an increasing interest in software development outsourcing in Colombia, the number of IT vendors is rapidly growing. These are both local companies and international businesses that already have experience working in different locations and are expanding their outreach. As of March 2023, there are around 350+ outsourcing companies in Colombia, so you can tell the market is still young. However, their number keeps on growing. Here’s a brief overview of the companies that offer such services as outsourcing in Colombia.
Read more: Top software development companies in Latin America: A comprehensive review
Emerging tech hubs: Bogota and Medellin
Colombia is home to multiple IT hubs, the two most prominent ones being Bogota and Medellin. Bogota is the center for business and finance, and Medellin is a hub for science and technology.
In 2022, 74% of Colombian startups that received either domestic or foreign investment originated from the Bogota region. This is not surprising, as Bogota is the country’s capital and a major hub for software development outsourcing in Colombia, especially in the banking and financial services industry. Bogota is becoming increasingly attractive as a destination for outsourcing in Colombia, with Medellin, the country's tech and science hub, not far behind.
The 2010s saw Medellin transition into one of Latin America's major tech hubs, becoming a popular destination for digital nomads from all over the world because of its tech-friendly economy and beautiful scenery. After the pandemic and the 2022 tech crash, North American businesses started looking for Colombian outsourcing opportunities, giving tech hubs like Medellin a chance to grow and expand.
The long-standing cooperation between N-iX and US-based clients
The US is the biggest investor in the Colombian IT sector and the biggest consumer of software outsourcing in Colombia. American companies work with partners worldwide, and nearshore destinations like Latin America have always been on the radar due to their geographic proximity. At the same time, N-iX, a global custom software development company, has had a long history of cooperation with US-based businesses and thus expanded its presence to Colombia. This allows us to combine all the benefits of working close to our partners in the US with 20 years of experience in technology consulting and custom software development, mature business practices, and strong expertise across industry domains.
Over our 20 years of work with clients from across industry verticals, we have helped numerous US companies achieve their technology goals and gain measurable business value. Let us take a look at some prominent examples of N-iX’s cooperation with American industry leaders.
Setting up reliable in-flight internet connectivity solutions for Gogo
Gogo has been in the business of providing in-flight Internet for airplanes for over two decades. Boasting a workforce of over 1,000 employees, the company has built an excellent reputation through its advanced technologies, top-notch service, and worldwide coverage. It currently has partnerships with 16 commercial airlines, and its technology has been installed on 2,900 commercial and 6,600 business planes.
Gogo partnered with N-iX to migrate to AWS cloud and build a unified data platform. We have also implemented antenna health monitoring and developed models to predict satellite antenna malfunctions. As a result, the client was able to improve the speed of the in-flight Internet, identify root causes of antenna performance issues, predict equipment malfunctions, and reduce the number of cases where no fault is found. N-iX delivered the following results:
- No-fault-found rate reduced by 75%;
- Reduced the cost of licenses (Cloudera/Microsoft) through migration to the cloud. Enabled the client to control and optimize resources in the cloud based on the current processing needs;
- Reduced operational expenses on penalties to the airliners for insufficient in-flight Internet performance;
- Implemented predictive analytics to predict possible failures in antennas (>90 %, 20-30 days in advance);
- Identified the reasons behind antenna malfunctioning helping Gogo prevent some of the common failure causes.
Long-term partnership with a manufacturing leader Fluke
Fluke Corporation, a US-based business, produces, circulates, and provides electronic test equipment and software for gauging and monitoring asset conditions. The company employs approximately 2,400 staff members, and more than one hundred countries have distributors and manufacturer representatives associated with them.
The client required more visibility into the condition of their assets and wanted to guarantee the high performance, customization, and scalability of the Fluke solutions, as well as smooth integration with CMMSs like SAP, Emaint X4/X5, and IBM Maximo. To assist them in enhancing asset maintenance, the N-iX team supplied maintenance teams with the essential asset info in real-time, as well as applications that are able to process it correctly. Our experts have delivered a tangible value to Fluke Corporation by:
- Increasing the equipment uptime;
- Reducing maintenance costs;
- Improving the performance, scalability, and customization of Fluke products.
By going for Colombian outsourcing, US-based companies can achieve cost optimization, access skilled talent, and utilize the latest technologies in software development. Additionally, the support of the Colombian government, the influx of foreign investment, and the country's strong drive for innovation make Colombia an ideal destination for software outsourcing. By partnering with a trusted vendor like N-iX, you get the best combination of Colombian talent and mature business practices proven by two decades of work with partners from across the globe.