Over the past year, Sebastián, an Ecuador-based developer, has received more LinkedIn messages from recruiters trying to poach him than ever before. One message in particular caught his eye: it came from a Miami-based delivery startup. Sebastián, who asked that his last name not be used so as not to jeopardize his current job, was excited about the potential growth opportunity.
“I would like to know how companies work in the United States, how things are done there,” he says. Many other experienced developers outside of the US are increasingly sought after by American tech companies as the rise of remote work and a talent shortage in the US has spurred searches for more global teams.
A 2022 report by technology services firm Commit estimates that offshoring of software development roles will increase by 70 percent over the next year. Some companies, like Coinbase and Shopify, have already aggressively hired outside of the US to fill open technical positions. “Software developers are becoming the first global role,” says Alex Bouaziz, CEO of Deel, a startup that provides payroll and remote hiring services. His company saw a 50 percent increase in its US-based clients hiring abroad in 2022.
Historically, companies have gained access to a larger pool of talent by strategically establishing offices in secondary markets. “It was mostly like we have a HQ1, then we pick a market and build HQ2,” says Dylan Serota, co-founder of Terminal, a company that combines developers in Latin America, Spain and Poland with startups in countries like the USA and USA connects UNITED KINGDOM. Terminal provides the infrastructure to offer benefits and pay local taxes, something many smaller companies don’t have the resources to do. The rise of Remote has encouraged companies to rethink how they approach talent in ways they might not have considered before, Serota says.
To facilitate this process, companies like Terminal and Telescoped screen developers and startups, and then provide benefits like health insurance, pay local taxes on developers’ behalf, and ensure developers receive perks like paid time off and equity. “About 80 percent of the developers we work with have equity stakes in the startups they work with,” says Serota.
Many new hires come from countries like the Philippines, Argentina, Brazil and India. While tech companies have long sought these markets to cheaply fill call centers, content moderator positions, and IT departments, they are now following talent to fill vacancies on one of their teams. “We used to think of this as a cost arbitrage story — you hire in Mexico or India because it’s cheaper,” says Jimit Arora, partner at research firm Everest Group. “Now I see this as a talent arbitrage story. You go where the talent is.”
Latin American talent in particular has attracted the attention of US-based companies. The region shares time zones with the US, and sourcing talent in cities like Mexico City or Bogota allows startups to “avoid the competition for talent in places like San Francisco,” says Bouaziz. It’s also significantly cheaper: the average monthly salary for a software developer in Mexico is $3,165, according to Coders Link, a platform that connects Latin American talent with US-based tech companies. That’s about a fifth of the salary of a software developer in San Francisco. The war in Ukraine, which was a major center for IT outsourcing, also accelerated this trend, according to Serota. As workers have been forced to flee their homes or fight the Russian invasion, foreign companies have been looking for new places to relocate their work abroad, and Serota says demand is moving quickly to Latin America and some other markets in relocated to Eastern Europe.