Outsourcing Software Development to Colombia

Colombia is building a strong reputation in tech with over 1,500 startups and a software market on track to reach $35 billion by 2028.  With tech salaries up to 54% lower than in the US, outourcing software development to Colombia offers real cost advantages. 

I’m David Gomez, Head of IT Recruitment in Latin America at Alcor. Our job? Building software R&D centers for tech product companies across LATAM and Eastern Europe without hidden costs and buy-out fees. With tech recruitment, Employer of Record, and 360° operational support all covered, our clients go from 10 to 100 devs in a year.

In this article, you’ll learn why more US tech companies are choosing to hire software developers in Colombia and how to do it efficiently. You’ll also discover how local salaries compare to US benchmarks, get a clear view of how Colombia stacks up against other LATAM tech hubs, and find out about an alternative to traditional outsourcing.

Key Takeaways

1. Colombia’s tech outsourcing sector is set to grow from $755.29 million in 2025 to $1.8 billion by 2029.
2. The total employment cost of tech talent in Colombia is still around 54% lower than in the US, even with recruitment fees, benefits, and the 13th-month salary included.
3. Colombia is home to one of the strongest tech talent pools in LATAM, with over 165,000 specialists.
4. With just a 2-hour time difference from the US West Coast, Colombia makes real-time collaboration easy.
5. Alcor’s tech R&D solution helps you skip outsourcing hurdles, build a 30-engineer team in 3 months, and save up to 40%. All while staying fully compliant.

Colombia’s IT Outsourcing: Industry Overview

Why is choosing to offshore software development to Colombia a strategic decision? Let the facts speak for themselves.

The country’s tech outsourcing sector is valued at $755.29 million in 2025. It is expected to reach $1.8 billion by 2029, thanks to strong government support, expanding digital infrastructure, and companies looking to outsource tech development.

Colombia’s talent pool is another draw for offshoring: over 165,000 software developers and other tech specialists are already in the workforce, and 15,000 new tech graduates enter the market every year. Colombian engineers are experts in JavaScript, SQL, Ruby, and Python.

Colombia has three main tech hubs:

• Bogotá: Colombia’s top-ranked tech hub (1st nationally, 2nd in South America), home to 62% of the country’s tech companies and a hotspot for foreign investment.
• Medellín: Ranked 2nd in Colombia and 7th in South America, this “Valley of Software” stands out in e-commerce and fintech innovation.
• Cali: Colombia’s 3rd-largest tech hub (13th in South America), focused on digital modernization and tech solutions for agribusiness.

The government’s National Digital Strategy is fueling this rise with initiatives in AI, cloud, cybersecurity, and workforce development. The Colombian government has also launched a National AI Policy with a budget of approximately $120 million allocated until 2030. This initiative aims to develop AI research, promote ethical use, and position Colombia as a leader in AI within Latin America. The result? Global players like Google, Microsoft, and Oracle have already chosen IT outsourcing in Colombia to grow their operations.

Software Development Outsourcing Rates in Colombia

Outsourcing cost in Colombia is a major reason why more North American tech companies are turning their eyes toward LATAM. When you’re facing an average US tech salary of $172,000 or more, it’s no surprise that many choose destinations like Colombia to stretch their budget and often save over 50% on labor costs without sacrificing quality.

Payment models vary: some companies pay per hour, others per project, and many offer annual contracts. For consistency, we’re sharing annual salary data in the table below to help you make clear comparisons between senior tech specialists in Colombia and the US.

Position	Annual Senior Tech Specialists’ Salaries, USD
	Colombia	USA
Blockchain Developer	62,400	132,000
Mobile Developer (iOS/Android/Xamarin)	62,400	114,000
AI/ML Engineer	60,000	132,000
Java Developer	60,000	114,000
Python Developer	60,000	126,000
C/C++ Developer	57,600	114,000
Cloud Developer	54,000	174,000
Automation QA Java Engineer	54,000	96,000
Product Manager	51,600	120,000
Manual QA Engineer	45,600	84,000

As you can see, Colombian annual outsourcing rates typically range between $45,600 and $62,400, depending on the tech role. For instance, the average AI/ML engineer salary in Colombia is $60,000, while a Product Manager earns $51,600. It is a 54-57% drop compared to U.S. compensation for the same positions. It’s like getting Silicon Valley-caliber skills without the Silicon Valley invoices.

Naturally, software development outsourcing rates in Colombia shift depending on the seniority level and tech stack involved. But if you’re only looking at this annual price tag alone, you’re only seeing part of the picture.

Payroll taxes

If you hire developers and other tech specialists under the B2B model, there’s no payroll tax liability since they take care of their taxes.

But if you go the full-time employment route, be prepared to cover mandatory contributions on top of the gross salary. For example, a $5,000/month salary would cost your company roughly 30.02% extra, which includes:

1. Social Security Contributions (federal):

• Pension fund contribution: 12%,
• Health insurance contribution: 8.5% (only applicable when salary exceeds 10 min. monthly wages), and
• Labor risks system: 0.522%.

2. Payroll taxes (local):

• Institute for Family Welfare contribution: 3%,
• National Apprenticeship Service (SENA) contribution: 2%, and
• Family Compensation Fund: 4%.

Local peculiarities

If you’re hiring under the FTE model, you should also include:

• Cesantía payment: Equal to one month’s salary for each year worked, including any applicable transportation allowance.
• Cesantía interest: 12% of the total cesantía amount.
• 13th-month salary (prima): Equivalent of one month’s salary.

Recruitment fees

Hiring costs in Colombia vary based on the role’s seniority:

• 15% of gross annual wage for mid-level tech specialists,
• 20% for senior-level positions, and
• 25% and more for leads and top-tier talent.

Keep in mind that recruitment fees in the US are 10% higher than in Colombia, ranging from 25% to 35% of the annual salary.

Standard benefits package

In Colombia, tech companies typically offer a benefits package worth around $6,500 per year. It usually includes:

• Medical insurance: $1,000,
• Learning & development: $1,500,
• Corporate merchandise: $100,
• Work equipment: $3,000, and
• Wellness & mental health support: $900.

That’s nearly $9,000 less than the average in the US, where annual benefits per tech specialist cost around $15,400.

The table below shows how the total annual employment cost of hiring a senior tech professional in Colombia compares to one in the US.

Position	Annual Senior Tech Specialists’ Salaries, USD
	Colombia	USA
Blockchain Developer	86,580	187,000
Mobile Developer (iOS/Android/Xamarin)	86,580	163,600
AI/ML Engineer	83,500	187,000
Java Developer	83,500	163,600
Python Developer	83,500	179,200
C/C++ Developer	80,420	163,600
Cloud Developer	75,800	241,600
Automation QA Java Engineer	75,800	140,200
Product Manager	72,720	171,400
Manual QA Engineer	65,020	124,600
Gross Annual Salary + Recruitment Services + Standard Benefits Package + 13th-month salary (for Colombia).

Even with recruitment fees, benefits, and the 13th-month salary factored in, hiring a tech specialist in Colombia still costs about 54% less than in the US. Take Blockchain developers—you’ll save up to 53% compared to US rates. Go after Cloud developers, and the gap stretches beyond 68%.

Another reason why foreign tech companies go with nearshore software development to Colombia is Colombia’s business taxes and incentives. According to Colombia’s Tax Reform Law, tech companies that invest in research, technological development, and innovation get a 25% discount and a 100% tax deduction on income tax.

Colombia vs Other Latin American Countries

As mentioned earlier, Colombia is home to one of the biggest talent pools in the LATAM region, with around 165,000 tech specialists. Most of these developers are based in top tech hubs like Bogotá, Medellín, and Cali, where the infrastructure is well-equipped to support growing tech teams and business operations. On the education side, Bogotá has led the way, producing over 215,000 software and tech graduates in the past five years.

Would you like to hire top developers in Colombia? We provide IT staffing in Bogotá, Medellín, and Cali!

Another advantage of outsourcing software development to Colombia is its convenient location and time zone, which overlap with the US. Since the country has only a 2-hour difference from the US West Coast, American tech product companies can keep their programming process uninterrupted while enjoying instant communication with their Colombian team. It’s like working with your team next door if your next door had Silicon Valley-caliber engineers and better LATAM weather.

Colombia vs Mexico

When evaluating outsourcing destinations, Mexico naturally comes up as one of Colombia’s key competitors. Proximity is a major advantage: with just a 4-hour flight from San Jose, CA, to Mexico’s top tech hubs, companies can easily schedule on-site visits and maintain close collaboration with their engineering teams.

Beyond logistics, Mexico’s tech talent pool is significantly larger, with around 800,000 professionals across software development and related fields. The country produces 124,000 new graduates each year in areas like computer science, programming, and electronics.

Mexican programmers are especially strong in software development using JavaScript, Python, C/C++, React.js, and Flutter. According to the Coursera Global Skills Report 2024, this level of expertise earned Mexico the 3rd spot in LATAM for tech skills.

Want to scale your tech product team in Mexico fast, 100% compliant, and with no hidden costs? Franki, a California-based startup, answered yes to this question and contacted Alcor. The deal was sealed right away.

The results of our partnership:

• 40% saved compared to traditional outsourcing,
• 2 iOS Developers, 3 Android Developers, and 2 Quality Control Engineers hired with an average time-to-hire of just 4 weeks, and
• 100% compliance with Mexican legislation under Alcor’s EOR.

Colombia vs Brazil

Another major player in the LATAM region is Brazil. Its tech outsourcing sector is among the largest, projected to hit $10.38 billion by 2029. What sets Brazilian software engineers apart is the quality of their services. With expertise in JavaScript, CSS, Python, Java, C#, and PHP, Brazilian tech specialists earned the #1 spot in LATAM in the Coursera Global Skills Report 2024.

Brazil also offers a business-friendly ecosystem, ranking 27th in the Global Startup Ecosystem Index (9 spots above Colombia). Overall, the country boasts more than 13,000 startup companies, about 60 accelerators, and 100 tech parks.

Colombia vs Argentina

One of the most common outsourcing destinations in South America is Argentina. The local IT services market is on track to hit $3.14 billion in 2025, with a steady 4.55% annual growth projected through 2029. While its tech talent pool is smaller than Colombia’s, Argentinian coders rank second in the EF English Proficiency Index among LATAM countries, 15 spots above Colombian ones.

Argentina’s business landscape is also experiencing positive growth, making it even more attractive to outsource software development. The Entrepreneurs’ Law, for instance, enables business registration in a day and guarantees a 75% tax deduction. In this way, Argentina is steadily catching up with Colombia in the Global Startup Ecosystem Report 2025, holding the 5th position in LATAM.

Colombia vs Chile

Chile is also among the favorite LATAM destinations for tech product companies looking to outsource software development. According to Statista, the tech outsourcing industry is projected to reach $1.09 billion by 2029.

While the Chilean tech talent pool is smaller than Mexico’s or Colombia’s, local developers bring a broad skill set to the table. They work confidently with a wide range of technologies, including PHP, Java, Python, ASP.NET, SQL, and Go. The country also leads AI development in the region.

Chile ranks 20th globally in tech skills, and its capital, Santiago, took the #1 spot in Latin America in the 2024 Brand Finance Global City Index. On the business side, Chile offers a strong ecosystem. It now ranks #1 in LATAM for Ease of Doing Business. Colombia is placed third in this ranking.

Top 5 Software Development Companies in Colombia

For non-tech businesses, the prospect of outsourcing one-time tasks and projects to Colombia can be beneficial. According to Clutch, there are over 420 software development firms in Colombia that offer expertise in custom software, web and mobile app development, and IT staffing services. Top-rated vendors include:

1. Ballast Lane Applications LLC,
2. Teravision Technologies,
3. Rootstack,
4. Koombea,
5. BetterWay Devs.

So, why do businesses outsource software development to Colombia? Simple: it’s cost-effective for non-tech companies. Instead of building an in-house tech team, they can tap into the vendor’s pool of outsourced developers in Colombia and cut costs significantly. Here are a few use cases:

• a retail brand looking to outsource mobile app development to expand customer reach,
• a car manufacturer choosing to outsource VR test drive tools to enhance the buyer experience, and
• a healthcare provider planning to outsource website development to showcase services better.

However, for product tech companies, the strategy of IT outsourcing to Colombia isn’t always straightforward. By exposing sensitive data to a third party, you could jeopardize your IP rights. Moreover, hidden costs are not rare either, not to mention team indifference, possible control loss, and indirect communication with developers. The obvious result of these drawbacks is a poor end product.

The key? Choosing the right partner. One that eliminates the typical risks and offers a solution to successful IT outsourcing to Colombia.

Spoiler alert: that is Alcor’s solution. Keep reading to find out why.

IT Outstaffing in Colombia

A similar model to software development outsourcing in Colombia is IT outstaffing. It’s often mistaken for staff augmentation, but they’re not the same. In fact, IT outstaffing is about filling the expertise gaps by bringing in remote programmers from a third-party vendor who remain on that vendor’s payroll. Unlike outsourcing, where an external team handles an entire project, outstaffed developers become an extension of your in-house team.

The advantages of such cooperation include direct communication, team management, and project supervision. Vendors also take care of the employees’ equipment, workspaces, and social benefits.

Still, this model is not without risks, just like the Colombian IT outsourcing strategy. As for tech startups, IT outstaffing can deprive them of receiving additional funding. That’s because investors value the products developed internally without using a temporary workforce. Meanwhile, buy-out fees can cost startups an arm and a leg.

And here you may be wondering again what steps to take to stay risk-free. The answer hasn’t changed—choose Alcor. Read on to discover our solution.

Better Than Outsourcing to Colombia

If you want to avoid the usual headaches that come when you outsource or outstaff, there is a better way to implement the Colombian IT outsourcing strategy. And it’s built for tech product companies like yours.

Alcor’s all-in-one R&D solution gives you the freedom to scale with confidence by combining:

• IT recruitment in Colombia, other LATAM & EE countries: We source the top 10% talent, with your first hire ready in 2-6 weeks. Most of our developers stick around—98.6% pass probation, and many stay for 2.5+ years.
• Full Employer of Record services: No need to open a local legal entity. We ensure zero launch risk and handle payroll, taxes, compliance, employee benefits management, and on/offboarding.
• 360° operational support: From office leasing and hardware procurement to tech support and day-one setup.

Just like it’s ready for you now, this model was ready for BigCommerce. This US-based tech product company had had enough of bouncing between outsourcing vendors. They needed tech specialists who were not just available but all-in. So, they chose Alcor to build their dedicated team.

The results of our cooperation:

• 30 elite developers in 6 months, including rare tech roles like QA for PHP, with some filled after just 2 CVs.
• 50% cost savings. Alcor helped optimize salaries and leveraged a 5% PIT incentive for additional tax relief.
• GDPR compliance covered. Our legal team crafted a special solution for full data compliance.
• No legal entity required. Through our EOR model, BigCommerce stayed 100% compliant and fully operational from day one.
• New R&D office in just 1 month. Alcor found the space, negotiated the lease, and set it up.

Why outsource when you can build a team that’s truly yours?

Alcor is the solution behind People.ai, Sift, Dotmatics, and more.

Now it’s your turn. Let’s build your team together.

References:

1. StartupBlink
2. GlobalData
3. International Trade Administration
4. El Pais
5. Clutch
6. World Bank Group
7. Brand Finance Global City Index 2024
8. Et CIO
9. EF English Proficiency Index
10. Statista
11. Coursera Global Skills Report 2024
12. Secretariat of Economy
13. Invest in Bogota
14. El ILIA