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Software Development Outsourcing in Chile in 2024

Lead IT Recruiter in LATAM
Software Development Outsourcing in Chile in 2024 - Alcor BPO profile
25 January 2024
16 min

IT outsourcing in LATAM is booming, with over 75%‚ÄĮof US companies looking to explore possibilities of its talent pool.¬†The software development outsourcing sector in Chile¬†alone is projected to reach US$0.66bn in 2024. But what exactly entices companies to pivot toward IT recruitment in Chile?¬†

 

I‚Äôm David Gomez, Lead IT Recruiter at Alcor, a full-cycle IT recruitment and R&D center services provider. For over 7 years of IT recruitment in LATAM, I‚Äôve developed a broad understanding of how to find the best software developers in Latin America to help tech product companies set up their top-tier software engineering teams from 0 to 100 employees within a year.‚ÄĮ¬†¬†

 

Software Development Outsourcing in Chile in 2024 - Alcor BPO

 

In this article, I’ll unpack Chilean IT market benefits, top IT hubs, the software developer’s profile, local salary ranges, the challenges, and alternatives to outsourcing to Chile for software development to find the perfect fit for your IT needs. Ready to navigate the Chilean tech scene and explore the best tips for hiring and managing your developers in this location? Dive in with me!   

 

Software Development Industry in Chile: Overview & Trends 

 

Bolstered by AI adoption, a digital information surge, and a diverse IT services landscape, the Chilean IT market is expected to reach‚ÄĮ$2.5 billion by 2028, with an annual growth rate of 8.2%. Its startup-friendly environment, coupled with 1st place in Latin America for ease of doing business, makes software outsourcing and nearshoring in Chile‚ÄĮ¬†a bridge to success.

 

And what about the IT outsourcing sector in Chile? The industry is expected to rake in a cool $1.04 billion by 2028, growing at a healthy clip of 12.16% per year. And the business process outsourcing sector doesn‚Äôt lag behind ‚ÄĒ its revenue is projected to hit a whopping $530K in 2024 and $650K in 4 years. And the best part? Over 8,000 tech companies are already reaping benefits from Chile‚Äôs tech industry. Among them, 200 specialize in IT outsourcing, offering custom software development, managed IT, SaaS, blockchain, and IoT. But are they worth working with in this destination? I‚Äôll talk about it later in the article, and now, let‚Äôs shed some light on the…¬†

 

Technology Trends in Chile for 2024 

 

Did you hear that Chile has been recognized as a leader in AI development in the region, according to the Latin American Artificial Intelligence Index (ILIA)? Yep, that’s right. AI adoption here exceeds the Latin American average in business and government initiatives. Moreover, Chile leads in governance with a citizen-involved AI strategy, a dedicated coordinating body, active participation in global AI standards and regulations, and even pioneering Neuro Rights protections in its constitution. This has led to 70% of local companies utilizing AI tools to gain insights from large volumes of data, automate their processes, and improve their decision-making capabilities, Accenture reports. 

 

But wait, there‚Äôs more. This location blazes its digital trail ‚ÄĒ powered by renewables and smart agriculture,¬†IoT and Cloud ignite a $6.75 billion transformation by 2024.¬†Meanwhile, businesses are migrating to the cloud with gusto, and IDC even reported a 53% surge in cloud investments as of 2023. Why the heat? The answer lies in unmatched scalability, streamlined data flows, and productivity gains ‚ÄĒ¬†a trio that’s turning heads and unlocking possibilities across Chilean industries.¬†¬†

 

And the tech trends in Chile don’t end here! Standing strong among its peers, Chile also boasts a mature cybersecurity landscape. Statista predicts the market to expand at a steady 10.6% CAGR between 2024 and 2028.  

 

Meanwhile, the question still stands: 

 

Why Outsource Software Development to Chile? 

 

Well, see for yourself: 

 

Diverse tech talent pool 

Chile has a growing skilled IT talent pool, estimated at 61,000+ ICT professionals. This number positions the country as one of the 5 most powerful forces in the region after Brazil, Mexico, Argentina, and Colombia. According to The IMD World Digital Competitiveness Ranking, Chile is also #1 in Latin America for digital skills. 

 

Strong tech education 

The country’s vibrant tech scene is nurtured by numerous local universities with tech programs, 5 of which are ranked in the top 30 for LATAM. These include prestigious institutions like Pontificia Universidad Cat√≥lica de Chile, Universidad de Chile, Universidad T√©cnica Federico Santa Maria, Universidad de Concepci√≥n, and Universidad Diego Portales.¬†¬†

 

Also, robust ICT education programs produce high-caliber developers well-equipped to meet the demands of the evolving digital landscape. For example, InvestChile’s “Digital Talent Up” program, launched in 2023, has funded over a thousand boot camps, equipping young minds with in-demand skills.¬†

 

Significant cost savings 

Chilean software developers’ salaries are around 65% lower than the wages of US coders on average. For example, front-end software developers from Chile earn $38,000 per year, while programmers in the States have a remuneration of $109,000. Keep reading to learn more about the salary differences among software developers in Chile, the USA, Canada, the UK, and Germany. 

 

Developed IT infrastructure 

Chile nurtures a vibrant tech hub ecosystem, with Hubtec, HUB Apta, and Know Hub Chile, providing fertile ground for startups and established players. Plus, the Chilean government is turbocharging its journey into the digital era with a whopping 64% budget boost in 2023. So, brace yourselves for a complete transformation set to unfold by 2027! Meanwhile, the ambitious “Chile Digital 2035” plan aims to boost digital rights, infrastructure, security, and public sector digitization. Just look at the numbers ‚ÄĒ 86% of public services were digitalized in 2022, with eyes set on hitting¬†95% by 2025.¬†

 

Software Development Outsourcing in Chile in 2024 - Alcor BPO

 

Growing tech hubs  

Boasting the region’s 3rd largest IT workforce in LATAM, Santiago attracts foreign tech giants like Google, Starlink, Amazon, and Microsoft with its robust infrastructure, welcoming business climate, and skilled professionals. The city maintained its 67th place globally and 4th in Latin America.¬†¬†

 

Beyond Santiago, Chile’s tech scene shines in Valpara√≠so and Concepci√≥n. With their burgeoning infrastructures and vibrant startup scenes, both cities draw in industry giants like Google, IBM, and Uber. Meanwhile, Concepci√≥n’s IT flourishes in commerce, cybersecurity, and digital marketing, adding diversity and dynamism to the national tech landscape.¬†

 

Thriving startup scene 

Chile secured 36th place in the Global Startup Ecosystem Index and remains the 2nd highest-ranked country in LATAM, just behind Brazil. Over‚ÄĮ122 startups from the software and data sectors call Chile home, while the total number of startups has reached 303. These include unicorns like Betterfly, Cornershop, and NotCo.¬†Now, here‚Äôs the real game-changer ‚ÄĒ the Startup Chile program.¬†Get ready for doors swinging wide open to global entrepreneurs, with a top-notch accelerator nestled in the heart of Santiago and a golden ticket in the form of a 1-year startup visa.

Cultural proximity & time zones  

Only two hours ahead of major U.S. and Canadian cities like New York, Boston, and Washington D.C., Chilean software developers not only bridge the time gap but also seamlessly blend into the cultural tapestry. They are adaptable and constantly seek new knowledge to stay ahead of the curve. Local developers foster real-time communication and smooth collaboration with foreign colleagues. You can see why international tech giants like Oracle, IBM, Microsoft, Google, and many others have opted for nearshoring software development to Chile. 

 

Government incentives 

If you decide to nearshore your company’s software development in Chile, you can expect quite a warm welcome from the local authorities. The Chilean government has introduced Law No. 20.570, offering a sweet deal for companies investing in research and development (R&D). This law significantly cuts your corporate tax bill, making R&D more attractive than ever. 

 

Here’s how it works:¬†

  • Tax credit: Invest in R&D and get a 35% tax credit back on your investment. Think of it as a government discount on your R&D costs.¬†
  • Deduction boost: The remaining 65% of your R&D investment can be fully deducted from your taxable income, regardless of your business type. This is like getting some of your R&D money back through lower taxes.¬†
  • Big bonus: There’s a maximum tax credit of approximately $1 million (UTM 15,000) – even if you invest more than that in R&D. So, there’s no cap on the potential tax savings you can enjoy.
  • Easy registration: Sign up online with the Chilean Economic Development Agency (CORFO) until December 31, 2025.¬†¬†

 

In short, the Chilean government is throwing money at companies that invest in R&D. Don’t be left behind – take advantage of this fantastic incentive and boost your innovation!

 

 

 

Chilean Software Developer Profile 

 

25% of women and 75% of men with a degree enter a career in STEM. To balance the scales, Chile launches initiatives like Fundaci√≥n Kodea and Girls in Tech Chile that don’t just empower women in IT ‚ÄĒ they inject 20% more female developers into the country‚Äôs tech workforce each year. ¬†

 

Regarding skills, Chilean software engineers secured 12th place in tech and 39th spot in data science, according to the Global Skills Report 2023.¬†Paired with decent English skills ‚ÄĒ¬†#10 in LATAM in the English Proficiency Index ‚ÄĒ¬†Chilean developers are highly sought-after talents on the world stage.

 

What sets Chilean software engineers apart is their mastery of statistical programming, data analytics, computer programming, and mobile development. The most popular programming languages include PHP, ASP.NET, Java, Python, Node.js, and Perl. 

 

Software Developer Salaries in Chile 

 

Businesses looking to optimize their development costs can achieve significant savings by nearshoring their software development to Chile. Check out this table to get a closer look! 

 

Positions USA Canada UK Germany Chile
Front-End Software Developer $109,000 $102,000 $63,000 $65,000 $38,000
Back-End Software Developer $122,000 $110,000 $66,000 $70,000 $40,000
Mobile App Developer $100,000 $92,000 $68,000 $60,000 $36,000
Data Scientist $128,000 $90,000 $76,000 $78,000 $40,000
DevOps Developer $125,000 $116,000 $80,000 $74,000 $38,000
Software Development Engineer in Test $91,000 $70,000 $58,000 $64,000 $32,000

Developer salaries were converted to US dollars at a relevant exchange rate for January 2024.

 

 

Challenges of Outsourcing to Chile‚ÄĮ¬†

 

When you outsource software development to Chile, beware of some pitfalls as well, for example: 

 

Data security concerns 

Data storage leaks rise yearly like a tide – 82% of breaches‚ÄĮinvolve data stored in the cloud. Suppose you entrust the development of your software to a software outsourcing provider in Chile. In that case, your sensitive data might be exposed unless you adopt robust security measures ‚ÄĒ a possible task in your own R&D center. Another concern is unscrupulous software development companies that might breach your confidential data and exploit your intellectual property for personal gain. ¬†

 

Lack of control 

IT outsourcing to Сhile usually means delegating most management functions to the software development outsourcing services provider. Limited oversight of the development process leaves you mainly in the dark. You can’t immediately check in with the devs to see if they got your feedback. This can lead to dragged-out timelines, communication gaps, and costly errors. Even worse, you never know what the end software product will be like. 

 

Questionable dedication 

IT projects thrive on passionate collaborators. But outsourcing buys you skills, not hearts. Your software developers perceive your outsourcing provider as their primary employer. Why is it bad for you? These developers¬†work under your vendor‚Äôs brand, follow their corporate guidelines, and treat your project as just another one in their pipeline. This ‚Äėleased workforce‚Äô mindset dampens their desire to innovate and go the extra mile for your software product. Effort becomes optional, quality suffers, and complications multiply.¬†

 

Cloudy pricing 

While cost savings remain a primary motivator for IT companies to outsource software development, financial pitfalls still lurk beneath the surface. All because IT outsourcing providers frequently add opaque, not pre-agreed, charges for their services, including the procurement of unnecessary equipment, provision of pricy training for developers, or any extra adjustments and fixes that erode initial cost advantages and lead to budget strain over time. 

 

Tips to Outsource Software Development to Chile‚ÄĮ¬†

 

Once you’ve considered the benefits and potential drawbacks of offshoring in Chile, it’s time to choose a reliable partner. Here are a few tips:¬†¬†

 

1) Define Project Requirements and Goals 

Start by thoroughly outlining your project’s scope, functionalities, and development timeline. Identify specific technological needs and budget constraints. This clarity will help your outsourcing partner propose tailored solutions and avoid misunderstandings later.¬†

 

2) Select a Trusted Outsourcing Partner 

Prioritize vendors with proven experience in your industry or project niche. Review their past projects, client testimonials, and references to assess their technical capabilities, speed-to-hire, and delivery success. Ask for a comprehensive list of services to determine if you need external legal, recruitment, or other back-office support. It is a good sign if your vendor is on independent platforms like Clutch and has guarantees like compensation for delayed developer hiring timelines and candidate replacement warranties, as they ensure accountability and foster a mutually beneficial partnership. 

 

3) Learn about security and IP rights transfer guarantees of the vendor  

The alarming 63% rise in data leaks from development projects, including outsourced ones, exposes vulnerabilities rooted in unethical practices and weak security measures. While NDAs can deter misuse, they don‚Äôt fix the root issue. To ensure maximum protection, prioritize vendors with robust security measures like data encryption, access controls, and incident response plans. Don’t hesitate to delve deep into their IP protection policies, legal expertise in Chile, and IT rights transfer agreement conditions.¬†¬†

 

4) Establish Clear Communication  

Make sure to ask your partner about their protocol for managing timelines, milestones, and deliverables, and outline your desired level of transparency and reporting frequency. Transparency extends to finances as well. Choose a vendor with explicit pricing models aligned with your budget that openly discusses any potential hidden fees. To avoid invoice surprises, favor vendors who provide detailed regular invoices and require no significant upfront investments. 

 

 

Alternatives to IT Outsourcing in Chile 

  • IT outstaffing¬†

IT outstaffing in Chile is a common alternative to IT outsourcing. This model allows temporary collaboration with development teams provided by an outstaffing vendor who handles all employment aspects from HR payroll and tax payment to developer benefits and workspaces.‚ÄĮIT outstaffing lets you scale your software team up or down according to your needs. Plus, unlike in traditional IT outsourcing, you maintain direct supervision over the team and the development process. However, you might face the same security and developer loyalty issues as in outsourcing. And no one forgets buyout fees that you‚Äôll have to pay if you want to hire outstaffed developers in-house.¬†¬†

  • Employer of Record¬†

An EOR (Employer of Record) is the official employer of your developers who work for you. In this model, the vendor takes care of payroll, taxes, and benefits for your candidates but doesn’t interfere with any decision-making and team/development management process. Note that this solution rarely includes IT recruitment services, so you’ll have to find and interview dozens of developers (and spend thousands of dollars extra) before you get the perfect match.  

  • IT recruitment¬†

An IT recruitment agency handles everything hiring-related, from sourcing skilled developers to conducting interviews and helping you prepare job offers. This long-term partnership keeps you involved in decision-making and ensures your voice is heard and your expectations are met. However, only some tech recruiting firms can also perform essential operational functions like payroll, accounting, legal and compliance, employer branding, and others. It’s like the opposite of EoR. 

  • R&D center¬†

The R&D Center model evolves the EoR and IT recruitment approaches into a fully integrated expansion strategy. It seamlessly combines office space, employer branding, EoR, tax and compliance expertise, IT infrastructure setup, and procurement. This transparency and comprehensiveness unlock the true potential of your offshore team and maximize long-term benefits from the tech talent pool. This way, you can almost forget about taking care of mundane administrative functions. 

 

 

A US-based IT company,‚ÄĮPeople.ai, which develops a platform with the help of machine learning and AI that streamlines team management, marketing processes, and sales, opted for this solution when expanding to Eastern Europe. To avoid typical IT outsourcing struggles, they partnered with Alcor and got a complete cycle of support in real estate, legal, and finance issues. Alcor took care of every minor step in setting up the R&D office ‚ÄĒ¬†from IT infrastructure deployment¬†to office preparation and redecoration. As a result, People.ai got a thriving R&D center within just 4 weeks. Eventually, it was staffed with 25 skilled developers. People.ai received complete control over its R&D center together with all intellectual property rights.¬†

 

 

Software Development Outsourcing in Chile in 2024 - Alcor BPO

 

Hire Software Developers in Chile as Simple as Is 

 

Want to unlock Chile’s potential and build your dream software development¬†team here? Consider partnering with Alcor.

 

Apart from IT recruitment‚ÄĮservices, Alcor handles employer of record, which includes HR payroll, tax services, accounting, employee benefits management, and legal support. In addition to these services, our clients get compliance, employer branding, IT infrastructure setup, and¬†procurement management if needed. Focus on your core business, and we‚Äôll handle everything else!¬†

 

We guarantee to bring 20 developers of senior, lead, and other levels on board¬†in 3 months ‚Äď the first batch of candidate CVs will land in your inbox within 5 business days. At Alcor, speed meets quality. So, 80% of the developers we present to clients land interviews. What‚Äôs more, it takes us just 8 stellar CVs to fill a role on average. ¬†

 

The icing on the cake is that you will receive weekly hiring reports and an individual account manager who will guide you every step of the way.  

 

This is why our staffing model is different from traditional software development outsourcing to Chile ‚ÄĒ you get not only a fully functional remote engineering team that belongs to you from the beginning but also an all-in-one operational support, which we call a comprehensive software R&D center solution.

 

Software Development Outsourcing in Chile in 2024 - Alcor BPO

 

Our IT staffing solution has proven effective for many well-known tech companies, including a US-based tech product company, Gotransverse, that develops cloud-based software to automate billing, invoicing, revenue management, and analytics. With a 95% CV pass rate, it took our team just 6 weeks to handpick and place 6 top-tier developers for our client. ‚ÄĮOur comprehensive employer of record, along with finance, procurement, and IT infrastructure setup¬†services, allowed Gotransverse to bypass legal complexities and paperwork mountains, ensuring smooth and compliant hiring.¬†

 

Ready to hire developers in Chile? Let’s talk!  

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Contact us to receive a free analysis of your positions!

It includes the salary ranges and availability of the requested developers in Poland, Romania, and other countries in EE (as well as time-to-hire metrics and other KPIs for your case).

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