How to Offshore in Uruguay for Tech Companies

Patrick Ward Patrick Ward Follow Mar 25, 2020 · 8 mins read
How to Offshore in Uruguay for Tech Companies

Uruguay is not only a feasible option for IT staff augmentation; it’s a strong one at that. I’m going in depth on why and how you should approach offshoring in Uruguay, including the proper precautions to take when considering it.

Why Uruguay for Offshoring?

At the top level, three main components make Uruguay a compelling location for offshoring.

1. Location Within Three Time Zone of the Continental US

For good reason, this nearshore option is considered an undiscovered gem compared to some of its surrounding areas, namely Argentina and Brazil. Depending on daylight savings, Uruguay is only about one to two time zones ahead of Eastern Standard in the United States. Suppose you have a bug to take care of. When engaging with a Uruguayan vendor, you can communicate that to them in the morning and potentially roll out a fix within the same day rather than waiting until they wake up. When working with an offshore partner such as India or Pakistan, this just isn’t the case.

2. Engineering Talent Pool with Strong Education Pipeline

Starting in the 1980s, Uruguay invested so heavily in STEM education, it culminated in an early 2000s policy informally known as “Laptops in Cribs”. Traditionally, Uruguay had been highly agrarian, but in an effort to position themselves for the future, they gave children laptops with which to learn coding and programming languages during their most absorbent and formative years. Suddenly, the country had built a foundation to successfully bring up the next generation of people, highly educated in the field.

Even today, aspiring developers in Uruguay must commit to six years of schooling in order to become certified. Because technology develops so rapidly, you need to make sure your developer pipeline is moving at a suitable pace to keep up and meet new challenges. Therefore, it’s not just about who has the tech talent of today, but who has the tech talent of the future. Uruguay certainly satisfies this prerequisite.

By necessity, Uruguay is always looking at the next wave of technology. Terms like “machine learning”, “AI”, and even “5G” are still little more than buzzwords to a lot of people—but in Uruguay, those words represent the day-to-day reality of working as a developer.

This is where their educational background once again comes into play. While the benefit of the US candidate is their pure and fundamental computer science background, they often come out lacking practical experience, whereas your trade-school candidate tends to be the opposite. Uruguay’s standard six-year computer science education track provides the best of both worlds — rigorous fundamentals taught in the context of the industry by professors who are also practitioners.

Comparative Price Ranges for Offshoring in Uruguay

Quality concerns when offshoring are always legitimate, but there remains a certain pricing pressure evident in the US, where your average software engineer makes an approximate median salary of $85,000 per year—and in many cases, it can be upwards of $115,000. With Uruguay, on the other hand, you’re looking at a median $35,000 a year. Keep in mind that you can hire junior devs with a minimum six years of education, at even lower cost, with salaries tending to be closer to $20,000. This significant dropoff in price without sacrificing quality is the primary reason to go with a place like Uruguay over an onshore partner.

Of course, you’ll also want to compare Uruguay with its nearshore alternatives, Argentina and Brazil, where you can find devs for as low as $30 or $40 an hour. On the junior end of Uruguayan devs, you’re looking at $50/hr; at the senior end, maybe $75. So yes, it’s true that they’re more expensive than their neighbors—but their work ethic and formalized educational background elevate them to an unmatched level of versatility and value.

Remember: the goal is more than just finding a developer. It’s to find one who can competently deliver your ideal product while mitigating the risks of it collapsing, failing, or being unable to scale. Sometimes, a little foresight can save you more money than just seeking the cheapest staff available. It’s important that as a client, you don’t neglect to weigh-up the long-term implications of your decision.

Preparing for Potential Problems

Taxes

Taxation for US companies operating in Uruguay isn’t absent of complications; any partnership with an Uruguayan developer or agency means dealing with multiple different tax authorities. Your accountant will have to deal with separate entities: one for the US and one for Uruguay. If you’re not an accountant, suffice to say it’s difficult to deal with two distinct tax regulations.

However, it is important to note that Uruguay’s taxation itself is about equivalent to Argentina’s—and it’s considerably lower than in Brazil, whose taxation policy toward foreign entities can be less favorable. Additionally, Uruguay’s currency is not as volatile as its neighbors’, and it doesn’t tend to suffer the same erratic spikes in inflation as Argentina or Brazil.

Logistics

The logistics of working with foreign talent often necessitates working with an agency, as the alternative is navigating all the different systems mentioned earlier. Of course, you may be prepared to accept a one-on-one partnership if you’re only in need of one developer. That’s at your discretion. Just be aware that if you need any more support than that, an agency will absolve all of your regulatory, startup, and compliance costs. Would you rather sign a contract and pay a flat rate—or be painstakingly responsible for all the minutiae yourself? Take it on a case-by-case basis.

Competition

Competition for the talent pool is huge, and it’s why established agencies continue to thrive. Medellin in Colombia became a smart city. Buenos Aires in Argentina became a blockchain city. Montevideo in Uruguay went down a different path: rather than specializing in a single facet of technology, they decided to focus on creating well-rounded developers. This has led to a number of globally recognized IT consultancies like Cognizant swooping in to vacuum up the vast majority of tech talent present, making it difficult for new players to access that talent.

Culture

Differing cultural values play a very real role here. The American attitude is characterized by a fast-paced daily life and hungry ambition in business. If asked the question, “Do you live to work or work to live?” Many Americans would honestly fall into the former camp, but Uruguayans very much belong to the latter. You can try to crack the whip for extra hours or offer special incentives for meeting deadlines, but Uruguayans aren’t motivated by these things the same way Americans are. This is not a flaw of their work ethic; it’s simply a matter of principle. This is important to understand and plan around with your project managers.

How to Set Yourself Up for a Positive Outcome When Outsourcing in Uruguay

No matter the size of your IT company, there are methods to succeed and not just survive, but thrive. Before you make a decision, see where you fall on this list:

Tips for Early-Stage and Smaller Startups

If you’re a startup in its early stages, you’ll probably be looking at direct-to-talent options. At this point, you might look at a place like UpWork or TopTal for finding independent contractors. If your mind is made up on using an agency, choose a small one—like, less-than-10-people small. One might think of these as “boutique” agencies, the next step up from a one-to-one partnership.

Tips for Mid-Size Tech Companies

For mid-sized tech companies looking to bring on a team of 10-20 devs with a specific skill set, go with a reliable mid-level agency that’s been around for a while, like Rootstrap. There are about a hundred similar agencies based in Montevideo or greater Uruguay, and their rates are more affordable than top-level consultancies.

Tips for Larger Tech Companies

At the top tier, let’s say you’re directing a project in the upper echelons of a place like Google or Facebook, and you need a network of teams totalling to around 200 developers to support your operations and react to current events in a longer-term engagement. If you’re at the enterprise ($1B or higher) level, you might set up your own operations in another country.

Outside of that, managed IT services are the ones who will take care of absolutely everything. They can negotiate multi-year deals and get you discounts on certain components in addition to providing you with a tech team, managing your infrastructure, handling your cybersecurity, et cetera.

Someone in this position could certainly work with smaller agencies, but it’d likely only work with a subsection of the company, like the data or architecture team for a specific project.

Patrick Ward
Written by Patrick Ward Follow
Hi, I'm Patrick. I made this site to share my expertise on team augmentation, nearshore development, and remote work.
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