Tech’s Offshore Hiring Has Gone Into Overdrive

In the Past year, Sebastián, a developer based in Ecuador, has received more LinkedIn messages from recruiters trying to poach him than ever before. One particular message caught his eye: It was from a Miami-based delivery startup. Sebastián, who asked that his last name not be used to avoid jeopardizing his current employment, was excited by the potential growth opportunity.

“I would like to know how companies in the United States work, how things are done there,” he says. Many other experienced developers outside the US have found themselves in increasingly high demand from American tech companies as the rise of remote work and a US talent shortage have spurred searches for more globalized teams.

A 2022 report from tech services company Commit estimated that offshoring software development roles would increase by 70 percent over the next year. Some companies, like Coinbase and Shopify, have already hired aggressively outside the US to fill open technical roles. “Software developers are shaping up to be the first global role,” says Alex Bouaziz, the 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.

In the past, companies accessed a wider pool of talent by strategically building offices in secondary markets. “It was mostly like we have an HQ1, then we pick one market and we build HQ2,” says Dylan Serota, cofounder of Terminal, a company that connects developers in Latin America, Spain, and Poland with startups in places like the US and UK. Terminal provides the infrastructure to offer benefits and pay local taxes, something many smaller companies don’t have the resources to put in place. The rise of remote has encouraged companies to rethink their approach to talent in ways they would not have considered doing before, says Serota.

To help facilitate this process, companies like Terminal and Telescoped vet developers and startups and then provide benefits like health insurance, pay local taxes on behalf of the developers, and ensure the developers receive perks like paid time off and equity. “About 80 percent of the developers we work with have equity in the startups they work with,” says Serota.

Many new hires are coming from countries like the Philippines, Argentina, Brazil, and India. While tech companies have long sought out those markets to cheaply staff call centers, content moderator positions, and IT departments, they are now following talent to fill open roles on any 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, a partner at the 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 attention from companies based in the US. The region shares time zones with the US, and seeking out talent in cities like Mexico City or Bogota allows startups to “avoid competing for talent in places like San Francisco,” says Bouaziz. It’s also significantly cheaper: The average monthly salary for a software engineer in Mexico is $3,165, according to Coders Link, a platform that connects Latin American talent with US-based tech companies. That’s about one-fifth the salary of a software engineer in San Francisco. The war in Ukraine, which was a major hub for IT outsourcing, has also accelerated this trend, according to Serota. As workers were forced to flee their homes or fight the Russian invasion, foreign companies have sought new places to offshore their work, and Serota says the demand has shifted rapidly to Latin America, as well as some other markets in Eastern Europe.