Is Latin America the new India when it comes to offshoring? Maybe not, but it's playing an increasing role as large organizations move to a more diversified, multi-sourcing model, Beni Lopez, the US CEO of Softtek [1], said in a conversation today. Its business certainly isn't hurting: The company has seen a 35% annual growth rate in the past two years, he claims.

Softtek has operations in Mexico, Brazil, China and Spain, but does most of its business out of its Latin America bases. "We have an offshore component but it’s driven by follow the sun projects," he says. Despite rising costs in India, Lopez admits that Latin America still doesn't have a wage cost advantage over India or China.

Latin America's primary advantage is geography: It lies in the same time zones as North America, making collaboration and communication with support staff easier. While the same programs can be run from India, the time zone differences mean third-shift staffing, which leads to higher attrition rates, he claims. In some cases, he says, due to the need for time-zone synchronization and collaboration, a contract may require that 30% of support staff work in North America, usually at U.S. rates,while 70% work in India. By leveraging sites such as Mexico, he claims, 90% of the work can be outsourced. "We have an average of a 10 to 15% higher rate than India," he admits, but the higher percentage of the work done in Mexico can make the total cost of the engagement lower.

If not Latin America, then who will be the next India of offshoring?

In terms of large-scale operations, says Lopez, "The only other pure offshore destination is China." Softtek, he says, specializes in "follow the sun" projects. It's China operation may get a piece of such projects (although 60% of its business is local). But, he adds, there will always be work that can't be offshored easily.