Why is Nearshore Outsourcing in Costa Rica so Popular?

Outsourcing to Costa Rica might not be your first choice when you consider nearshore possibilities, especially given some of the great outsourcing destinations in the continent, such as Argentina or Brazil. Yet, slowly but steadily, this small country is becoming an interesting nearshore outsourcing destination for software companies.

As #1 in the Happy Planet Index, this charming little country is definitely worth a closer look. Discover why, when it comes to nearshore, Costa Rica might be a good choice for your company.

IT outsourcing to Costa Rica: Technological Advances in the Country

Costa Rica is the #1 exporter of high value-added services in the region and the amount. According to the Costa Rican Investment Promotion Agency (CINDE), IT service exports represent 6.2% of Gross Domestic Product (GDP).

In 2018, Costa Rica exported $3.3 billion in IT-related services and, according to the 2019 Global Innovation Index, is the second most innovative Latin American, behind Chile.

Local & Foreign Investments

According to CINDE, since 2006, the export of services in a Free Trade Zone Regime has grown 12% in 2015, from 22% to 34%, which amounts to approximately $2.4 billion. The total service exports per capita of Costa Rica is $1,540.

Large scale companies are responsible for 88% of IT-related exports while micro-companies account for 7%. Currently, 61% of the capital of exporting companies comes from the United States, 15% from Europe, and 13% from Panama.

San José de Costa Rica/ Credit: Shutterstock

Costa Rica IT Industry

San José, the capital, is at the center of software outsourcing in Costa Rica and of the IT industry in general. In fact, the Inter-American Development Bank expects San José to become one of the five most important poles for software industries and ITC development by 2025.

Currently, more than 20 Fortune 100 companies and over 250 multinationals have chosen Costa Rica as an outsourcing destination, including Microsoft, Intel, Hewlett Packard, IBM, NBC, Google, Amazon, and Sykes.

In terms of the country’s startup culture, several top companies have blossomed in local accelerators and hubs, including Yo Viajo, GreenCloud, Zero Army, Trip Fab, Leaf Grow, and SaborStudio.

When it comes to software development, some of the biggest players in the market are FusionHit, Gorilla Logic, ParallelDevs, 4Geeks, and R/CS.

To continue growing in IT leadership, Costa Rica has established a series of programs such as MenTe, aimed at encouraging women in STEM fields, and the San José Tech Pole Project aimed at renovating old buildings and turning them into tech poles.

Also, there are several free zones and technical parks to help expand the IT industry and IT outsourcing in Costa Rica, such as America Free Zone, Ultrapark, Escazú Village, Free Hold Free Zone, AAA Top Talent Free Trade Zone, La Ceiba Business Park, and San Antonio Business Park.

In addition, the government is currently looking to create a Tech City where more tech and outsourcing companies can be housed.

Coworking Spaces & Accelerators

Coworking spaces have become the perfect environment for local freelancers and companies to flourish. Although most spaces are located in the capital, many more have opened their doors in the rest of the country since 2018.

Some of the most popular coworking spaces today are Selina (located in San José and Jaco), Impact Hub (San José), Swinda Cowork Office By The Beach (Santa Teresa), Sand & Surf Coworking (Tamarindo), Cowork CR (San José), LoCoworking (Samara), SkyLoft Coworking (Santa Teresa), WeWork (San José), and 5DN (Escazú).

Incubators and accelerators have also become increasingly popular among entrepreneurs in Costa Rica. Some of the biggest to date are:

  • Parquetec: accelerator that helps build startups from the ground up and helps them scale their business to hit international markets.
  • Incuba UNA: helps accelerate startups created by local students and educational communities.
  • Carao Ventures: takes on new startups and provides strategic and financial management as well as a solid network of entrepreneurs to help startups grow collectively.
  • Auge: created by the University of Costa Rica, Auge helps innovative startups that are looking to promote inclusive, sustainable development in the country. According to the 2019 World Benchmark Study, Auge is one of the 20 best business incubators in the world linked to a university.

Connectivity Ensures a Successful Costa Rica Outsourcing

Costa Rica is one of the countries with the biggest amount of connected homes, with a 36% increase between 2010 and 2015, the greatest growth experienced by a Latin America in that timeframe, according to the Economic Commission for Latin America and the Caribbean (CEPAL).

In addition, out of 61 countries analyzed by the Alliance for Affordable Internet in their most recent report, Costa Rica is the 4th country with the most affordable internet. According to the National Telecommunications Fund (FONATEL) in 2018, 89% of the districts in the country had internet access.

Currently, almost 350,000 Tican homes have fiber to the home connections and an additional 100,000 more will be added soon. Costa Rica has also started looking into 5g networks and began a few trial stages, according to the Costa Rican Electricity Institute (ICE).

English is an essential part of outsourcing. Costa Rica definitely has what it takes in this department. According to the EF English Proficiency Index, Costa Rica is #2 in Latin America in terms of English proficiency, right after Argentina, and #30 worldwide. It scored higher than countries such as France, Spain, Italy, Russia, and Mexico.

English Proficiency, the Key to Outsourcing to Costa Rica

In addition, according to the 2019 TOEFL ranking, Ticos have the second-highest scores in the region, with 91, just below Trinidad and Tobago.

One of the government programs responsible for these results is Alliance for Bilingualism, created to get 15,000 students in low-income areas the opportunity of getting a B2+ level by 2022, improving their chances of getting better employment and education opportunities.

Teachers are also key to improving language proficiency. Currently, 51% of English teachers in Costa Rica have an intermediate level of English and 30% have an advanced level, according to a recent report by Interamerican Dialog and Pearson. 

Credit: Unsplash

Costa Rica Software Outsourcing Made Easy With Local Skilled Professionals

Costa Rica has one of the highest levels of literacy in Latin America, according to the Global Innovation Index, with 96%. Since 2010, the country has experienced steady growth.

In terms of coding and programming skills, Ticos are highly skilled. In fact, the Coursera Global Skills Index 2020 ranks Costa Rica as #3 in the region, behind Argentina and Brazil. Also, according to the World Economic Forum, its workforce is #1 in human capital.

Local software developers have several programming skills, and according to market share research, the most in-demand languages today are PHP, ASP.NET, and Java, while Lua, Node.js, Python, Perl, Ruby and Go are still less popular among local businesses. Agile development practices are also very popular and a key ingredient to successfully nearshore in Costa Rica.

When it comes to employment, between 2016 and 2017, 10,000 new jobs were created in the IT sector, and according to CINDE, computing engineers are one of the 10 most in-demand jobs today.

Local IT Degrees and Masters: Searching for Local Talent has Become Easier

The number of college graduates has grown steadily since 2010. Every year, around 4,000 students graduate from engineering programs.

The universities in the highest positions in global rankings in terms of computer science, engineering, and tech-related degrees are the University of Costa Rica, the Technological Institute of Costa Rica (TEC), and INCAE Business School (second-best business school in the region). However, most universities in the country offer at least one degree in engineering.

Costa Rica is also expanding its partnerships with other international universities. As a result, Texas Tech University, a collaboration between Microsoft and Women in Artificial Intelligence, will be opening this year to provide additional education in tech.

Students can also specialize in QA, in quality and productivity systems, application architecture, cloud computing, data analysis, and data science, machine learning, blockchain, and 5g, among others. These are all extremely sought after by companies looking to outsource their software development operations to Costa Rica.

Why Nearshore in Costa Rica: Additional Benefits

Aside from all the different sections mentioned above, in terms of nearshore outsourcing, Costa Rica offers several additional benefits for U.S. companies, including:

  • cultural compatibility: with excellent global workplace skills, Costa Ricans are perfectly capable of living up to the expectations of U.S. workplace demands.
  • cost benefits: Tico professionals provide great service at an affordable price. Rates are extremely cost-effective and depending on the level of expertise, rates per hour range between $25 and $50 per hour.
  • convenient time zone: U.S. companies can have up to 8-hour overlaps with developers in Costa Rica. Plus, the country is a short flight away and it can be reached from virtually any major U.S. city.
  • stable business environment: one of the few countries in the world with no army, Costa Rica is a beacon of peace and is one of the most politically and economically stable countries in the region. 
  • tax incentive package: Costa Rica offers an attractive tax relief package for foreign companies.
  • prosperous entrepreneurial country: According to the Global Institute of Entrepreneurship and Developments, the country provides the best conditions to start a business from scratch in Central America.

As with most developing countries, Costa Rica still has a long road ahead, but it offers some of the best conditions in the region to any company looking to expand and grow internationally.

Did you know nearshore outsourcing was so popular in Costa Rica? Leave us a comment.