• Access to a wider pool of tech talent   

The latest ManpowerGroup research reports that around 70% of tech leaders in the US face difficulties filling roles. With such a severe talent scarcity, Western tech companies are turning to different regions to hire skilled tech talent and launch their software development centers. This opens doors to millions of candidates with diverse skills and tech stacks. For example, Latin American and Eastern European regions boast over 2.5 million tech specialists who demonstrate Silicon Valley-level expertise in Java, C++, PHP, Python, JavaScript, Swift, .NET/.NET Core, and other programming languages. Additionally, they are well-versed in database development, mobile development, cloud computing, and data analytics. 

• Opportunity to slash costs 

Hiring a development team abroad not only unlocks a treasure trove of skilled talent but also lets you enjoy the benefits of more affordable salary rates. For example, senior software developers in Latin America earn about $55,000 per year, while those in Eastern Europe make around $68,000 annually. By comparison, their counterparts in the US charge approximately $117,000 for similar services. On top of that, setting up development centers in these regions means benefiting from business-friendly tax rates and a welcoming environment for growth.  

• Scaling abroad 

Setting up your software development center in a foreign country allows you to tap into new markets and build global partnerships while scaling your operations efficiently. Many Western tech companies have already leveraged this strategy to achieve significant growth. For example, Sift expanded its team with 30 talented software engineers in Eastern Europe within just a year and later achieved unicorn status after raising $50 million in funding from Insight Partners. Other success stories include Ledger, Dotmatics, Grammarly, and the list doesn’t stop there! 

• 61,000 tech talent pool, which grows with 6,000 STEM graduates annually.
• The average annual salary of a Chilean developer constitutes $46,000, which is 64% less than that of an American engineer.
• #4 in LATAM for tech skills, with programmers excelling at Java, Python, PHP, Node.js, and ASP.NET.
• #1 for AI & tech infrastructure and #2 in LATAM for innovation development.
• Ideal time zone alignment, as Chile has No time difference with the US East Coast and a three-hour difference with the West Coast.

• Legal aspects  

One of the main challenges in setting up your software development center abroad is understanding the local legislation and ensuring full compliance. On the one hand, you can tackle it all yourself, starting from scratch. In this case, prepare for a marathon of paperwork and months —possibly years of setup, all while learning the ropes and dodging costly pitfalls in the local market. In addition, overlooking critical legal requirements or missing deadlines could result in hefty penalties, fines, or even the risk of legal actions that could severely impact your business operations and reputation. On the other hand, you can skip the red tape and partner with a reliable local vendor. They handle all the legal nuances and setup, letting you jump straight into building your team without the bureaucratic headaches. 

• Quality of hiring 

Hiring software engineers in an unfamiliar market is no walk in the park. It demands in-depth research into the local labor scene, crafting a smart tech recruitment strategy, and navigating the interviewing process. On top of that, finding that perfect candidate who not only fits your technical needs but also blends seamlessly with your company culture adds an extra layer of complexity. To save time and money while establishing a software development center, tech companies choose to partner with experienced recruitment providers. Typically, these providers offer clear guarantees, such as a 2- to 6-week timeline to fill the vacancy, a specific number of CVs required to secure a job offer, and a large recruitment team with around 40 headhunters on board. 

• Provider choice  

Yes, choosing a reliable partner abroad is another pitfall tech companies face when opting for software development center services. Your scaling experience can quickly go south if your provider makes mistakes — like presenting unsuitable candidates, missing deadlines, mismanaging payroll & taxes, or failing to deliver other operational services, which could force you to juggle multiple vendors. Instead, look for a partner who is not only dependable and trustworthy but also brings top-notch tech recruitment and legal expertise to the table.  

Alcor is an excellent example of such a software development center service provider, having successfully assisted prominent tech companies like ThredUp, People.ai, Gotransverse, and others to set up their software development centers abroad. Our clients have praised our services, with one among others stating on Clutch: “Alcor’s expertise and implementations have enabled us to run our company in the way and at the level we want.” This is thanks to our unique solution, which combines tech recruitment with seamless EoR support, allowing our clients to operate their businesses abroad hassle-free. 

• You want to scale  

Building a software development center is a game-changing opportunity for established tech companies looking to scale and explore new markets. With resources often constrained in a single location, scaling can be a challenge. That’s why leading global tech firms like Ledger, People.ai, and Sift have turned to us to build their development centers abroad. Result? They’ve turbocharged their tech delivery while also growing big in the foreign market. 

• You aim to save costs 

Running software development activities can be pricey for American tech companies, as setting up a software development center with an engineering team in the USA often costs from hundreds of thousands to millions of dollars. But if you’re looking to cut operational costs, starting a software development center abroad is a smart move. For instance, Latin America and Eastern Europe offer some of the best price-to-quality ratios for this purpose, with developer salaries there being 2 to 4 times lower than in the US. Not only will you benefit from lower labor costs, but you’ll also save on technical equipment, office lease, and maintenance, thanks to generally lower prices and rental fees. With these savings, you can reinvest in your business according to your current needs. 

• You intend to focus on your product  

Tech companies are drawn to the software development center solution because it enables them to focus on what truly counts — advancing their core product. Imagine: while a professional service provider takes care of tech recruitment, EoR activities, and other operational support, you manage your offshore team and drive your company’s growth. It’s a great way to cut stress and boost productivity! 

With Alcor, you’ll avoid drowning in paperwork and back-office tasks when launching your software development center. We’ve got it all covered, and our software development center as a service process runs like clockwork:  

• We kick things off with full-cycle tech recruitment in your chosen location. Our team of 40 seasoned headhunters can find Valley-grade software engineers in just 2-6 weeks! 

• Accounting and HR payroll are crucial for smoothly running your new software center. And that’s where our EoR service takes care of everything — from managing salary payments and transferring funds between your R&D unit and headquarters to handling health insurance and leave policies. Plus, we offer comprehensive legal and compliance support, including real estate negotiations, contract drafting (SLAs, NDAs, B2B agreements), and support with labor laws, visas, and M&A. 

• At the same time, if you need your own physical office, our real estate experts are on the hunt for the perfect space for you. We handle everything from location selection and parking to security systems, office layout, seating, and equipment. 

• To complete your software development center setup, we’ll assist in choosing furniture and establishing a robust IT infrastructure — everything from computers and software to security systems and servers.  

When all is said and done, your turnkey software development center is up and running within just 2-3 months!  

• Working with multiple service providers in parallel 

Some companies opt for outsourcing the software development center setup to multiple service providers for different tasks: tech recruitment, employer of record, legal compliance, office lease, procurements, and so on. While this might seem efficient, this approach often backfires, leading to miscoordination, delays, and, ultimately, higher costs and disappointing results.  

Solution? Consider teaming up with a local software development center provider that can manage all back-office functions that you need in one place, ensuring your development center runs smoothly and saving a lot of your time and costs. 

• Overlooking employer branding 

When business leaders overlook promoting their company in a new job market, they often find themselves facing rejected offers from prime candidates. In fact, 60% of job seekers decide against accepting a position due to a company’s poor employer brand. This typically occurs when candidates are unfamiliar with the company’s values, culture, and growth opportunities, leading them to choose other options instead. 

To turn this around and boost your tech recruitment, Alcos kicks off an engaging employer branding campaign by crafting a compelling employee value proposition (EVP), building your company’s strong presence in local developer communities and tech media, and running impactful social media and PR campaigns. For example, we created a video featuring Sift’s Hiring Manager that highlighted the company’s values and team culture. Promoted across social media, the video had a significant impact — leading to a 15% increase in response and offer acceptance rates.