Context
NexTech Services, an India-based IT consulting and digital transformation firm, built its reputation through cost-efficient global delivery centers in Bangalore, Pune, and Hyderabad. Its model—offshore-centric, with limited on-site client presence—had worked well for North American and European clients for nearly two decades.
However, by 2022, NexTech’s expansion into Latin America revealed limitations in this approach. Clients in Brazil, Mexico, and Chile increasingly demanded local delivery presence, faster turnaround times, and local-language support. Moreover, regional governments began introducing “local content” requirements in technology outsourcing contracts, giving preference to firms with registered local entities and local employment commitments.
To respond, NexTech’s leadership began exploring the establishment of a regional delivery hub in Latin America. The hub would serve two purposes:
- Deliver projects closer to clients (same time zone, reduced coordination lag).
- Build a base of regional talent and leadership to grow NexTech’s credibility and market share in the region.
The Strategic Dilemma
The Global Head of Delivery, Priya Deshmukh, was tasked with designing NexTech’s “Latin America Capability Strategy.”
She faced several intertwined challenges:
- Location Choice:
- Mexico City: Strong IT talent and proximity to North America, but rising costs.
- Colombia (Bogotá/Medellín): Competitive costs, emerging tech ecosystem, government incentives.
- Brazil (São Paulo): Large client base, but complex labor laws and high local costs.
- Talent Strategy:
Should NexTech hire locally or deploy expatriate managers from India to ensure cultural and quality alignment?
The global HR head argued that expatriates were essential for the first two years. Regional leads countered that local leadership was key to client trust and retention. - Governance and Integration:
How tightly should the Latin America hub be controlled by headquarters? Should it follow standardized global processes or be given autonomy to adapt locally (e.g., language, work culture, client engagement norms)? - Cost and Scale Pressure:
Building a hub meant upfront capital investment—leasing facilities, local hiring, training, and compliance setup—while margins in Latin America were thinner than in the U.S. market. - Long-Term Play:
The CEO believed the region could serve as a “nearshore” delivery zone for both North and South American clients—similar to what Eastern Europe had become for Europe. But the question remained: Was this the right time to invest heavily?
Current Situation
By early 2023, NexTech had piloted a small delivery pod in Bogotá with 80 engineers, working on two client accounts. The pilot’s success improved client satisfaction but also exposed challenges—cultural misalignment, English proficiency gaps, and lack of senior technical leadership.
Priya now had to recommend to the board whether to scale up the hub to 500 employees and make it the regional headquarters, or to continue partnering with local subcontractors for the next few years while gradually building internal capability.
Discussion Questions
- What are the strategic reasons for building regional delivery capability rather than continuing remote delivery from the home country?
- How should NexTech decide on hub location and talent strategy (local, expatriate, or hybrid)?
- What governance model would balance global control and local autonomy for the new hub?
- What are the risks of premature investment in regional capability, and how can they be mitigated?
- How can NexTech ensure that regional delivery quality and culture align with its global standards while leveraging local strengths?
Dr. Selvaraj Vadivelu 