Costa Rica: The Near-Shore Alternative for Embedded Software Engineering Print

By Larry Allgood, President, Avionyx


Most companies are aware of the software engineering talent that can be found in India and other distant countries that can be utilized to reduce their overall software engineering costs. And with the economy slumping, many more companies are now looking at this option much more closely. Although there are many decisions to make and risks to take when going off-shore, Costa Rica offers a near-shore alternative that may make the decision a lot easier.

Near-shore outsourcing

As with buying real estate, the three most important things to consider when going off-shore are Location, Location, Location! This couldn’t be truer for going off-shore since the location affects nearly every critical aspect of how you will do business from now on. Consider this: Your location dictates how often and how soon you will be able to travel to, communicate with and ship to your off-shore location. Any company that has been to India and to Costa Rica can attest to the difference.

While India has plenty of talent and established companies to choose from, the 20+ hour flights are imposing and so is the one day lag time in day-to-day communications due to a 12-hour time difference which makes it difficult – if not impossible - to include all the team members in weekly teleconference status meetings.

Now throw in high employee turnover rates that make it unlikely you will have any continuity of team members from one project to the next. Shipping delays can span weeks. Putting a liaison at your location can help in some cases, but not always.

It is easy to understand why some companies have procrastinated in making the decision to go offshore.
But why go half-way around the planet to get cost-effective engineering talent? You may have asked yourself “Are there any developing countries in the Western Hemisphere that have software engineering talent and infrastructure that can compete with India?

Well, although many companies are not aware of it, the answer is definitely YES.

While many Americans are familiar with Costa Rica as a vacation, retirement or real estate investment destination, most are completely unaware that over 300 foreign companies (mostly from the US) have been quietly setting up operations in Costa Rica since 1997. These companies have been taking advantage of an excellent university system that has been producing top engineering talent for years, most of whom speak English fluently.

Intel – The First Company to Discover the Talent

It all started when Intel realized that Costa Rica had made a strategic decision 50 years ago to discontinue its military choosing instead to use that money to educate its people. Intel opened in Costa Rica and soon after turned its start up Integrated Circuit Fabrication facility into its most efficient Fab in the world, the only one that manufactures Intel´s server CPUs. And, although Intel is closing many of its fabs in Asia, it continues to expand its fab in Costa Rica.

As the news spread, more and more companies moved to Costa Rica, including Procter & Gamble, Hewlett-Packard, L-3, and Baxter Healthcare. Today, a new company moves to Costa Rica every 20 days.

Costa Rica has four major universities and 50 private colleges located in the San Jose valley, and it attracts 78% of all Central American engineering students. The computer science, computer engineering and electronic engineering programs are on par with major US universities.


Travel to Costa Rica

Oh, and no 20+ hour flights here. In fact at least 13 airlines have direct flights from 10 US cities to San Jose, the capital of Costa Rica (where most industry and universities are located) in 3-5 hours. See the following table for more details.

Airline US City US State Airport Code Frequency Flight Time

Airline US City US State Airport Code Frequency Flight Time
US Airways Phoenix AZ PHX Daily 5:45
LACSA Los Angeles CA LAX Daily 6:20
American Airlines Los Angeles CA LAX Daily 6:15
Frontier Airlines Inc. Denver CO DEN 5/week 5:45
LACSA Miami FL MIA Daily 2:45
American Airlines Fort Lauderdale FL FLL Daily 2:45
American Airlines Miami FL MIA Daily 2:45
Spirit Airlines Fort Lauderdale FL FLL Daily 2:45
ATA Miami FL MIA 5/week 2:45
Delta Air Lines Atlanta GA ATL Daily 4:04
US Airways Charlotte NC CLT Daily 4:12
Continental Newark NJ EWR Daily 5:05
LACSA New York NY JFK Daily 4:55
Delta Air Lines New York NY JFK 5/week 4:55
United Airlines New York NY JFK 6/week 4:55
US Airways Philadelphia PA PHL Saturdays 5:15
American Airlines Dallas-Fort Worth TX DFW Daily 4:10
Continental Houston TX IAH Daily 3:55
Jet Blue Orlando FL MCO Daily 3:04

 

Time Zone: Costa Rica is in the Central Time Zone and effectively in the Mountain Time Zone half of the year (it doesn´t recognize daylight savings time). Perfectly centered on the continental US time zones, this makes real-time daily communication easily manageable (no 1-day lags).

Near-Shore Cost Effectiveness

While the Indian off-shore model may make sense in large 25-100 person teams doing Windows and Web development, the model doesn´t fare nearly as well for typical embedded software engineering teams of 4-12 engineers. Simply put, there are not enough team members to amortize the extra cost of the liaison(s), reducing the cost-effectiveness further. Unlike Windows and Web development projects that can be done without any hardware (other than a PC), the target hardware in an embedded project is typically developed in parallel with the software. Additionally, multiple revisions of the hardware will need to be shipped off-shore to support the software development. While shipping can be delayed by weeks and sometimes a month or more in India, shipping to Costa Rica can make the door-to-door trip in 1-2 days if using a Fedex Letter box, and 3-5 days for larger shipments.

Infrastructure: Logistics certainly play big into risk management for off-shore collaboration, but other very important issues need to be considered, such as infrastructure. In addition to satellite communications, Costa Rica has no less than 3 under-sea telecom cables for voice and data from the Pacific and Atlantic, providing reliability through redundancy. And, although Costa Rica has numerous reliable power generation plants, 85% of which are hydro-electric, most of the free trade zones offer additional power backup systems that insure up time in excess of 99.9% of the time. These free trade zones also provide advantages with regard to security, taxes and streamlined customs processing.

Another issue that is all too evident in light of the violence in the middle-east and particularly after the November 2008 India massacre of hundreds of Indians, tourists and business people of the US and other countries, is political stability.

Political Stability: As a peaceful democracy for over 100 years, Costa Rica is known as the "Switzerland" of the West. The only political uprising occurred over 50 years ago when the incumbent president tried to use the military to retain power after losing his re-election bid. The people rose up and not only got rid of the president, but the military too. Costa Rica has since enjoyed a strong relationship with its neighbors and with the US as 50% of its imports and exports are with the US.

Although Costa Rica has many advantages over India for embedded software engineering, setting up a company in any foreign country and managing it is not particularly desirable for many companies and even for those companies that might want to take the additional risk, it is usually prudent to test the waters first by subcontracting to a company that is already established in Costa Rica.

Costa Rican Culture: Family-oriented, it is very common to have 2 or 3 generations of family living together. Unlike in the US where both parents must work, there are multiple family members in the home to help raise the children and to instill the right values and work ethic that some would say are missing from many kids in the US today.


About Author, Avionyx:
Larry Allgood is the president and founder of Avionyx, Inc. in the US and Avionyx, S.A. in Costa Rica. Mr. Allgood, an instrument-rated pilot and Electrical Engineer, has nearly 30 years of experience in embedded hardware, software and management experience with Avionyx, Harris Aerospace Systems Division and other companies.

Avionyx has provided embedded software engineering services since 1989, primarily to aerospace companies requiring high quality software assurance. Avionyx opened its engineering facility in San Jose, Costa Rica, in 2004 and has steadily improved its performance and quality metrics with a continued investment in training, process and tools. As a result, its customers have continued to expand Avionyx’s role in their projects.

If you would like to find out more about how Avionyx can help you improve quality while at the same time cutting your software engineering costs in half without the risk and hassle of going around the globe to do it, please visit www.avionyx.com or contact our sales department at 321-821-2365 x404 or email us and we will be happy to help.