Mexico Near Shore
Mexico as a Global Outsourcing Services Destination
Industry experts agree that the global provider selection process begins with an evaluation of the country. Among the main things to consider:
▪ Geo-political risk
▪ Local government support
▪ Number of IT professionals
▪ Competitiveness of IT professionals
▪ English language proficiency
▪ Cultural compatibility
▪ Cost benefits
Given this context, Mexico is an excellent alternative because it has significant competitive advantages for each criterion that are difficult to match.
This index refers to the measurement of risk for doing business with companies located in other countries. It is important to highlight that Mexico, besides being the second trading partner of the United States, it is also the country that has the greatest number of Free Trade Agreements, including NAFTA with the United States and Canada, one with EU and recently with Japan. These treaties show the trust that global markets have on the low risk level of doing business with Mexico.
Mexico is the country with the largest amount of flights to the United States. The average flight time between Mexican and US cities varies from one to five hours. Most of the Mexican territory is in Central time zone and the rest is on Mountain or pacific times. Daylight Savings Time is followed the same way as in the US.
Local Government Support:
The Secretary of Economy launched the Software Industry Development Program (PROSOFT) as part of the National Development Plan. This program establishes goals with a ten-year vision, including initiatives that promote competitiveness and sustainability of the IT sector.
A big modernizing process in the telecommunications infrastructure started in Mexico with the opening of that sector in the early 90’s. Local conglomerate Telmex and global companies such as AT&T, MCI and Telefonica have invested in infrastructure modernization including fiber optics and satellite links. Thus, many Mexican cities have similar infrastructure as those in the United States.
IT Professionals availability:
The IT services internal market in Mexico represents close to us$2.7 Billion3. Ninety percent of the requirements are taken care locally with more that 1,500 IT services companies. Moreover, the number of students enrolled in IT related programs, represent almost 11% of the national student enrollment. The number of graduates from technical schools and IT university programs annually exceeds 50,000 students4. The quality of public and private universities complies with world standards. Proof of this is the certification obtained by several universities in Mexico from international organizations such as the Accreditation Board for Engineering & Technology, the European Foundation for Management Development and the Southern Association of Colleges and Schools in the United States.
Moreover, it is important to emphasize that because of NAFTA and other bilateral agreements between the US and Mexico, Mexican nationals are not subject to a limited number of H-1B visas; this increases the availability factor for Mexican professionals.
Competitiveness of IT professionals:
Diverse factors make the Mexican professionals competitive in a global market, especially for North America. Many IT professionals work for US companies long established in Mexico, with projects similar to those in the US. Technologies used in Mexico are primarily the same as those used in the rest of North America.
Even though the average salary in Mexico is greater than countries such as India and China, are still highly competitive compared to salaries in the US. Combined with the efficiency gained in infrastructure, telecommunications and proximity, in many cases Mexico provides a lower total cost of engagement.
English Language Proficiency:
A large number of the professionals and business executives in Mexico are fluent in the English language, especially in the IT sector where all the reading materials and training are in English. Mature companies in the service export arena count with English teaching programs in order to enhance the communication between their personnel and their US clients.
The United States and Mexico share the most transited border in the world. There is a constant exchange of services, goods and culture. The US exported to Mexico close to 100 Billion dollars in 2003, which makes Mexico its second largest export destination5.
A great part of the Mexican professionals are exposed to business practices, risk prevention culture and managerial concepts typical of the US, because they work at or for global or US companies. In addition, every day life interaction between both countries gets them closer every day. Mexican society follows closely cultural, sports and entertainment events in the US. All this translates in a greater integration of the day-to-day bi-national work teams.
The cost benefits provided by companies from Mexico go beyond low hourly rates. The benefit extends to reduce the Total Project Cost, which includes the different costs associated with the development of a project such as human capital costs in the US and offshore as well as all the indirect costs. The greatest advantage that Mexico represents due to its proximity to the US is the leverage offsite resources. It is also a more economic option regarding indirect costs such as travel and telecommunications.
NAFTA offers a legal framework for the implementation of contract obligations, intellectual propriety protection and data privacy, as well as migratory measures and regulation of cross border service commerce.
Mexico is also free of US Government export bans, such as those that restrict nationals from specific countries with nuclear weapon programs to have access in certain industries.
It is important to emphasize that under the NAFTA umbrella, most of the goods are allowed to transit from one country to the other with none or very low custom fees, as well as the option of importing goods temporarily. This opens many possibilities for the exchange of services that involve physical contact with equipment, which in other geographies results impossible due to distance, import barriers, and its associated logistical and legal problems.
In this context, we can realize that the advantages that Mexico offers are many, and that the combination of Location, Infrastructure, and Low Geo-politic Risk with Cost Benefits is what makes it stand out from the rest of the countries on the map of IT service sourcing.
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