Nearshoring is a great way to remain competitive, as it allows you to hire qualified talent within the same/similar time zone but for the fraction of the cost. For many businesses from North America, Latin America is now one of the most alluring software development destinations for nearshoring.
In this article, we will focus on Mexico as one of the most prominent nearshoring locations in the region. We will take a look the factors that make nearshore software development in Mexico so popular, explore what makes the Mexican tech market attractive to foreign investment, and explain how you can benefit from collaborating with local talent.
Why should you do business in Mexico?
According to the American Industries Group, Mexico has tremendous nearshoring potential in the Americas. The country is among the most prominent IT exporters in the world, with more than $21B in exports. In recent decades, foreign investments and IT outsourcing have been essential to the country’s economy.
The US and Mexico have a close relationship regarding investment and trade, mainly due to the US-Mexico-Canada Agreement (USMCA), effective since 2020, which includes a specific chapter on digital trade. The chapter aims to form the basis for the three countries to cooperate in developing and integrating their digital markets. It also addresses key elements such as removing restrictions on cross-border data transfers. Addressing them is vital for digital trade to flourish in North America.
What's more, Mexico is a member of the G20, the Pacific Alliance, and the Organization for Economic Cooperation and Development (OECD). All these memberships contribute to the overall economic stability of the country. In March 2018, the country became the first LatAm nation to establish fintech regulations, which were crucial for ensuring user protection.
The country provides attractive incentives to international companies, such as:
- No obligation to pay local or state income taxes on corporate earnings;
- Special grants that are provided by the National Council of Science and Technology (CONACYT);
- Global commerce and free-trade agreements with several jurisdictions, including the EU, Norway, Israel, Switzerland, Costa Rica, Colombia, as well as Japan;
- As stated in the 2020 Doing Business ranking by World Bank, Mexico has one of the highest scores (8) regarding transaction transparency.
So it is safe to do business in the country. But what about nearshore software development in Mexico? Let’s take a look.
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Nearshore software development in Mexico: market overview
Regarding hiring nearshore, Mexico is a very alluring destination for US-based businesses. And here is why. The local government invests in infrastructure in order to promote IT outsourcing and, thus, foreign investment. One of such activities was, for instance, establishing IT clusters throughout Mexico. So, the local companies can collaborate with one another to boost the Mexican tech branch.
So, the business environment is now favorable for nearshore outsourcing in Mexico. Now, let’s view the benefits you can expect when choosing Mexico as your destination.
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The business environment in the country is favorable for outsourcing
A member of the OECD, Mexico is an emerging financial market with Latin America's highest per capita income. It is an export economy heavily dependent on the economic situation in the US, which is the target market for 80% of Mexican exports.
Mexico is the second biggest IT market in the region, with 225,000 tech professionals and the largest number of IT vendors. More than 438 Mexican software development firms are listed on Clutch. Regarding industry focus, many providers of nearshore outsourcing to Mexico specialize in financial, business, and consumer services, as well as e-commerce, retail, and others.
The main areas of expertise are mobile app development, web development, IT strategy consulting, and IT managed services.
Mexico also has some of the region's best and most sought-after accelerators, with a wide variety of high-quality programs and different sorts of investments. Here are some examples:
- TechStars: Annually, the platform chooses 500 newly-established firms to undergo a three-month mentorship and receive $120,000 in investments for their development. As of late 2021, the accelerator has worked with over 2,300 companies.
- 500 Startups LatAm: This accelerator was named the most active venture capital fund in the world by Pitchbook in 2019. It has invested over $10M in 170+ startups, including companies like Apurate, Pagaris, GravitiBonnus, Expansive, Chipax, Reservaturno, and Shopeando.
- MassChallenge: Partnered with Meta Mexico, the International Development Bank (IDB), and Nestlé, this zero-equity accelerator provides mentorship as well as up to $100,000 in investment.
Local STEM education system ensures constant talent inflow
The country is on track to provide its tech industry with the talent to meet growing demand with a constant inflow of qualified graduates. Annually, Mexican universities graduate 120,000 students with engineering degrees. In fact, the country boasts some of the best technical universities in the region. Some are listed at the top of the international rankings, such as QS and Times World University Ranking.
Currently, the three universities with the highest scores in international rankings in technology studies are:
- National Autonomous University of Mexico (UNAM);
- Tecnologico de Monterrey (ITESM);
- Universidad Autonoma de Nuevo Leon (UANL).
These and other institutions prepare the professionals that will enter the labor market in the years to come. So, it is vital that you choose a nearshoring destination with a strong network of tech universities.
Time zones in Mexico overlap with those in the US
Opting for nearshore outsourcing to Mexico, the US-based businesses can work with teams in the same or close time zones. Additionally, Mexico shares its borders with the US, making potential business trips much faster and more convenient. Here is the image of available connections from major US cities to Latin America.
In the picture below, you can see how the time zones in Mexico are close to those in North America.
Mexican professionals are a good fit for international teams
The fact that Mexico and the US share a border means that the two cultures have a long history of coexistence and exchange. However, it is not the only reason that representatives of these cultures work well together. According to Hofstede Insights, Mexico has a score of 30 in terms of individualism and is considered a collectivistic society. It means that Mexican professionals are prone to a long-term commitment to the member “group,” be it family, friends, or, most relevant in this case – the work environment. So, they are good team players, which is vital for successful nearshore outsourcing to Mexico.
When it comes to power distance, at a score of 81, Mexico is a hierarchical society. This means that locals accept a hierarchical order in which subordinates expect to be told what to do. Managing such a team is easier. That is also critical when it comes to nearshore outsourcing in Mexico.
Many global businesses have already established R&D centers in the country
Many global giants opted for nearshore software development in Mexico when the local IT market started to develop. Delphi, Toyota, Ford, Nissan, and Chrysler are just a few. A significant chunk of Mexican tech professionals works in the R&D sector. This fact can be viewed as both advantage and disadvantage of nearshore software development in Mexico. On the one hand, the presence of such industry giants may lead to intense competition for talent, as these companies allure the best employees. On the other hand, these global businesses set a high bar for their employees, so the other professionals in the market must keep up to stay competitive in the labor market.
Local laws ensure intellectual property protection
Mexico and the US have built trade agreements that guarantee intellectual property protection. This allows you to freely share the information needed to design and create new software with experts in Mexico without fearing having this data stolen from you.
With all the benefits in mind, let’s now take a look at the most significant hubs where you can opt for nearshore software development in Mexico.
Hubs of nearshore outsourcing in Mexico
To successfully attract foreign investment and develop IT skills and products, Mexico invested in more than 20 technological parks in Aguascalientes, Chihuahua, Coahuila, Mexico State, Guadalajara, Durango, and Jalisco.
However, the most prominent IT hubs across Mexico are Mexico City, Guadalajara, and Monterrey. Let’s take a closer look at them.
1. Mexico City
A recent CBRE report states that Mexico City has the second-highest availability of technological talent in Latin America, with more than 160,000 developers. It is also a startup-friendly destination home to 65 business startups.
Known as the "Mexican Silicon Valley," Guadalajara is home to a thriving technology industry and 93 outsourcing companies, according to Clutch. The city has the second-largest pool of skilled developers – 100,000 professionals and houses 65 startups on par with the capital.
This is another major IT outsourcing hub in Mexico, with an advanced tech hub with a high concentration of full-stack and back-end developers, QA specialists, and solution architects. The city is known for its expertise in software development, cybersecurity, and data analytics expertise.
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How can N-iX help you find talent for nearshore outsourcing in Mexico?
- N-iX is a global software development company that’s been working with clients across industry verticals such as manufacturing, automotive, logistics & supply chain, healthcare, and other industries for 20 years;
- Our professionals work with such global businesses as US-based companies like Gogo, Seeking Alpha, Office Depot, Fluke, and OpenText, as well as Fortune 500 enterprises;
- N-iX partners with such American tech giants as Microsoft, OpenText, Amazon, and Google providing our clients with consulting and development services;
- We have a delivery centre in Colombia and work with talent across the whole Latin America to provide you access to the region’s top professionals and hire experts in 25 countries across the globe;
- N-iX is a globally recognized vendor, awarded with numerous industry recognitions such as Forbes, CRN 500, IAOP GO100, Forrester, and more.