Businesses from North America have been working closely with custom software development companies in Mexico for decades building strong technology partnerships. Tech giants such as Microsoft, Microsoft, Oracle, and Google run R&Ds in Mexico, benefiting from the country's strong talent pool, geographic and cultural proximity, and favorable conditions for doing business.
It is the right time for you to look closer at software development outsourcing to Mexico and see how your business can benefit from it. Together, we will discover the factors that make the Mexican tech market attractive to foreign investment, touch on the possible challenges of working with local talent, and ultimately explore the opportunities for your business in the region.
Market overview
The American Industries Group states that Mexico possesses significant potential for nearshoring in Latin America. It stands out as one of the leading exporters of IT globally, with exports exceeding $21B. Over the past few decades, foreign investments and IT outsourcing have played a vital role in the country's economy.
The United States, Canada, and Mexico enjoy a strong relationship in terms of investment and trade, largely thanks to the implementation of the US-Mexico-Canada Agreement (USMCA) in 2020. This agreement contains a dedicated chapter on digital trade, aiming to foster collaboration among the three countries in developing and integrating their digital markets. Cooperation with fellow North American countries also strengthened the Mexican software development outsourcing market. It also addresses crucial aspects, such as eliminating restrictions on cross-border data transfers. This is essential for the growth of digital trade in North America.
Mexico is also Latin America’s leader in the number of software development companies that provide technical solutions to clients worldwide. Overall, Mexico, Colombia, Argentina, and Brazil stand out as the countries hosting a substantial number of prominent IT outsourcing companies in Latin America. Here are the approximate numbers of companies available to assist with outsourcing to these regions:
The good news here is that even if you don’t find the suitable partner in Mexico, you can always look south and consider outsourcing your project to other Latin American countries like Colombia. The country also offers a substantial talent pool along with a large number of software development companies to partner with.
Read more: Software development outsourcing in Colombia
Economic stability and security
Mexico holds memberships in prominent organizations like the G20, the Pacific Alliance, and the Organization for Economic Cooperation and Development (OECD). These memberships contribute to the overall economic stability of the country. In March 2018, Mexico achieved a significant milestone by becoming the first Latin American nation to establish fintech regulations. These regulations were crucial in safeguarding user protection, especially in the context of fintech and banking in general.
Government initiatives for lucrative tech climate
The Office of the Presidency in Mexico houses the National Digital Strategy Office, which is responsible for formulating and executing the nation's digitization policies. The strategy encompasses two primary objectives: digitalizing the public sector and expanding broadband access. The government supports the country's digital landscape across such initiatives:
- Fondo Nacional Emprendedor is a grant program initiated by the Mexican government to foster entrepreneurship, focusing on the tech industry.
- Promotion of STEM education by establishing 120 tuition-free tech universities, aiming to incentivize young individuals to pursue careers in STEM fields.
- The creation of over 20 tech parks in Mexico, including the Creative Digital City, Guadalajara Software Center, Apodaca Technology Park, and Monterrey Technology Park. These parks serve as dedicated spaces for technological innovation and development.
- 500 Startups LATAM is a program that provides financial support and guidance to local startups operating in various industries.
Growing talent pool of skilled experts
As a result, outsourcing to Mexico currently offers a talent pool of approximately 700,000 software engineers, with a significant number of people specializing in C++, DevOps, and Java.
Mexican engineers have gained widespread recognition for their remarkable performance on the global technology stage. The country's longstanding collaboration with major technology giants has had a significant impact on its pool of talented professionals, combined with a strong emphasis on technology education. The Coursera Global Skills Report 2021 highlighted Mexico's outstanding rankings in various fields based on the average participant’s skill proficiency:
Additionally, in the 2022 Pentalog report, Mexico secured the second position globally for developers’ qualification. Notably, Mexican engineers excelled in C/C++ and Python programming, claiming the top spot worldwide.
Thanks to exceptional educational opportunities provided by the government, every year, Mexican universities produce more than 130,000 graduates in computer science.
Favorable business climate
Additionally, Mexico ranks 11th worldwide in terms of providing credit assistance and tax cuts to the arriving international organizations, offering incentives for capital investment. The country's weaker currency also enhances the purchasing power for business opportunities in Mexico. The Mexican government creates favorable conditions for foreign investment, offering incentives such as tax credits and research and development support. These favorable conditions make outsourcing to Mexico an appealing prospect and a perfect location for doing business.
Why software development outsourcing to Mexico is perfect for North American businesses
The Mexican government is committed to improving the country's infrastructure, particularly in the telecommunications, energy, and transport sectors. This will simplify and cheapen connectivity across North America. US and Canada-based businesses will have a much easier time traveling to visit their colleagues in Mexico, and vice versa. The communication will become much more fluent too. But that is not all. Let us look at the advantages and disadvantages of outsourcing to Mexico.
Overlapping time zones and geographic proximity to North America
Time zone compatibility is crucial in facilitating seamless cooperation between businesses in Canada and the US and Mexican software development outsourcing companies. The proximity of Mexico results in overlapping working hours (UTC-06:00), minimizing communication gaps and enhancing collaboration efficiency.
Technology companies that help with outsourcing to Mexico often position themselves as nearshore partners thanks to their geographic proximity. The proximity and ease of travel across North America are significant advantages for businesses that opt for software development outsourcing to Mexico. You can easily visit your teams, facilitating enhanced knowledge sharing, faster onboarding, and improved communication processes between the client and their development team.
Cultural compatibility and English proficiency
Establishing work relationships across borders requires cultural compatibility, encompassing shared interests, understanding, and respect. The United States, Canada, and Mexico share a deep economic and cultural connection, underscoring this compatibility's significance.
Proficiency in English also plays a crucial role in establishing effective cooperation between Mexican software developers and US-based companies. Mexico ranks 51st out of 100 countries in the EF English Proficiency Index (2021) and is classified as having a moderate proficiency level. Many software engineers in Mexico possess excellent English skills, particularly those employed by international companies or engaged in collaborations with clients or colleagues from different nations.
Favorable rates-to-value ratio
Mexico's software engineers frequently command hourly rates up to 2 times lower than their counterparts in the United States. This cost advantage stems from lower taxes and a generally lower cost of living in Mexico. As a result, Mexico has emerged as a top choice for companies aiming to reduce their software development costs and optimize expenses while maintaining the quality of the final product. Based on our experience, Mexico offers exceptional value for money, blending affordable rates with a pool of experienced and highly skilled engineering talent.
Important considerations: Peculiarities of doing business in Mexico
Talking about the advantages and disadvantages of outsourcing to Mexico, we must mention certain complications you may encounter along the way. You have to evaluate outsourcing to Mexico pros and cons before making your decision. When opting for software development outsourcing to Mexico, it is important to take into account certain additional costs, which may include:
- Currency exchange rates: Fluctuations in currency exchange rates between your home country and Mexico can impact the cost of your project. It is essential to consider potential exchange rate risks and plan accordingly.
- Tax implications: Understanding Mexico's tax regulations and obligations is crucial to avoid surprises or penalties. Tax laws may differ from those in your home country, so consulting with tax experts can help ensure compliance and mitigate unexpected tax liabilities.
- Insurance and travel expenses: It is important to consider insurance costs to protect your business and assets during subcontracting. Additionally, if travel is required for meetings, or other project-related activities, travel expenses should be factored into the overall budget.
It is recommended to work with global tech partners who have a presence in Latin America and are familiar with how the business runs in the region to navigate these intricacies. Additionally, finding a reputable Mexican IT outsourcing partner well-acquainted with the local system can further streamline the process and provide valuable support.
Final thoughts
Finding a trusted software engineering partner in an unfamiliar location can cost precious time and resources. Here at N-iX, we understand your needs and are committed to delivering results that match your business objectives with respect to your budget and timeline. With our team extension services in Latin America, we build reliable partnerships to strengthen your team and offer technology solutions to drive your project to its objectives. We offer several advantages that will help you acquire top talent in Mexico:
- Development center in Latin America to acquire talent from across the region.
- Presence in 25 countries across Europe and the Americas, enabling us to build distributed teams as per your requirements.
- Flexible IT staff augmentation services, allowing you to easily scale your team as needed and add more experts when required.
- A robust recruitment process that ensures we only hire top-notch experts.
- Seamless integration of the team at any stage of your software development life cycle.
