With Mexico having established itself as a leader in the aerospace manufacturing sector with a growth rate of about 20% annually since 2004, according to ProMexico, and other Latin American countries like Brazil also competing for a slice of the pie, the potential need for IT services to meet the demands of this growing industry have come to the fore.
According to ProMexico, the aerospace industrial sector in Mexico has more than 32,000 workers in 260 companies, in the manufacturing, services and design engineering areas and MRO. Mexican aerospace exports amounted to 5.463 billion USD in 2013, according to data from the Ministry of Economy, and in a presentation at an aerospace summit, FEMIA (La Federación Mexicana de la Industria Aeroespacial) stated that it expected to provide over 37,000 jobs with more than 350 companies in the sector in the country in 2015.
LatAm on the Radar
Steve Whitlock, chief technologist for Boeing’s Information Security Solutions group, has noticed increasing interest in Latin America in the aerospace industry, especially in terms of more international organizations adding Latin America to their regular meeting schedules. He cited the example of the International Civil Aviation Organization (ICAO), which has been hosting meetings in Brazil and Mexico for the last few years.
He also mentioned the Internet Engineering Task Force (IETF), the organization that creates and manages the Internet protocols (everything from IP, TCP to DNS, BGP, TLS, IPSEC), which meets three times a year. “Historically, they’ve met in the United States, Asia and Europe each year. In April 2016, the organization will meet in Argentina for what I believe is the first time, replacing meeting in the United States that year. The IETF typically meets in locations where there is significant Internet capability and maturity,” he said.
The Open Group, another international standards organization, has been holding regional events in Brazil for a few years and more recently in Mexico City. “That these organizations are regularly meeting in Latin America is a sign of the maturity of the infrastructure and business potential for this region,” Whitlock said.
Stephanie Leutert, a Masters student at Yale University in the Jackson Institute for Global Affairs who conducted research on Mexico’s aerospace industry in Queretaro last summer, noted that, at this point, the majority of the suppliers for Mexico’s major aerospace companies are not from Latin America.
Leutert explained that Mexican suppliers have at times struggled to break into the global aerospace supply chains given issues such as funding constraints, certification challenges, and at times finding a qualified workforce. “A few of these points are less relevant though for service providers than for pieces and parts manufacturers – given service providers’ lower start up costs and/or certification requirements. Yet it is worth saying that access to capital does remain an issue for most small Mexican companies,” she added.
Leutert, however, did emphasize the fact that Mexico has a growing IT industry, which has been expanding at three times the global average, and a growing number of qualified workers, with an estimated 115,000 engineering and tech professionals graduating each year. “So this is a place where expansion could potentially be large,” she said. “Though right now many of these graduates go into industries that have been around longer than the aerospace industry.”
In Leutert’s opinion, it would be much easier for Mexican IT companies that already service other advanced manufacturing industries, in particular the automotive sector, to simply expand their activities into aerospace rather than build companies from scratch or try to grow smaller businesses into globally competitive service providers.
“The state government of Queretaro already has a program to help Mexican aerospace companies gain a foothold in international supply chains, through steps like guiding them through the certification process,” Leutert said. “Something on this level could easily be imagined for expanding the Mexican IT sector into aerospace.”
A Range of IT Needs
Whitlock said that, with current aerospace growth, there is a market for providing IT communications and processing infrastructures to support aerospace and other local industry.
“Specific services could be about anything that Boeing IT currently does (or outsources) to support our business. Examples of this support include managing e-mail systems, Web presence, data bases, data storage and management as well as cloud based processing and storage service. These services also can include security infrastructures such as crypto support for signing and encrypting data, e-mail, delivered software, and more,” he said.
Whitlock added: “Latin American could potentially lead the way in IT services for this sector because of their potential cost advantage, proximity to customer and the tendency of organizations to have more trust in doing business locally.” He emphasized that good data protection laws can help Latin American companies position themselves in this space. “In Asia, data protection laws vary greatly and can be a distinguishing factor when deciding where to place business,” he said.
Joseph Sherman, a Management Consultant at Jerusalem-based JJS Consulting who has engaged with the Mexican aerospace industry as a student and research assistant, believes that cyber-security in the aerospace sector could be an area of opportunity. “There is a lot of growth and investment in building the aerospace sector, but relatively little in keeping data safe,” he said. “Aerospace companies must think about their own cyber security team, and the security of their partners. Many companies think about security last – after hackers have stolen millions of dollars in data.” He added that the hackers are “often state-sponsored thieves with economic and political agendas beyond the technology.”
Sherman said: “Latin America could be a leader in cyber-security for aerospace. It will need to bring in top talent from the US and Israel, train local engineers and focus on innovation in the sector.”
He cautioned, though, that cyber-security in aerospace is a specialization where the difference in being a market leader and a close runner-up makes a huge difference in how well a company’s production and trade secrets are kept. “Rather than this becoming a growth specialization for all of Latin America, I see a few centers of cyber-security emerging that will compete globally,” he said.