Less than a 150 mile drive from Guadalajara –one of Mexico’s most well known and successful tech hubs– there’s Colima, a small state with big hopes for its future as the country’s next technological sensation.
Colima, with a population of over 700,000 residents, dreams big of becoming a tech hub. After the Covid-19 pandemic exploded, a letter signed by the state’s “entrepreneurial community” circulated the web as an open invitation for potential US investors and engineers to join the state.
Comparing itself with Silicon Valley, and with the promise of great food and beer, the letter assured that “Colima stands ready to welcome talent from around the world, and collaborate directly with you to ensure this pathway to great technology gains [and] looks forward to supporting U.S. tech companies and forging prosperous and exciting ventures together.”
The picture isn’t as rosy, though. Executives from other Mexican tech clusters and entrepreneurs within Colima’s own tech ecosystem told NSAM that the state has potential to become the country’s next tech star, but is still marred by several issues, such as a lack of government support and a severe problem of talent retention.
And Colima’s own tech cluster agrees. Hector Aceves, the cluster’s General Director, shared his thoughts on the state’s current situation as a potential hub for technological development and innovation, painting a picture that shows bright spots swallowed by misty tones.
Just About Ready to Launch
Despite its small size, Colima finds itself in a privileged position. The state holds Mexico’s busiest port (Manaznillo), which transformed it into a logistical hub that has grown exponentially alongside the country’s manufacturing and export industries. With the signing of the US-Mexico-Canada Trade Agreement, and with the possibility of nearshore relocation of industrial plants from the US, Europe and Asia, it is expected that portuary operations in the state will expand even further.
The market is open for software developers and providers of tech services. As logistical operations increase, and under the light of a recent supply chain crunch, logistics firms seek technological solutions to major hurdles. Gartner predicts that, by 2026, 75% of commercial supply chain management vendors will make use of AI, advanced analytics and data science. One of Mexico’s most recent unicorns, Nowports, reached that status offering tech solutions for supply chain operators.
“If you ask me if we’re ready I would say sure; we’ve been ready for the past 10 years”— Hector Aceves, General Director at Colima’s Tech Cluster
Nevertheless, no one is taking advantage of that opportunity in the state, according to Hector Aceves.
“I’ve had the opportunity to visit some of these customs agencies, and I’m like ‘Wow, you guys got some marvelous tech solutions’. But they don’t see that; they see their innovations as a competitive advantage that must be shielded from competitors. And those competitors act the same,” he explained in an interview.
In the eyes of Aceves, Colima’s place as a logistics hub puts its tech sector in a position to explode into the scene as a strong provider of software-as-a-service (SaaS) not only for local clients, but also international ones.
US and Canadian firms like Magma Software have been partnering with local software companies for over a decade, he said, and the cluster is already in talks with Turkey’s National Software Federation to launch an SaaS project. The local tech companies have been ready, assured Aceves, for a decade. But things just don’t take off.
“It’s being done [SaaS exportation] in a very dull and circumstantial manner. You need an anchor company. The model requires certain components to arise,” he said. “If you ask me if we’re ready I would say sure; we’ve been ready for the past 10 years.”
“We’ve been trapped in a cycle of ups and downs”— Hector Aceves, General Director at Colima’s Tech Cluster
Things aren’t entirely sour, though. More software companies are opening offices in the state capital, assured Fernando Mora, Marketing Director at software development firm michelada, which has offices in both Colima City and Guadalajara.
“In Colima’s capital, the level of job offers is increasing. More and more software companies are opening offices in the city, which has made competition for talent harder,” he told NSAM in an e-mail exchange.
In early July, the Mexican government and the Inter-American Development Bank (IDB) announced plans to financially support nearshoring projects in Mexico’s south-southeast. They aim to attract big-name manufacturers to the region, producing a rising tide that would benefit SMEs. Though skeptical, executives from tech clusters in and outside of the region hope to see the benefits for SaaS vendors with the arrival of anchor companies in need of tech solutions.
The brain drain is real in Colima. The state’s tech ecosystem has been unable to retain the engineers that it produces year after year, losing them to more developed and attractive markets, such as neighboring Guadalajara, Monterrey, Mexico City and even the United States.
“We don’t retain talent. We have a ridiculously low talent retention index, of about 0.02%. We feed others,” said Aceves. “About 680 engineers graduate every year from our three main educational institutions, but barely any of them stay. They all migrate.”
Aceves assured that the state produces top-quality engineers. Benjamín Huerta, president at Jalisco´s Institute of Information Technologies (known as Ijalti) echoed that sentiment, pointing out that there’s a constant wave of software developers arriving in Guadalajara from Colima. Fernando Mora described the state as a hotspot for tech talent development.
“At a national level, Colima is considered one of the main talent seedbeds, especially for Ruby developers,” he said.
The size of the local economy and the opportunities that arise in bigger, more successful tech markets push Colima’s tech talent to flee, leaving the local tech ecosystem with a handful of engineers to show for its efforts.
Forsaken By Government
Colima also has to deal with a problem that’s familiar to most tech ecosystems in Mexico: government support, or a lack of it.
“We’ve been trapped in a cycle of ups and downs. Sometimes, we get a local administration that actually gets it, and we make a lot of progress. But later we get other administrations who don’t, and it’s not the same. Our progress is halted,” explained Aceves.
The state’s tech cluster finds itself in standby, according to its director. Local authorities are focusing on more pressing matters, such as security, public finances and health. Tech barely figures in their radar. And Mexico’s tech industry is well acquainted with the federal government’s lack of interest.
Despite all the shortcomings, Aceves still has hopes for Colima’s future as a tech hub. It won’t be easy, though. In his view, it will take a generational passing of the torch among entrepreneurs and public officials for things to take off.
“When this explodes, I don’t know about unicorns, but we’ll definitely see several logistics companies with very advanced technology,” he said.