Nearshore Americas

New White Paper: Assessing Mexico’s “Differentiated” Positioning

An increasing number of U.S. firms are turning to Mexico for services ranging from application development to business process outsourcing, making the most of factors such as common time zones, cultural similarities and immigration advantages, says Nearshore America’s latest White Paper on Mexico’s high-tech services sector.

The report titled “Mexico, A Rising Nearshore Star’ makes an assessment of the country’s skilled workforce, educational level and the tech hubs. Mexico’s strength, in part, is derived from its strategic positioning – a factor that will continue to emerge as way to differentiate the country from other Nearshore nations.

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Mexico’s ITO and BPO services sector saw its revenue double—from $6.99 billion to $12.25 billion — between 2006 and 2011, and the recent tax and labor reforms have made the business climate more conducive, the report says. To give a closer view, the White Paper cites the examples of three Mexican firms –Softtek,­ Hildebrando Services Inc and Neoris, a subsidiary of Cemex – and outlines how they are serving their North American clients using the resources available in the country.

Expanding tech hubs – including Guadalajara, Monterrey, Mexico City and Queretaro – and a growing population of English-speaking IT workforce are also contributing to this growth.

“For companies that are already heavily outsourced to Asia, Mexico can provide a hedge by reducing geographic and geopolitical risk,” the report pointed out.

Mexico’s software and service sector comprises of about 500,000 IT pros. In Mexico City alone, according to the report,  there were more than 32,000 students enrolled in IT programs as of 2011, and about 114,000 nationwide.

Finally, the report says the United States’ new immigration law might favor Mexico operators. The proposed changes in the US visa rule affects the Indian outsourcing service providers if it imposed a limit on the number of company employees deployed at client locations inside the U.S. “Mexican tech pros can bypass the whole process, thanks to the North American Free Trade Agreement (NAFTA), established in 1994,” the report said.

Most Mexican staffers who need to work for an extended period at a client site in the U.S. can enter the country on a TN visa. There are no numerical caps on the program and TNs can often be obtained in a matter of days or weeks from a U.S. consulate, compared to months or more for an H-1B.

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Outsourcing sales in the Americas as a whole slumped in the first quarter of 2013, but the report says Mexico is seeing a solid growth. The actual contract value (ACV) of all deals, including ITO and BPO, worth more than $5 million struck in the region was $1.6 billion, down 38 percent from Q1 2012. Mexico, however, posted a strong gain in Q1, when ACV was $100 million–up 100 percent from the previous year.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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