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IT outsourcing

Nearshoring to Mexico: For CTOs, it’s about time

Sophie Lelarge
Sophie Lelarge
Chief Revenue Officer & Chief Customer Success Officer Americas

For years now, American companies have been using Asian countries as a back-office, with India being the most popular.

Why?

Because they’re just cheaper. Depending on experience, an American business analyst can bill about 200 dollars per hour. An Asian with the same experience and profile – 42 dollars. A junior developer in the US? 105-111 dollars. In Asia? 18-24 dollars.

Given those numbers, it would seem only logical thing to staff a team in Asia and save the company some money.

Except that this may come with unanticipated complications for companies that are not used to working with very remote teams. These companies soon discover that cultural and language differences are the least of their problems. Because of the difference in time zones, the most basic problem turns out to be handling communication between the in-house team and the offshore team.

How can companies ensure seamless communication between their teams?

nearshoring to mexico - pentalog

Savings come at a higher cost than you think

Payroll savings are just one part of the equation, because they don’t take account of the relationship between price and cost. For example –

  • You know the price of a developer. But what is the cost replacing that developer? We read that 65% of software engineers in India leave their current jobs within two years, and that the attrition rate at Indian startups ranges between 50% and 80%. But if the team that you’re working with goes through a complete turnover every couple of years, then it may have more technological expertise than last year’s team, but you can’t depend on their experience or their product knowledge or even their knowledge of each other. It’s hard to put a price on integrating each new person in the team, but we would argue that the cost is even higher than that.

  • Something that initially doesn’t even seem to have a price is time zones. But remember what happened to your office hours after you moved a project to Asia? How late do you stay or how early do you arrive in the office because Bengaluru is 10 and a half hours ahead of New York, or 13 and half hours ahead of San Diego? We’re in touch with CTOs who have started working the night shift and sleeping in the day, just to try to stay in sync with their development teams. It’s hard to put a dollar figure on time zones, but how much do they cost?

Nothing new, here

You know that the only irreplaceable resource is not people, or knowledge, or plant, or money. You know that it’s time.

Do we want to talk you out of working with Asian countries? Not exactly. Instead, we want to draw your attention to somewhere that might be kind of unexpected – somewhere that might save you some time.

Mexico?

Mexico.

One of only two countries that share a land border with the USA, Mexico is at this time the 15th-largest economic entity in the world.

But that’s not where we want to focus.

#Pool of Talent

We want to focus on Mexico’s developers.

  1. The World Bank estimates that Mexico’s ICT (Information and Communication Technology) industry is growing at a spanking annualized rate of between 10 and 15 percent – and that Mexico is now the third-largest exporter country worldwide of IT services (right behind India and China).

  2. This didn’t happen by accident. It is the result of years of deliberate policy on the part of the Mexican government to improve the country’s infrastructure and expand its digital presence. Since the beginning of the century, the government has been working hard to attract and educate students in IT, through initiatives like MexicoFIRST and PROSOFT, both providing practical, accelerated training in cutting edge technologies.

  3. As a result, the pool of talent is pretty impressive (some half a million IT professionals at this time), and constantly growing: more Mexicans get engineering degrees than do Canadians or Germans! By 2035, Mexico is on track to be one of the world’s top 20 countries in terms of the highest number of tertiary students.

  4. In part because they earn a little more (price), they also stay longer (cost). Mexico easily trumps India’s or China’s employee retention rates, so your team won’t lose time training the newbies every two months.

#International Community Member

We want to focus on Mexico’s cross-border advantages.

  • Membership in the United States–Mexico–Canada Agreement (USMCA – formerly NAFTA) not only facilitates travel, it also guarantees the cross-border flow of data. Less visibly but genuinely critical, the USMCA also extends the provisions for Intellectual Property Rights to the strictest levels, which is not the case for all countries which export IT services…

  • With hundreds of flights every day between the two countries and with basically no travel restrictions (USMCA again), you can be in Guadalajara in a matter of two to four hours, tops, no matter what US hub you’re close to.

  • Unexpectedly in Mexico, you will find a level of English that will surprise you. One of the plus points that India has always had going for it is its vast English-speaking population, nominally the greatest native-speaking population in the world. But as you know from experience, you often need a good deal of care and attention to be able to hear that English correctly. You wouldn’t have that problem in Mexico.

  • But even beyond the linguistic issues, Mexico provides a much closer cultural fit than Asia. You don’t have to worry about how to handle business cards, or whether or not you can order a beef burger for lunch!

#What time is it?

We want to focus on geography and proximity.

Consider the one irreplaceable resource in your toolbox: time – yours and everybody else’s.

  • In the high-tech hub of Guadalajara, it’s the same time as it is in Chicago, with only one hour’s difference from New York, and two hours from Los Angeles.

  • Think about being able to make a phone call or call a meeting – and everybody can respond right away and nobody needs to give up sleep to do it. This lets you go back to your regular (probably crazy!) office hours.

  • Think about being able to identify a problem, diagnose it, and correct it – today. Not tomorrow, not soon, but today.

 

The Pentalog Experience

A couple of years ago, here at Pentalog, we took a good long look at the same numbers and ideas, and in 2018, we opened offices in Guadalajara. We haven’t looked back.

Now, when you close your eyes and think of digital product development/software engineering, you may not be thinking of Guadalajara. But if you’re starting to find this idea at least worth exploring, and you’d like to know more, please get in touch.

After all, for CTOs, it’s about time.

 

Further reading:

High-Tech Cities: Ready for the Next Fiesta in Guadalajara?

Guadalajara, Mexico: best-kept IT outsourcing secret? In any case, Pentalog is setting up shop there!

One-year Anniversary of Pentalog Guadalajara: Outsourcing in Mexico done right


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