With its proximity to the United States and a thriving technology sector, nearshore software development in Mexico offers a compelling proposition for companies looking to optimize their operations.
We’ll explore the current state of the Mexican nearshoring market, highlighting some key aspects of nearshoring to this city.
We’ll also share how you can partner with Distillery to make your nearshore software development venture successful.
This Article Contains
- A Snapshot of Mexico’s Software Development Market
- 8 Compelling Reasons to Nearshore Software Development in Mexico
- 3 Popular Nearshore Software Development Hubs in Mexico
- Nearshore Software Development Models in Mexico
- Possible Challenges of Nearshoring Software Development to Mexico
- The Best Way to Nearshore Software Development in Mexico: Partner with Distillery
A Snapshot of Mexico’s Software Development Market
Here are some statistics that support Mexico’s promising future as a nearshoring haven:
- Mexico has 38 IT clusters, housing approximately 400 IT outsourcing companies, offering various services such as software development, engineering, and high-tech manufacturing.
- The IT outsourcing segment experienced significant revenue growth from 2016 to 2020, with a 10.2% increase in the Compound Annual Growth Rate (CAGR).
- Mexico’s IT services market is projected to generate USD11.04bn in 2023, with software outsourcing services making the largest contribution (approximately USD 3.92bn.)
- Between 2023-2027, Mexico’s IT service sector revenue is expected to grow at an annual growth rate (CAGR) of 6.23%, resulting in a market volume of US$14.06bn by 2027.
- According to the Global Innovation Index 2022, Mexico ranked #58 among the “Top Digital Nations Worldwide” and was among the top three countries in Latin America.
The Mexican government has also helped create a tech-driven environment through various initiatives and reforms.
These include:
- Digital Agenda for Mexico: It’s a comprehensive strategy to promote digital transformation across multiple sectors. This initiative focuses on expanding broadband connectivity, improving digital literacy, and enhancing e-government services.
- National Digital Strategy for 2021-2024: It seeks to leverage technology to drive economic growth and social development. It focuses on the digitalization of the public sector and increasing broadband access.
- Investment Incentives: The government offers tax benefits, grants, and financial support for research and development projects to attract foreign companies. It also encourages technology-related investments in Mexico.
- Startup Support: The government launched the Startup México program to support the growth of startups and entrepreneurship.
The result?
Major global IT companies like Google, Apple, and Microsoft have set up their R&D offices in Mexico and continue employing Mexican software professionals.
So what factors have turned the nearshoring spotlight on Mexico?
8 Compelling Reasons to Nearshore Software Development in Mexico
Here’s why Mexico is a lucrative nearshore software outsourcing destination:
1. Large and Growing High-Quality Developer Talent Pool
With approximately 225,000 tech professionals, Mexico is the second-largest IT market in Latin America.
Mexico is also ranked #2 in the world for best developers, according to the 2022 Pentalog report.
Mexican developers excel in data analysis, machine learning, probability and statistics, data management, and statistical programming. The IT talent here has a 93% computer programming and 79% mobile app development proficiency level (Coursera Global Skills Report 2022).
The country also has the largest number of IT vendors, with over 438 Mexican software development firms listed on Clutch.
That’s not all!
Mexican software developers are considered the most educated among Latin American countries. The country also has the highest rate of engineering graduates in Latin America, and 25% of all tertiary degrees are in STEM.
Mexico also has six educational institutions ranked in the top 50 in Latin America.
Notable universities include the National Autonomous University of Mexico, Tecnologico de Monterrey, and Universidad Autonoma de Nuevo Leon (UANL).
2. High-Quality IT Infrastructure
Mexico has over 20 tech parks with modern facilities, including Guadalajara Software Center, Creative Digital City, Apodaca Technology Park, and Monterrey Technology Park.
These tech parks are located in major IT powerhouses like Guadalajara, Monterrey, and Mexico City, as well as emerging hubs like Tijuana and Merida.
The government also encourages IT companies in Mexico to build cutting-edge technologies, particularly AI-based solutions, to streamline software product development processes.
What’s more?
The Mexican government has allocated substantial funds to upgrade local tech infrastructure, including the 5G mobile network launch in 2021. This has enhanced internet connectivity and accelerated digital operations.
Various programs and initiatives also back the country’s tech ecosystem:
- The 500 Startups LATAM program provides funding and mentorship to startups across multiple industries.
- The Fondo Nacional Emprendedor is a government-run grant program that supports entrepreneurs with a focus on the tech industry.
- Mexico has also opened 120 tuition-free tech universities, incentivizing young people to pursue STEM fields.
3. Geographical Proximity and Overlapping Time Zones
Mexico’s overlapping time zones with the United States offer it a strategic advantage.
How?
For example, America’s IT hub San Francisco is just an hour behind Mexico City and Guadalajara. There’s also no time difference between San Francisco and Tijuana.
This enables face-to-face meetings and real-time interactions for better remote work collaboration.
On the other hand, an American company outsourcing software development to an offshore location like India would face a 9+ hour time gap.
Moreover, since Mexico is in North America, potential business trips are faster, cheaper, and more convenient.
4. Ease of Doing Business
In addition to the above benefits, many US companies prefer Mexico for nearshore software outsourcing due to its Ease of Doing Business rank (60th place out of 190 global economies).
Here are some factors that contribute to this:
- USMCA agreement: The United States-Mexico-Canada Agreement (USMCA) promotes free trade and facilitates foreign investment between the three countries. It also protects intellectual property rights, making nearshoring to Mexico safe and cost-effective.
- Membership of international organizations: Mexico is a member of the G20, the Pacific Alliance, and the Organisation for Economic Co-operation and Development (OECD), which adds to its economic stability and reputation. These memberships signify Mexico’s commitment to international cooperation and contribute to its overall business environment.
- Attractive incentives: Mexico offers various incentives to international companies, such as exemption from local or state income taxes on corporate earnings and special grants from organizations like the National Council of Science and Technology (CONACYT).
5. Cultural Affinity
Since Mexico borders the United States, Mexican developers are typically aware of US workplace ethics, deadline expectations, and quality standards.
This helps them build strong relationships with the US onshore product development team and minimize cultural clashes or misunderstandings.
Moreover, a nearshore software development vendor may share the same national holidays, making it easier for companies to streamline workflows and deadlines.
6. Bilingual Workforce
Even though Mexico and the United States have different official languages, many Mexican developers are fluent in English and Spanish.
English is also widely spoken amongst college-educated computer science and engineering graduates.
This makes it easier for Mexican remote workers to communicate with international clients. It also significantly reduces the chances of mistakes resulting from language barriers.
Their fluency in Spanish can also be an advantage when an American company wants to provide regional customer support.
7. Cost-Effective Tech Talent
Mexico has gained popularity due to its affordable tech talent compared to the US or Western Europe.
For example, the average salary of a software developer in the United States is around USD 7650/month and USD 7039.66 (5,530 GBP) in the United Kingdom.
But in Mexico, it’s only about USD 1790.65/month!
Note: Actual salaries may vary based on the developer’s experience, qualifications, and location.
As a result, nearshoring software development to Mexico allows businesses to cut their labor expenses by more than 50%.
Moreover, the average cost of living in Mexico ($786) is 64% less expensive than in the United States ($2213). This means US companies can provide competitive salaries to remote workers in Mexico and yet make the most of their outsourcing budget.
8. Proven Outsourcing Track Record
With over 350 outsourcing companies, Mexico has become a hotbed for nearshore software development outsourcing in Latin America.
Many global IT companies like Google, Apple, Intel, and Oracle also have a strong presence in Mexico, indicating their confidence in the country’s outsourcing capabilities.
Moreover, Mexico has a long history of engaging in offshore outsourcing activities — particularly manufacturing. This has given this Latin American country a solid foundation and expertise in managing outsourced projects.
Next, let’s explore the Mexican hotspots for software development outsourcing.
3 Popular Nearshore Software Development Hubs in Mexico
According to CBRE’s 2022 annual report, Mexico City, Monterrey, and Guadalajara stand out among the ten Latin American markets with the best tech talent.
Let’s take a closer look at these cities.
1. Mexico City
As per CBRE’s annual report, Mexico City had the second-highest tech talent employment in Latin America in 2021.
Mexico City also topped the best city for startups in Mexico in 2023. It’s even home to unicorns like Kavak, Clip, and Konfio.
The developers here excel in:
- Full-stack development
- Back-end development
- Mobile app development
- Web development
2. Guadalajara
Did you know Guadalajara is known as “Mexico’s Silicon Valley”?
The city’s tech talent has attracted IT recruiters like Facebook, Google, Apple, Netflix, etc.
Guadalajara is also considered the center of education in Western Mexico, producing 9000 software engineers annually. Consequently, the city has Mexico’s second-largest tech talent pool and houses over 44 startups.
The city’s tech skills include:
- Full-stack development
- Front and back-end development
- UX/UX design
- Mobile app development
3. Monterrey
Monterrey is located close to the United States border, making it an easily accessible nearshore location for North America.
According to the Global Startup Ecosystem Index 2023, Monterrey has Mexico’s second-best startup ecosystem, with 47 startups.
The city has a high concentration of tech talent for:
- Quality assurance
- Fullstack and back-end development
- Mobile app development
- Cybersecurity
Now, if you plan to nearshore your software project development to Mexico, there are a couple of models to choose from.
Nearshore Software Development Models in Mexico
Here are four ways to nearshore software development in Mexico:
1. Short-term Project-Based Requirement
Small businesses with a short-term software development requirement, say, mobile app prototyping, can hire Mexican freelancers’ software development services.
They can help you create interactive prototypes using tools like Adobe XD or InVision.
You needn’t worry about complex recruitment stages, lengthy contracts, etc., as freelancers work as sole entrepreneurs. You can get straight to business!
2. Staff Augmentation
Also known as integrated teams, this software outsourcing model is ideal for companies looking to fill an in-house expertise gap.
Based on your needs, a nearshore outsourcing company will provide you with a software developer having the required skill sets.
The software engineer will work as a part of your internal team for a specific period or project.
For example, you can hire Mexican developers with particular programming language skills (e.g., Java, Python, JavaScript) or expertise in specific frameworks or technologies.
This way, you can quickly scale up or down your nearshore development team as and when your project requirements change.
3. Dedicated Teams
Under this software outsourcing model, you can hire a Mexican development team to work exclusively on a project.
For example, a technology company in the United States can nearshore a dedicated development team comprising:
- Software developers to design, develop, and maintain your solution.
- Quality assurance engineers to perform different types of testing on the software product.
- Software engineers to take care of DevOps.
- Project managers to oversee the entire software development process.
4. End-to-End Custom Software Development
Let’s say you’re a US startup with an innovative software idea but lack in-house technical resources.
You can nearshore the entire development process to a software development company in Mexico.
They’ll handle complete custom software delivery — from initial planning and design to development, testing, deployment, and ongoing maintenance and support.
However, like all outsourcing approaches, nearshoring software development services to Mexico has some challenges.
Possible Challenges of Nearshoring Software Development to Mexico
There are two nearshore development challenges you should be aware of:
1. Bureaucracy and Complex Legal Frameworks
Although the Mexican government has taken strategic steps towards digital transformation and ease of doing business, you still need to complete paperwork.
This can significantly delay your development process.
You must also comply with several local rules and regulations to conduct business in Mexico. These include:
- Data protection laws: You must adhere to Mexico’s Federal Law on Protection of Personal Data Held by Private Parties (FLPPDHPP). It provides guidelines for collecting and processing personal data and is comparable to GDPR in Western Europe and Eastern Europe.
- Intellectual Property rights: Be mindful of agreements, such as the TRIPS (Trade-Related Aspects of Intellectual Property Rights), to protect your IP rights.
- Labor laws: Comply with regulations concerning working hours, overtime pay, benefits, and termination of employment.
- USMCA regulations: Ensure your digital trade activities align with the United States-Mexico-Canada Agreement (USMCA).
- Tax obligations: A US company may have tax implications for outsourcing to Mexico.
- Contractual agreements: You must have detailed outsourcing agreements covering the scope of work, terms and conditions, payment terms, dispute resolution, and termination.
2. Delays Due to Longer Hiring and Ramp-Up Times
Any nearshore or offshore outsourcing process can be time-consuming. It involves recruitment, onboarding, training, and team integration.
All this can delay the ramp-up times, negatively affecting development projects, especially time-sensitive ones.
So what should you do?
Given the complexity of the legal landscape and hiring process, you should engage with a nearshore software development company.
The Best Way to Nearshore Software Development in Mexico: Partner with Distillery
Distillery is a highly acclaimed nearshore software development company that offers flexible and cost-effective nearshoring options for all your software development needs.
Our cross-functional professionals provide the required engineering firepower through:
- Staff augmentation
- Dedicated team
- Full-cycle, end-to-end custom software development
How do we hire our top tech talent?
Let’s break it down.
- Targeted talent attraction: We seek applicants with high-demand technical skill sets.
- Technical skill verification: We conduct online tests to validate each candidate’s skills.
- Behavioral assessment: We conduct HR interviews to ensure their cultural fit.
- Technical assessment: Candidates undergo a live 1:1 coding interview with Distillery’s technical lead.
- Project match: We hand-select candidates that are perfect for your project.
- Client interview: You can speak directly with the candidates to ensure they are fit for your project.
Once you approve your team, they can start your software development project ASAP!
Here’s how we ensure 100% delivery every time:
- Team hired by top-tier technical talent: You get the same skill sets you would get locally.
- Customized cross-functional teams: We offer tech talent for DevOps and cloud, UX/UI design, QA, and project management.
- Tailored Service Delivery Approach (SDA): We deliver value at speed consistently.
- Scalability and flexibility: Right team size, the right skills, and at the right time.
Tap into Mexico’s Software Development Potential with Distillery
Mexico is a thriving nearshore destination.
With an extensive talent pool, robust tech education system, proximity to the US, and ease of doing business, it’s an ideal choice for companies looking to nearshore software development.
If you need a trusted partner to make nearshoring a smooth ride, contact Distillery. We can help you unlock the potential for success in your software development project.