Doing Business in Mexico
Doing business in Mexico presents a unique opportunity for service companies providing software development or IT services. The country's growing economy, coupled with a rising demand for technology solutions, has created a favorable environment for these businesses. However, successfully navigating the Mexican market requires a deep understanding of the local business landscape, including the specific requirements for skilled talent in the IT sector.
Investing in Mexico: an Opportunity for Services
The nearshoring boom in Mexico presents a major opportunity for U.S. service providers, particularly those looking to increase their ability to market and promote their services close to home. Companies can take advantage of the proximity of the two countries by providing services like logistics, maintenance/repair, testing, inspections, research, automation, engineering, training, coatings application, software, installation, etc.
Mexico boasts a young population with about 2 million young people entering the workforce annually over the next five years (Secretariat of Economy, 2023). Many of these young people are trained in areas of future growth. In fact, in the 2021-2022 scholastic year, more than 169,000 students graduated from Science, Technology, Engineering, Math (STEM) fields. In 2021, more than 83,000 engineers graduated with a focus on electronics, industrial, mechanical, construction and chemical processes.
Software Development Industry in Mexico
Mexico is often hailed as a hub for manufacturing. However, it has emerged as a significant player in the global software development landscape in recent years. With its strategic location, burgeoning tech ecosystem, and talented workforce, Mexico produces software for domestic consumption and exports world-class software solutions to global markets.
The ICT (Information and Communication Technology) market in Mexico creates roughly US$60 billion in economic value annually (Mordor Intelligence) through business process management, e-commerce, domestic electronics manufacturing, digital payments, digital communication services, and other ICT-related industries.
The increasing collaboration in North America through nearshoring, coupled with the millions of Spanish-speakers in the U.S. has highlighted Mexico as a top destination for the ICT service sector.
Key Software Research & Products
Prowess in the software development industry in Mexico is diverse, ranging from enterprise solutions to cutting-edge innovations in areas like artificial intelligence, cybersecurity, and fintech.
Artificial Intelligence
Artificial intelligence is taking the world by storm across several industries, increasing productivity, reducing human error, and improving the customer experience, all while reducing operating costs. Additionally, AI is allowing more and more workers to be valuable in the software development sector.
No-code or low-code development allows software developers to create applications with minimal coding. Mexico boasts several A.I. research centers, particularly in academic institutions, that focus on areas like machine learning, robotics, and natural language processing. Products developed in this sector include AI-driven analytics tools, automation solutions, and predictive modeling platforms.
Download the e-book to review the top institutions researching Artificial Intelligence.
Cybersecurity
With the increasing threats in the digital realm, Mexico has invested heavily in cybersecurity research. Local firms have developed advanced threat detection systems, encryption technologies, and secure communication platforms catering to domestic and international markets.
Mexico's cybersecurity market is increasing, with numerous companies offering various services to protect businesses and individuals from online threats.
Download the e-book to view top cybersecurity companies in Mexico.
Fintech
Mexico's fintech sector is thriving, with solutions ranging from mobile banking platforms to blockchain-based payment systems. The country's unique challenges, such as financial inclusion and remittance management, have driven innovations that are now being exported to other emerging markets.
Today, the increasing connectivity of Mexican citizens is warranting a second boom in the tech industry. Notably, citizens in rural areas are embracing mobile banking and e-commerce, even bypassing traditional banking services altogether. Mexico boasts an important financial technology startup sector, arguably the hottest in Latin America.
Download the e-book to see the top fintech startups coming out of Mexico.
Software Development Talent in Mexico
The IT talent in Mexico has grown at a 30% annual rate since 2004 (Csoft Cluster Monterrey). Several factors contribute to Mexico's ability to produce world-class software:
- Educational Institutions: Mexico boasts top-tier universities and technical institutes that offer specialized programs in computer science, software engineering, and related
- Bilingual Proficiency: Given its proximity to the U.S., many Mexican professionals are proficient in English, facilitating seamless collaboration with international clients and partners
- Cost-Effective Solutions: Mexico's competitive labor costs make it an attractive destination for companies looking to develop high-quality software solutions at a fraction of the cost compared to other North American countries
Candidates in this sector are accustomed to working remotely and flexibly. Many work on projects both in Mexico and internationally, so availability is often part of the compensation equation. When onsite work or team collaboration is required, it is often more challenging to find candidates willing to hold regular office hours. Flexibility or hybrid schedules are more dominant in this sector.
Prodensa has hired over 400 ITC-related roles for clients doing business in Mexico since 2022.
Download the ebook to see 12 example candidates in the software development industry, as well as a breakdown of the compensation structure.
IT Outsourcing Hubs in Mexico
Mexico’s tech hubs offer the best opportunities for maximizing innovations, creating collaborative environments, and setting up startups. In the context of IT outsourcing to Mexico, these cities are often where tech firms set up their R&D centers and offices.
- Mexico City: the country's capital is home to over 180 established tech vendors and startups. The key focus areas of local enterprises are fintech, e-commerce, and software development.
- Guadalajara: is a tech hub in Western Mexico that locates around 90 software engineering companies. Most of Guadalajara's tech initiatives prioritize software development, artificial intelligence, and biotechnology.
- With around 55 engineering vendors located in Monterrey, the city is emerging as a prominent hub for IT outsourcing to Mexico. The city has a developed ecosystem of startups in the fields of healthtech, fintech and edtech.
- Tijuana is located only 20 miles from San Diego. It has recently become a hub for an increasing number of software development firms, as well as hardware and manufacturing enterprises.
- Puebla is home to a technology park in Puebla's Parque Tecnológico Innovación, that hosts incubators and accelerators for local startups. The main specializations of local vendors are software development, e-commerce and fintech.
Several multinational corporations have established software development centers in Mexico, leveraging the company's talent pool and favorable business environment to become significant players in the software development industry in Mexico, including IBM and Oracle.
Read more about the Tech Boom in Mexico including the mapped R&D clusters in our blog post.
Software Development Trade with Mexico
The software development industry in Mexico has been steadily growing, focusing on serving markets in North America, Europe, and Latin America. The country's proximity to major markets and trade agreements position it as an ideal location for exporting software products and services.
The software development industry in Mexico is a testament to the country's evolving technological landscape, driven by a talented workforce, robust educational infrastructure, and a business-friendly environment. As the global demand for software solutions continues to grow, Mexico is well-positioned to solidify its role as a key player in the software development arena, offering value-driven, high-quality solutions to clients worldwide.
The USMCA Digital Trade Chapter
The USMCA (United States-Mexico-Canada Agreement) includes a robust digital trade chapter that lays the groundwork for significant growth in this sector across North America. This chapter is particularly relevant for the software engineering industry in Mexico.
Key takeaways:
- Opportunities: the USMCA eliminates customs duties on digital transactions and restricts limitations on cross-border data transfers. This fosters a more open environment for software development and service delivery across borders.
- Challenges: despite the agreement, some hurdles remain. Variations in data privacy regulations and cybersecurity standards among the three countries can create complexities for software companies operating regionally.
Overall, the USMCA's digital trade chapter presents a significant opportunity for the software engineering sector in Mexico. By working together to address remaining challenges and fostering a more integrated digital marketplace, North America can become a global leader in the digital economy.
Doing Business in Mexico: Software Services
International corporations continually invest in Mexico due to its many benefits in talent, creating increased international experience among its 55 million employed professionals. Many professionals have international certifications and compliance standards knowledge as well as diverse systems and software experience.
Global operations depend on Mexico to provide key talent and business continuity. Mexico is a natural destination to provide manufacturing and administrative talent.
Case Study: Software Company's Successful Expansion into Mexico
A software development company specializing in financial services solutions sought to expand its talent pool to Europe. After considering various options, they decided to explore Mexico's potential as a hub for software development talent. However, they faced challenges due to their limited budget, lack of local presence, and unfamiliarity with the Mexican market.
Prodensa, a consulting firm, stepped in to assist the company. They conducted a market feasibility study, developed a talent strategy, established a worksite in Mexico using their Employer of Record service, and provided operational support.
Through this partnership, the software company successfully created a robust software development team in Mexico, attracting top talent and fostering a positive company culture. The use of Prodensa's Employer of Record service allowed the company to establish a presence in Mexico without the immediate need for a subsidiary. This strategic approach has enabled the company to grow and expand its operations in the Mexican market.
Review the entire case study here.
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Further Reading about IT Talent in Mexico
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