Nearshoring: Mexico Is a Great Option for Software Development

The world of technology is evolving rapidly, and with the increasing popularity of nearshoring as a business strategy, it is creating  a great opportunity for software development companies. In fact, according to Statista data, software development represents 64% of outsourced services worldwide.

Furthermore, the Foreign Trade and Labor Market of the Mexican Institute for Competitiveness (IMCO) stated: "Nearshoring has a strong potential to improve the quality of jobs. It can translate into higher-paying jobs and, while detonating economic growth, it also detonates labor supply. And the more productivity and resources there are, the greater the possibility of higher incomes." ().

According to the Inter-American Development Bank (IDB), our country’s economy could benefit the most  in the region from this industrial model. It is estimated that Mexico could receive up to US$35 billion a year thanks to the export of goods, which is almost half of the profits that all the countries of Latin America and the Caribbean combined would achieve under this business strategy.

Why Is Mexico Attractive for Nearshoring? 

According to a report by Thomson Reuters, taxes and tariff rates are lower (0.04%) among USMCA partners, compared to China's rates (up to 19%). In addition, US imports from Mexico grew 20% between January and July 2022 compared to the same period in 2021. Our country ranked as the US’ second-largest supplier.

The Strategic Role of Mexican Digital Talent

There is a large availability of digital profiles with a good command of English who can provide consulting in digital transformation to companies in the US and Canada, so nearshoring also opens the door to growth in the demand for technological talent.

Upgrades and improvements in the Mexican technology market have hit the ground running. The Mexican government has created 38 technology and IT clusters to achieve this goal. The efforts are beginning to bear fruit as foreign companies have taken notice. The result is that many organizations are contacting developers from Mexico and the rest of Latin America  looking for remote software development services

In this regard, our country has a great competitive advantage: IDC data indicate that Mexico is the second-largest IT services market in Latin America, in terms of market value, only after Brazil. Mexican exports of IT services have increased their relevance by rising from 19% in 2018 to 29% in 2023 and are expected to amount to more than MX$177 billion (US$10 billion) this year.

The young people who will become the future talent are fundamental to the success of this strategy and we can assume a promising future for engineering and science in the country, especially in the telecommunications industry, which is fundamental in the digital era.

Competition for Mexican Talent

The connection between the success of nearshoring and investment in technology talent becomes even more evident when examining current trends in the world of work, whereby companies that can offer an enriching work environment and tangible opportunities for learning and professional improvement will have a clear competitive advantage and retain the best associates.

In this regard, developing a company culture that promotes innovation, creativity and teamwork is essential. Leading companies not only focus on talent acquisition, but also on its development and evolution. In addition to tangible aspects, these include investing in training and creating a stimulating work environment.

Those companies that address this challenge with determination will be optimally positioned to capitalize on these opportunities by driving innovation, competitiveness, and sustainable growth in the dynamic global business landscape.

Challenges to Overcome 

Talent pool: Mexican digital talent is perceived to have limitations vis-à-vis key sectors, such as technology. However, in 2022, more than 110,000 university graduates earned engineering degrees in Mexico and the country has a reputation for its skilled workforce and contribution to the automotive and aerospace sectors. In addition, the USMCA  is likely to serve as a catalyst that will encourage the specialization of talent in highly skilled professions.

Sustainability: Due to government barriers that have recently been erected in the renewable energy sector, there has been growing concern about Mexico's commitment to sustainability. That said, North American efforts to accelerate the energy transition (such as the electric vehicle market) are already pushing Mexico onto a more sustainable path. 

Labor standards: Labor standards have improved significantly in Mexico over the past two decades. The implementation of the USMCA was a key element for labor reforms in Mexico with the goal of further improving conditions for workers to create a homogeneous labor market in the region. Union democracy, transparency and accountability are growing, especially in export sectors; the minimum wage has almost doubled between 2018 and 2022; and labor subcontracting is now regulated with the objective of ensuring that workers' rights are respected.

Developing Talent, Exporting Knowledge 

Our country also has strengths in other sectors, including the knowledge industry, and according to EY estimates, for every technology professional available today, in 2024 seven will be required throughout Latin America. In other words, the operation of automated processes will generate greater demand for digital profiles.

Mexico has proven to be a hotbed of talent in the field of information technology. Numerous universities and educational institutions in the country have focused their efforts on training highly qualified professionals in areas such as programming, cybersecurity, artificial intelligence, and software development. This has resulted in a global quality IT workforce that can successfully compete in the international market.

Mexican IT talent is distinguished by its creativity, adaptability, and technical excellence. These professionals are well versed in the latest trends and technologies, enabling them to tackle complex challenges and develop innovative solutions. In addition, many are bilingual or even trilingual, which facilitates communication with clients from all over the world.

Now we must ask ourselves, what job challenges lie ahead? In terms of the volume of population that is available to work, our country has enough manpower to meet the demand generated by foreign investment, but it is truly necessary to adjust in terms of technical skills and careers. The main adjustment is to make job offers attractive to the labor force that today is not being taken advantage of, and to develop the skills required for the positions that will be created in the value chain.

An important challenge to overcome and take advantage of the job opportunities that nearshoring will generate is the coordination between the private sector and universities to develop specialized profiles in line with the new demand for skills.