Mexico’s “nearshoring” software development effort is coming of age

Need a mobile app, original software, software maintenance? Need geographic or time-zone convenience, or fluent English-speaking contractors?

By Raoul Lowery Contreras

Babies born today will be 32-years-old in 2050, when the United States will not be the No. 1 economy in the world (it will be No. 3) and next-door Mexico will be right behind the U.S. in economic size (No. 5 or No. 7, depending on the study). That is projected by experts. But what of today?

From Business Insider:

“Mexico is the 11th-largest economy in the world with free access to the largest economy in the world … not to mention, vast amounts of American investment pouring in … Mexico is seen as a land of drug dealers. But this perception is like viewing the United States as if it were Chicago in the 1920s and 1930s and the typical American as Al Capone.”

While most Americans think of Mexico as a Third World country, those who live on the border, those who see Mexicans every day, those who do business in Mexico, know that it is not.

Guadalajara is the hi-tech capital of Mexico. It is a higher-education center with quality public and private universities producing thousands of Science Technology Engineering and Mathematics (STEM) graduates annually. The Mexican state of Jalisco (Guadalajara is its capital) has 12 universities, including the prestigious Tecnológico de Monterrey, creating 85,000 graduates in IT a year. In the past four years an estimated $120 million has been invested in more than 300 hi-tech start-ups.

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“Itexico” is one of those start-ups that is maturing in Guadalajara with offices in Austin, Chicago and Mountain Valley, Calif.

Mexico, surprisingly, ranks well in the world with engineering graduates — about half the number of U.S. engineering graduates with only one-third the population.

Guadalajara has a security-tight hi-tech complex, Guadalajara Ciudad Creativa Digital, headquartered in a former shopping mall. It was founded by a public/private partnership led by the Jalisco state government. The state leased more than 100,000 square feet and built it up into individually wired turn-key work spaces and charged hi-tech start-ups minimal rent. In they came, one- and two-person operations, small cohorts of educated men and women, young and old, who knew what ones and zeroes do when properly put together. An industry was born.That effort continues. However, the days of one- and two-person firms has passed, replaced by firms with dozens and even hundreds of people churning out more than $21 billion (with a “B”) worth of tech products that are exported all over the world — in particular, to the United States.

“Itexico” is one of those start-ups that is maturing in Guadalajara with offices in Austin, Chicago and Mountain Valley, Calif.  It was founded by Guillermo Ortega, a Mexican engineer, and Anurag Kumar, also and engineer and an Indian immigrant to America. Kumar is the COO of the company. It has grown from a staff of a half-dozen to 170.

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Convenience is the key word, and language is next, with time-zone relativity closing the deal.

Need a mobile app, original software, software maintenance? Need geographic or time-zone convenience, or fluent English-speaking contractors? Ortega and Kumar explained to this writer (in better English than I speak) why their American/Mexican facilities are better to deal with than firms in Europe or Asia.

Convenience is the key word, and language is next, with time-zone relativity closing the deal. Well-educated people working with ones and zeros from top universities, including MIT and California State University, who speak the same language make working with Guadalajara totally more desirable than working with Singapore, Hong Kong or Moscow.

The beginning: Mexican manufacturing grew exponentially when giant American manufacturers flooded into Mexico in the 1980s and 1990s to take advantage of wages, the peso, geography and transportation to the world’s largest market, the U.S.A. Then, China entered the global industrial scene and, in 2001, Mexico found itself with empty manufacturing facilities left behind when plants moved to China for lower wages. The nascent Mexican auto industry took up some of the unemployed but other efforts were needed.

The brightest Mexican minds gathered and commissioned the Massachusetts Institute of Technology (MIT) and consulting firm Accenture to conduct a study of how to fill the employment gap left behind by Chinese-bound companies.

The public/private partnership to help hi-tech start-ups was suggested; it was organized. The 14-year-long leader is retired Hewlett-Packard executive and engineer Julio Acevedo Garcia, who revels in the non-paid job. He works unpaid at it full-time.

Itexico founders and partners Ortega and Kumar told us about their first days in business and how they grew and continue to grow. Their pitch made sense to customers, and referrals provide 70 percent of their business. Today, Itexico has 170 employees; in five years, it projects 1,000. Today, Mexico’s hi-tech industry accounts for $21 billion in exports; in five years, maybe $100 billion?

Mexico could be the 5th largest economy in the world in 2050. Will it be led by hi-tech in Guadalajara? Maybe.

Raoul Lowery Contreras is the author of “The Armenian Lobby & American Foreign Policy” and “The Mexican Border: Immigration, War and a Trillion Dollars in Trade.” His work has appeared in the New American News Service of the New York Times Syndicate.

 

 

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