Although relatively new in the market, Indian services giant Tech Mahindra is making new waves in Mexico with an aggressive expansion strategy that seeks to leverage the country’s low-cost labor pool.
The company is experiencing impactful growth in Mexico and plans to ride this wave for at least the next few years, with its most recent expansion – a new delivery center in Aguascalientes – being announced just last week.
Nearshore Americas attended the grand opening of this new facility to catch up with Pablo Gallegos, the company’s Vice President and Country Head for Mexico, who offered more details on the scope of this new operation and the company’s mid-term goals for Mexico as a Nearshore destination.
Nearshore Americas: What is Tech Mahindra’s vision for this new facility and how does it fall into your overall Mexico operations?
Pablo Gallegos: In Mexico, we have a headcount of 1,300, while in Aguascalientes we have 60 people, with plans to ramp to at least 300 people by December 2019. For commodities – such as Java developers or SAP – and BPO activity, the city is perfect and we plan to use the local talent. High-end technical skills will remain in Mexico City, because these profiles can’t be found in Aguascalientes.
English is a challenge in Aguascalientes, so the interaction has to mainly be in Spanish, but some people will be located here as part of the Mexico City delivery team, which will control that interaction as part of the global delivery network. For voice BPO, the city is very cost-effective for Spanish campaigns.
We cannot have a 24/7 operation in Aguascalientes. This is a challenge in this state because people are not used to working night shifts or over the weekends, so those components will be handled in Mexico City, while Aguascalientes will hold regular office hours as an augmentation to that team.
Nearshore Americas: With large tech cities like Monterrey and Guadalajara pulling in other Indian players, why is Tech Mahindra choosing Aguascalientes to expand with this new delivery center?
Pablo Gallegos: Our main operation is in Mexico City because of the large available talent pool. We were looking for a tier 2 location for business continuity and disaster recovery, so started to analyze Monterrey, Guadalajara, and Queretaro.
At the end of the day we realized that Aguascalientes had incredible infrastructure, with seven fiber optic rings across the city, and is growing in a very well-planned way. The talent pools in the other cities are drying up, so there is none available anymore. A lot of companies landed there and consumed the talent, so companies need to import talent from other states, adding cost elements to the model. This is what we are trying to avoid as we look to offer a more cost-effective model of operation, which Aguascalientes allows for.
Nearshore Americas: How did the company determine that the talent had dried up in Monterrey and Guadalajara?
Pablo Gallegos: The talent is there, but it is expensive, which means the available talent pool has become very limited. Many large companies landed in the last few years, soaking up the talent for their huge operations. This is a big issue for companies like us, because one of our main differentiators is cost. To be able to offer attractive rates, we need to be handling a more cost-effective operation.
Nearshore Americas: Which verticals or accounts are you focusing on with the Aguascalientes team?
Pablo Gallegos: Nissan is a very important account for us, and one of the largest we have globally. Along with its manufacturing plants in the state, there is also the financial arm of Nissan-Renault Finance Mexico, meaning it’s a must that we are here, close to them.
Nearshore Americas: Many companies have been putting investments on hold as Mexico awaits a solid agreement on NAFTA and a new government, so why has Tech Mahindra decided to open this facility now instead of waiting?
Pablo Gallegos: The automotive industry in Mexico may experience changes when NAFTA 2.0 hits and when AMLO takes over, but the financial arm of Nissan – one of our main targets – will still have strong, relevant presence in Aguascalientes. Today, we have a good level of business with Nissan, not only here but also in Mexico City, so we are confident that, no matter the future of the automotive industry and its bilateral connection with the US, this was a good decision.
Nearshore Americas: Shifting gears a little, how much are your Mexican operations leveraging and developing automation solutions, and what have been the challenges of doing so?
Pablo Gallegos: In Mexico we are seeing a lot of traction with RPA as customers here launch new initiatives, and new customers look for us because we already have a good understanding of the most relevant players in the RPA arena, such as UIPath, which is finding success all across Latin America.
While we have been able to train our teams in RPA, we need people with more advanced skills than the ones we have been able to find so far. To address this, we are looking at an academy model that brings SMEs to train our local teams. RPA is quite recent in Mexico, so we will initially need to develop our own skills before the market is better able to give us what we need. The basic foundation of knowledge is there, but you have to build on that.
Nearshore Americas: How does Tech Mahindra view Mexico as a global and regional market, and what is the company doing from here to serve the US market on a Nearshore basis?
Pablo Gallegos: Almost 50% of our global revenue is generated from North America, in the US and Canada. These customers have been heavily using offshore models, but are now asking for Nearshore models even more. For them, the benefits of an almost domestic flight to see their extended teams are huge versus a flight to India. This is why we’re under more pressure from customers to strengthen our Nearshore capabilities.
The second factor is the exchange rate between Mexico and the US. It has always been fairly attractive, but today’s rate of around 19-20 pesos per USD, we are even more attractive. The situation remains almost the same, and the salary levels are not moving that drastically in Mexico, but the exchange rate certainly is moving dynamically, resulting in much better ways to offer cost-effective rates.
We are using Mexico as a Nearshore delivery location. We had some customers with 100% of their teams located in the US, but now some positions have been moved to Mexico just to balance the cost component. This includes technical support roles, device testing, and other related roles. While we have related some offshore activity to Mexico, we have not yet moved any full accounts.
Mexico is quite new for us, starting our operation in 2014, so it has been a nice journey for us to realize the potential that Mexico has, which is why we are now having much more aggressive growth. This is supported by acceptance from both the group, internally, and our customers.