Nearshore Americas hosted a standing-room only outsourcing forum yesterday in New York City, featuring a deep look at investment opportunities and the robust tech ecosystem emerging out of Guadalajara and the Jalisco State region. Special guest Carlos Sada, Mexico’s Consul General for New York, kicked off the event by remarking that countries like the US and Mexico have to continue to find ways to establish complimentary ties – and those partnerships are exactly what is fueling Guadalajara’s IT exports.
The western Mexican state of Jalisco, home to “Mexico’s Silicon Valley,” provides not only low-cost IT and business process outsourcing but highly innovative experts in areas from chip design to multimedia.
But in choosing what to outsource to Jalisco, customers should do true “apples to apples” comparisons of the costs of Jalisco compared to more well-known destinations such as India. That comparison needs to include the full package of costs related to the engagement, and not just salaries.
Those were the key messages from outsourcing analysts, vendors and Mexican state and federal officials at the half-day executive briefing, “Mexico’s Silicon Valley: Getting the Real Story.” The program was sponsored by Secretariat of Economic Development Jalisco State Government, MexicoIT, CANIETI and ProMexico.
Among the reasons for choosing Jalisco and its capital (and high-tech center) Guadalajara is to diversify some of a company’s outsourced work from India, which is experiencing high inflation and attrition due to the rapid growth of its outsourcing industry, said Tony Mataya, partner with ThinkSolutions, who keynoted the program. “Having 70% of my development staff in India, with a 30% attrition rate, is kind of a scary thought” for customers, he said.
Innovation is a major strength in Jalisco, said Francisco Medina, general director of the Jalisco State Council of Science and Technology. He said local developers focus on “value-added” areas such the development of code for embedded systems and in semiconductor design. Chip giant Intel, for example, has nearly 700 employees in Guadalajara developing advanced products, and that workers in Guadalajara can perform advanced R&D at costs one-sixth those in the US Multimedia is an area where Jalisco developers can perform work equivalent in quality to the US at less than half the cost.
Medina acknowledged that staff costs in Jalisco are 10-15% higher than in India, but that other considerations such as the time and cost of travel to India can reduce that gap. Another guest speaker – Enrique Cortes, of Dell Latin America – said cost savings in India were greatest for lower-level staff, but “as you go up the scale to project leaders and highly sophisticated software developers, that’s very little difference between India and Mexico.”
Several speakers stressed the importance of visiting the outsourcer’s site, meeting the actual developers who will be performing the customer’s work, and spelling out in the contract that they will not be reassigned to another customer’s projects.
One attendee asked whether concerns about public safety increased the costs of insuring the work a customer moves to Mexico. Medina admitted that “Mexico faces a problem in perception that is affecting insurance rates,” but suggested customers use local insurers who have a more realistic understanding of actual risks and thus will charge lower rates.
Cortes said limited competition in Mexico’s telecom industry can make it hard to get needed services. He also advised companies to look first for good English skills in job applicants and then determine if they can learn technical skills, rather than the other way around.
Unlike other governments that offer future tax incentives, government aid in Jalisco took the more attractive form of direct funding that of 50 percent of the capital costs of moving to the area.
Experts of this article originally appeared in Global Delivery Report
Nearshore Americas will hold future investment forums in New York City. If you are an outsourcing customer or provider and have an interest in participating, contact us for more information.