Source: Computerworld, September 15, 2003
Country Analysis: Mexico
The Mexican Information Technology (IT) outsource software services sector is a USD $30 million1 industry. Although the industry is quite small compared to behemoths such as India and Russia, Mexico has unique advantages which it can exploit to vault it into serious consideration for offshore software outsourcing. The chief among them is the proximity to the US market, the North American Free Trade Act (NAFTA), low-cost qualified personnel, and access to the Latin American market. The advantages of Mexico's proximity to the US is that not only is it easy to access Mexico from almost anywhere in the continental US, but many Mexican and American firms already have extensive experience working together. This familiarity breeds similar business cultures and allows for US firms to be comfortable in outsourcing key software processes to Mexican firms. Another big advantage for Mexico is NAFTA. NAFTA allows the free flow of goods and services between Mexico, Canada and the US. NAFTA also protects intellectual property rights in all three nations. This legal framework gives some assurance to US firms that the software developed by Mexican firms will not be misappropriated for other uses. A final advantage is that Mexico is an ideal point for accessing the vast Latin American market due to similar language, culture and knowledge of that market by Mexican firms.
Even with all these advantages, there are reasons why Mexico only exports approximately USD $30 million in software exports. These reasons can be summed up in Mexico's lack of experience, lack of English speaking skills, and lack of expertise. The vast majority of Mexican software services firms are very small and do not show up on the radar screen of IT executives who make outsourcing decisions. A second major barrier is proficiency with English - most Mexican programmers speak Spanish. Although Mexican firms have started to beef up the English speaking skills of their employees, Mexico is still has a long way to go before it can catch up with Indian firms in language proficiency. Finally, Mexico itself has a serious marketing problem in that the country is not seen as a prime location for outsourcing software development work. Most of the headlines go to places such as India, Russia and Philippines. Mexican software services industry has not done a good job of talking up its strengths and capabilities.
A major problem with Mexico's human resource
pool is that the nation's software services sector has access to only
about 30,000 qualified programmers2.
Mexico only produces a few thousand new IT grads annually - not enough
to keep pace with demand, much less compete against China and India.
Although the average programmer salary is USD $5,1503,
there are not enough qualified individuals to fill all required spots.
The biggest obstacle that Mexican firms face is that most qualified
Mexican programmers are more eager to work for larger national firms or
move to the US and work North of the border. Mexico will have to
ramp up its technical education to produce programmers in significant
numbers to fulfill the requirements of the Mexican software services
industry if Mexico is to become a player in the worldwide software
Although, Mexico has the second largest IT market in Latin America, after Brazil. The nation has a very poor telecommunications infrastructure due to underinvestment by the dominant carrier - Telmex. Mexico has approximately 15 telephone lines per 100 people, for a total of only 15 million lines for the entire population4. In terms of Internet users, the total number has increased to over 6.8 million by the end of 2002, compared to just over 1.7 million in 1998. The penetration rate for PCs is quite high, with over 80 PCs per 1,000 people5.
The Mexican government has acknowledged that the software sector is a priority sector, through the establishment of the Program for the Development of the Software Industry (PROSOFT). The ambitious goals of PROSOFT6 include: 1. To reach a production level of USD $5 billion of software development and related services. 2. To equal the IT expenditures of the OECD countries (Currently 4.3% of GDP). 3. To become Latin-America's leader in the software development and related services sector. The strategies for achieving these goals include: Development of Mexico's human capital, Strengthening of the indigenous software industry (gaining critical mass), Improving Mexico's image as a software development site and Enhancing Mexican firms process and quality assurance capabilities.
Industry Association Support
Mexico does not have a standalone software industry association. Instead, The Mexican Association of Information Technology Industry (AMITI), is Mexico's national IT industry association. AMITI's, which represents most of Mexico's small software developers, main job is to promote the Mexican software industry and lobby the government on behalf of all of Mexico's IT industry. AMITI has not done a very good job of promoting the Mexican software services industry. This association concentrates mainly on Mexico's large IT manufacturing businesses. The Mexican software services industry would be better served by establishing its own software industry association, which can then highlight Mexico's nascent software services sector.
Regional IT Cluster
Mexico's main software clusters are located in and around Mexico City and three technology parks in Monterrey and Guadalajara. Two of the three technology parks, Monterrey Technology Park and Apodaca Technology Park are located in Monterrey. The other technology park, Guadalajara Technology Park is located in Guadalajara, Mexico's version of Silicon Valley. These four locations have the advantage of a large pool of existing technology companies, a relatively large supply of labor, good telecommunications infrastructure and tax breaks for locating in the parks.
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