In the 1960s and 70s, many large American and Canadian companies began to explore the advantages of “offshoring,” to reduce operational costs. By sending knowledge work, such as IT development and production manufacturing to foreign countries, these North American companies also discovered advantages such as less expensive tax rates, favorable labor regulations, and for those who moved manufacturing, cheaper raw materials, and less stringent environmental restrictions. These benefits are only amplified by bucking the trend of offshoring and choosing to nearshore software development in Mexico.
By the 1990s, countries such as India, China, The Philippines, and Eastern European countries began to dominate this offshoring trend. However, in the coming decade, especially for companies in North America, the momentum gradually shifted to what became known as nearshoring, and Mexico became the “go to” location for services such as IT and software development. Companies such as Asinpa, with a vast talent pool of highly trained developers, suddenly had a very powerful advantage.
Factors That Make Nearshore Software Development in Mexico a Savvy Move
There are many reasons that nearshore software development in Mexico has started to dominate technology outsourcing and thereby make “nearshoring” a powerful trend for North American companies. However, as Gustavo (Tavo) Vasconcelos, the founder and CEO of Asinpa notes, “Nearshoring technology projects to teams in Mexico is ultimately about two things: time and money.”
Factors that led to these efficiencies are varied and numerous.
According to several sources, the US and Mexico have a close relationship regarding investment and trade, mainly due to the US-Mexico-Canada Agreement (USMCA), effective in 2020, which includes a specific chapter on digital trade. This forms the basis for the three countries to cooperate in developing and integrating their digital markets. It also addresses key elements such as removing restrictions on cross-border data transfers.
With regards to hiring nearshore software development, Mexico offers many advantages for US-based businesses. The local government invests in infrastructure to promote IT outsourcing, and this leads to foreign investment. More than 438 Mexican software development firms are listed on Clutch.
Several sources note that many providers of nearshore software development in Mexico specialize in financial, business, and consumer services, as well as e-commerce, retail, and others. The main areas of expertise are mobile app development, web development, IT strategy consulting, and IT managed services.
Time and Money
“Mexico’s location is also a huge benefit for companies who want to outsource technology development,”
Tavo said. “Our center of excellence is in Guadalajara, Mexico (also known as the ‘Silicon Valley’ of Mexico) and all resources are in the Central Time Zone. This means no midnight calls! This factor addresses the ’time advantage’ of nearshoring with Asinpa.
“There are also issues with cultural barriers,” he said. “We have designed our company and scrupulously recruited developers that enable us to seamlessly respond to customer requests in a manner that U.S. and Canadian companies expect. This can lead to savings on technology development of 50 to 70 percent, and that informs the ‘money’ factor.”
The Evolution of Outsourcing Technology Development
From the beginning of offshoring, large companies have realized numerous advantages by sending technology development to countries such as China and India. However, the world has changed and become fraught with bad actors, cultural barriers, and mundane irritants such as vast differences in what amounts to a typical workday when one party is in the U.S. and the other is on the other side of the world.
Because of these challenges, nearshoring has evolved into a better strategy for outsourcing technology projects and Asinpa has built a superior team in nearby Mexico.