mexico it 2012

GOING GLOBALThe 2012 Investor’s Guide to Mexico’s Business and Technology Services

By Luke Bujarski

GOING GLOBALThe 2012 Investor’s Guide to Mexico’s Business and Technology Services TABLE OF CONTENTS

EXECUTIVE SUMMARY

MEXICO IT SERVICES MARKET OUTLOOK 2012

MEXICO’S ECONOMY OFF TO A GOOD START IN 2012

LABOR POOLS

BUSINESS ENVIRONMENT

LABOR MARKET FRAMEWORK

TELECOMMUNICATIONS INFRASTRUCTURE

SECURITY

NEARSHORING SWEET SPOTS

REGIONAL PROFILES

Appendix A

Appendix B

SOURCES

Page 3

Pages 4 - 6

Pages 6 - 8

Pages 8 - 11

Pages 11 - 17

Page 17

Page 17

Pages 18 - 20

Pages 20 - 22

Pages 23 - 32

Pages 32 - 35

Pages 35 - 38

Page 39


EXECUTIVE SUMMARY: Despite an uncertain global economy, Mexico’s outsourcing industry is expected to grow by 10-15 percent this year, amounting to roughly USD $13 billion by year’s end 1. ITO will represent around 60 percent of this revenue. However, �tting the proper project to the right region within Mexico requires a keen understanding of how the country and the regions within it compare on critical attributes such as wage levels, skills, infrastructure and security. This white paper provides a detailed look at the state of the Mexican IT and outsourcing ecosystem, and a detailed comparison of these outsourcing and IT “hot spots” to help customers make more informed nearshoring decisions.

Among the key �ndings: Despite hurdles, Mexico’s outsourcing industry is expected to grow in 2012.

Key areas where Mexico can add value include agile development, software testing, multimedia and games, and software testing.

Challenges for Mexico include conservative business attitudes, high telecommunications costs, and a potential shortage of skilled English-speaking personnel in key outsourcing locales such as Mexico City, Guadalajara, and Monterrey.

Customers should take into account signi�cant di�erences in education and training quality among di�erent areas of the country.

While security is a concern, actual risk levels vary widely across the country, and rarely a�ect either outsourcers or customers.

Principal Researcher: Luke M. Bujarski


MEXICO IT SERVICES MARKET OUTLOOK 2012With sluggish global economic growth, political transition and continued �scal instability in developed countries, Mexico’s outsourcing industry will have hurdles to overcome in 2012. Experts also urge that nearshore vendors will need to do more to stand out in a vastly competitive global market. While new technologies and applications continue to push global demand for IT services, Mexico’s service providers will be pushed to deliver increasing value and innovation to ever-demanding customers.

Despite these challenges, the nearshore case for global IT services will remain strong in 2012. Service providers continue to expand their operations in response to buy-side demand and pressure to reduce operational costs. Time zone alignment and competitive wage rates have also made second-tier cities like Queretaro and Hermosillo strong candidates for new vendors and captive operations. Likewise, moderate yet steady economic growth in Mexico and Latin America promises to boost local demand for IT services, particularly in the energy, logistics, health care, and retail sectors. In addition to the big multinational vendors, highly-specialized boutique service providers focused on high-end web, multimedia, and embedded software applica-tions have also reported increased revenues in 2011, with continued expansion expected in 2012.

A recent report emphasized two key trends that suggest IT outsourcing vendors will grow in 2012. Firstly, IT spending in North America is expected to grow in 2012. Secondly, while companies expect to spend more on IT, this expansion will not be coupled with increased hiring, partly because companies lack the in-house capabilities to do the type of work that is in demand. Cloud, social media, and mobile applications are among the IT categories most expected to grow. The question is whether the nearshore model is compatible with this higher level of development. Nevertheless, there have been recent technological advances and changes in best practices that could push additional business to Mexico.

Continued Global Growth in O�shore Outsourcing Will Bene�t Mexico

If analyst predictions are correct and 2012 turns out to be a slow year for outsourcing, then total global o�shoring industry revenue –across ITO, BPO, and KPO – could grow anywhere between 20 and 30 percent, amounting to roughly USD 350-400 billion by year’s end 2. ITO will represent around 60 percent of this revenue. NASSCOM, the Indian Outsourcing Association, expects global sourcing to expand across traditional functions such as IT and BPO, but also knowledge-driven services such as legal process outsourcing (LPO) and �nancial analytics 3. Trends data on Mexico’s IT service industry also show an average annual growth rate of 12 percent. These country-level forecasts are perhaps the strongest indication that the global services industry will march forward at a brisk pace in 2012. A recent report by Information services Group also noted that IT services contracts have been shrinking in size over the last ten years. This fact will also represent greater opportunity for Mexico’s niche domestic vendors to snatch up contracts from US and Indian multinationals.


Rapid Pace of Technological Innovation Presents Opportunities and Obstacles for Mexico

New technologies and industry best practices will also be a game changer for Mexico’s IT services in 2012. Time zone alignment is proving to be a bigger competitive di�erentiator than most could have imagined when the term ‘nearshore’ was coined almost 20 years ago. The need for quick project turnaround has seen agile, scrum, and other ‘live-time’ software and application develop-ment methodologies grow in popularity and are now said to be used by more than 35 percent of all companies in the United States, large and small. The ability to collaborate on cross-functional teams in the United States gives Mexico a distinctive advan-tage over India, where time zone di�erences make ‘live-time’ development less practical. India remains vastly cheaper than Mexico on a FTE level, but total cost of project ownership can swing in greater favor for the nearshore, as ‘live-time’ development becomes the industry standard.

Despite these advantages, IT automation is changing the overall workforce landscape. The cloud and virtualization are reducing the need for redundant in-house IT infrastructure, particularly for application development and testing. And while the advent of new technologies in the cloud, mobility, and social networking space are creating new opportunities for talented developers, Mexico’s IT services providers will have to ensure that their technical and creative capabilities keep pace with the rapid prolifera-tion of these technologies. As a direct challenge to the IT innovation environment, the Mexican work culture remains conserva-tive and more risk averse than in countries like Chile and the United States. Professional failure (but not from a lack of trying) is frowned upon which pushes professionals away from new companies and/or starting new companies, and more toward higher-paid positions with locally established enterprises. This is particularly true of graduates coming from highly regarded private institutions that are attracted to stability and attractive wages o�ered by industry.

Mexico’s momentum in the IT services space comes amid political and economic turmoil in developed countries. The 2012 US Presidential election and ensuing debates will focus heavily on America’s ‘jobless’ economic recovery and the role of government in stimulating job growth. While analysts overwhelming agree that recent anti-outsourcing rhetoric coming out of Washington is “toothless,” and will not stop companies from o�shoring support functions outright, recent congressional proposals like the U.S. Call Center Worker and Consumer Protection Act should be monitored closely by Mexico’s sourcing community. Economic insta-bility in Europe will also put a damper on the outsourcing industry globally. Slow growth and declining consumer demand in Europe will a�ect global economic growth which will in turn limit new contracts. Despite this turbulence, new technologies and a growing demand for IT services will continue to propel Mexico’s IT services industry forward.


Buyer Preference for Vendor Diversity Will Push Additional Volume to Mexico

In a recent interview with CIO.com, John Keppel, partner and president of research and managed services for ISG noted that "A decade ago, a client may have awarded an ITO contract to one service provider with instructions to 'take care of everything.' These days, clients are separating out asset purchases from services and splitting the service stream by scope to many di�erent service providers 4 ." This trend toward smaller IT outsourcing contracts will likely open the door for Mexico’s service providers to shore up additional contracts in 2012, and beyond. The broader adoption of the ‘multisourcing’ approach could also bene�t niche IT outsourcing �rms in Mexico that o�er more specialized services. The big full-services �rms will also be challenged to ensure a higher level of customer value as services integration capabilities – i.e. experience in managing multiple contracts for the client, will become more sought after by demanding buyers.

MEXICO’S ECONOMY OFF TO A GOOD START IN 2012Nissan’s recent announcement of a multi-billion dollar expansion of their manufacturing facilities in Aguascalientes underscores Mexico’s growth as an export economy, as well as its heavy focus on the manufacturing sector. The country’s dependence on exports also makes Mexico vulnerable to external shocks and particularly to recessions in the United States. Nearly 80 percent of Mexico’s exports are received by the United States, while in comparison, Brazil is around 60 percent. 2012 could also see increased government spending in Mexico, as a result of the upcoming Presidential election. In a recent interview, Thomas Wainwright Mexico Bureau Chief for the Economist magazine noted that government spending on infrastructure projects and education goes up during election years as incumbent party o�cials seek to get reelected.

The World Bank estimates that the global economy will grow at just 2.5 percent in 2012.5 The latest revisions to the IMF global economic outlook report points at the Euro Zone Crisis as the most in�uential destabilizing factor for global growth, with Greece, Italy, and Spain as the central concerning factors 6. How economic sluggishness will a�ect the global sourcing sector is controver-sial. Clearly, the expansion and growth of consumer markets and companies creates greater demand for outsourced services. However, lower demand for products and services also pushes global companies to reduce costs via o�shoring arrangements and increased productivity. Disproportionate economic growth between the developed and developing world also pushes multina-tional enterprises to expand their business lines into developing markets. Emerging markets now make up more than half of global GDP, compared to only one third just 30 years ago. More signi�cant still is the fact that developing markets made up four �fths of global real GDP growth over the last �ve years 7. Despite a gloomier global economic picture in 2012, the International Monetary Fund positively re�ects on Latin America and the Caribbean as positioned for more “sustainable” growth. The Economist magazine also noted that compared to other Latin Ameri-can markets, Mexico’s economy has remained more stable with regard to core in�ation, GDP growth, excessive expansion of credit, and current account balance 8.


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The declining value of the Mexican Peso relative to the dollar has also made the country’s export sector more competitive, particu-larly in the U.S. market (see chart). Currency �uctuations can a�ect both the buyer and vendor but disparities in exchange rates tend to favor both parties during new contract negotiations. As vendor-country currencies rise, pro�t margins erode which can a�ect service quality of existing contracts.

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01 Historical Exchange Rates - USD to Mexican Peso Data Source: www.oanda.com

Currency risk should not overshadow other cost issues when exploring new geographies. Cost of living in�ation is what ultimately erodes cost arbitrage and pro�tability, as wages go up. Analyzing other macroeconomic indicators such as unemployment rates, GDP growth, excess credit growth, and of course in�ation also o�ers a better sense of overall market health. Mexico has seen relatively low baseline in�ation compared to countries like India and the Philippines.


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02 Select Macroeconomic IndicatorsData Source: International Monetary Fun

LABOR POOLSWith a population reaching 113 million people, Mexico’s overall labor pool is large compared to most Latin American countries. Compared to developed countries and other emerging economies Mexico’s population is also quite young with a higher concen-tration of working age people between 16 and 65 (see �gure). However, with a labor force participation rate of only 64% – i.e. those of working age that are actively participating in the economy, this also limits the available pool of talent in Mexico. Gender distribution in Mexico’s workforce is among the most disparate of among OECD countries. Employment rates among men are 81 percent, while only 44 percent of the female labor force is employed 9.

INDIA MEXICO PHILIPPINES1,206 110 96 1,527 10,803 2,255

8.80 5.40 7.60 58.30% 19.30% 26.10%21.50% 12.20% 17.00%62.43 42.90 44.43 Government Dept % GDP

Population 2011 (millions)GDP Per Capita (USD)

GDP Growth (over previous year)Rise in Consumer Prices (last 5 years)

Rise in Consumer Prices (5 year projection)


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03Compared to other developed or developing nations Mexico’s population is quite young with a higher concentration of working age people between 16 and 65

Data Source: U.S. Census Bureau International Database

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100+ Mexico - Total Population 114,975,406

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100+ China - Total Population 1,343,239,923


There also exist regional extremes in education outcomes and performance among Mexico’s di�erent states. Here, data on gradu-ation rates, concentrations of talent with advanced degrees, as well as trends across the K-12 base were used for deeper compari-son of 11 local markets in Mexico:

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04 Education by Region: Labor Pool and Quality MetricsData Source: Instituto Nacional de Estadística y Geografía (INEGI)

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Bubble size represents relative size of labor pool with a bachelors degree or higher

National Average


Mexico City performs well with the largest pool of college graduates (bubble size); the highest concentration of graduates with advanced degrees (vertical axis); and the highest K-12 grade achievement rates (horizontal axis). Veracruz, on the other hand, has a relatively large pool of generalized talent, but scores low on K-12 quality, as well as on concentration of postgraduate degrees. Queretaro is a third scenario where you have a relatively small talent pool, but one that is highly specialized and above the national average when it comes to K-12 performance.

BUSINESS ENVIRONMENTThe Latin American Venture Capital Association 2011 Scorecard report commends Mexico’s overall private equity and venture capital environment. Favorable tax treatment, corporate governance requirements, and a strong capital market relative to other Latin American countries makes Mexico a more stable option for foreign investment. Economic growth and FDI hit a ten-year low in 2009, directly following the global �nancial crisis, but investment and economic activity has since resumed. The North Ameri-can Free Trade Agreement (NAFTA) also simpli�es global services exchange between Mexico and the United States, particularly with recent visa and travel restrictions imposed on foreign nationals in India. The World Bank Ease of Doing Business survey also pointed to local-level improvements on new company formation and incorporation, but Mexico scored comparatively low on overall ease of doing business 10. The World Bank report also pointed to regional di�erences in overall business climate, with Mexico City considered the least friendly environment for doing business.

According to Gartner, Mexico is the fourth largest producer of IT services after India, the Philippines, and China. Data from the Ministry of the Economy shows that exports in the information technology, administrative and technical services sector (ITO and BPO) have more than doubled over the last four years, with a total market value reaching four billion US dollars in 2010. This robust growth was re�ected in Mexico’s performance on the 2011 A.T. Kearney Global services Location Index. Placing sixth out of �fty countries, Mexico moved up by �ve slots from 2009 and beat out China, Poland, Argentina, and Chile on overall �nancial attractiveness 11. In addition to favorable exchange rates and low wages, this noteworthy jump in the rankings likely had to do with Mexico’s somewhat delayed recognition and emergence as a global services player.


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05 Mexico's BPO/IT Outsourcing Industry (blns USD)Data Source: Mexico Ministry of the Economy

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Various ‘push’ and ‘pull’ factors have lifted Mexico into the mainstream as a viable o�shore alternative to India. As new markets like Mexico improve their services maturity and infrastructure, enterprises that had outsourced exclusively to India in the past, now have more options and are exploring total cost and the relative advantages, and disadvantages of each market.


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06Push and Pull Factors Driving Nearshore MomentumPush factors are reasons why vendors/buyers look to diversify out of current geographies; while Pull factors are reasons why vendors/buyers look to the nearshore as a delivery platform.

PUSH FACTORS PULL FACTORSOffshore Fatigue Proximity: Distance, Time Zone Risk Mitigation Expanding Talent Pool

Delivery Diversification Growing Domestic MarketClient Demand Lower Talent Movement Restrictions (vs. offshore)

Increasing Offshore Costs Cultural Affinity (suited to serve unique costumer needs)Value Chain Alterations High Growth Rates & Standard of Living

Slow Infrastructure Improvement NAFTA, FTA AgreementsSlow Policy Making/ Implementation High Concentration of Young Population

Restrictive Trade Practices/ Taxation Overlaps Key Market for MNC’sLimited MultiVertical/ Service Experience GeoPolitical Stability

Growth in the outsourced IT services sector can largely be explained by two core global market trends: First, the practice of o�shoring business activities from developed to developing countries continues to grow at a rapid pace. Even while 2012 is forecasted to be a slower year for outsourcing activity in relative terms, year-on-year growth rates for the industry since 2005 range anywhere from 25 to 43 percent – according to data from the OECD, NASSCOM, and the Boston Consulting Group. Going forward, this tide of U.S. and European capital in the way of outsourced work will continue to o�er opportunities to countries like Mexico. Close economic ties with the U.S. and Mexico via the NAFTA have also accelerated services exports to the U.S.

Secondly, while India continues to dominate a large portion of the o�shoring industry, global enterprises and services providers have embraced a global delivery model. This has pushed Indian and American IT services providers to cater to buyer preferences to work with partners that have expanded capabilities outside of India. And while Mexico has become a viable alternative to India as an o�shore outsourcing platform, expert sentiments favor the notion that Mexico complements a global sourcing strategy and is uniquely suited for certain functions, but is not in direct competition with India.


However, Mexico is not a one-size-�ts-all option when it comes to global services. For U.S. based clients interested in more advanced IT support for application development and maintenance, Mexico would almost certainly be a better �t than would countries like Vietnam or Malaysia. For Europe-based �rms looking to establish a multilingual contact center operation that covers English, French and Arabic, then Mexico might not be the most suitable option, particularly because of time zone and language requirements.

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07 Average Savings in Percentage Terms Relative to the United Data Source: KPMG's Guide to International Business Location

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Government Support and Company Incentives

Mexico has adopted an aggressive strategy aimed at attracting multinational technology companies and at fostering a favorable climate for domestic �rms. These e�orts have been coordinated by guidance and funding from the Program for Development of the Software Industry (PROSOFT), a federally appointed arm of the Secretary of the economy in charge of strengthening Mexico’s IT ecosystem.


From 2004 to 2010 over 850 million U.S. dollars have been pooled together from direct PROSOFT funding, state government, enterprises, academia, and other contributors to fund attraction incentives, workforce training and certi�cation programs, enter-prise certi�cations, events, and acceleration of public policy. After evaluation, PROSOFT can fund up to 50 percent of an invest-ment project (including equipment, leasehold improvements, etc). Of that 50 percent, 25 percent comes from the federal govern-ment and 25 from the state government. The criteria used to evaluate an eligible project are typically the number of jobs created and the quality of those jobs. These grants come in the form of cash payments and not tax credits which are more common in Asian markets. There are other programs, both federal and state-level, that address needs such as training. Industry promotion e�orts are managed by MexicoIT, a public-private partnership which serves as a hub for information for prospecting investors and as liaison between local governments and foreign companies. There are also exceptions to payroll taxes, and municipal-level incentives, usually related to the attraction of large investments.

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Mexico IT Industry Promotions

Regional ClustersCentro de Software Jalisco – InteQSoft – CSOFTMTY - Others

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Mexico FirstTraining and Certi cation

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08Government Support Structure, Funding Goals, and Funding Sources


Mexico’s Service Providers Should Step Up Training Initiatives

While a high level of technical talent is available, one criticism that Mexico continues to receive is concern over scalability of opera-tions beyond those that have already been established. The major domestic and foreign operators are concentrated in three of Mexico’s biggest economic and population centers: Mexico City, Guadalajara, and Monterrey. Some question whether these markets can sustain additional operations with a headcount of 1,000 to 3,000 programmers, architects, technicians, and other support personnel. Here, lessons learned from India may be adopted. While India has a clear advantage when it comes to popu-lation (over one billion compared to 110 million) as well as English speaking personnel, some also point to the overall manage-ment model of domestic operators in Mexico, and a lack of focus on comprehensive training programs at the company level.

“Many companies in the region are �nding it challenging to replicate quality, and lack maturity models as well as training programs that have been one of the successes in other o�shore destinations, ” explained Anupam Govil President of Avasant LLC, an outsourcing consultancy 12. While Mexico’s education system has been making e�orts to tailor programs to the IT industry, we question whether domestic service providers are doing their part to adequately train personnel. According to Ravi Shanker, Sales Director for HCL America, companies in India like Infosys can hire 25,000 people every year, 80 percent of which are straight out of college and not necessarily from technical backgrounds 13. The di�erence is that they put new recruits through an intensive two to three month training program, building their workers’ skills from the bottom-up. “I am not sure that �rms in Mexico and Brazil understand the training concept as they do in India, and they need to establish strong training programs for new graduates.” Doing so would certainly open the door for more graduates to enter into the IT industry.

One champion for technical talent creation has been Mexico’s public university system. Under the direction and guidance of the Mexican government, many public universities have been working with private sector partners to develop curriculum uniquely suited for the IT services industry. However, the multinational vendors – both domestic and foreign – will have to invest more in employee training, if they are to compete outright with operators in India.

Coordinated Government Initiatives Will Improve Mexico’s Language Training

The Ministry of the Economy and PROSOFT, the government entity responsible for promoting and strengthening Mexico’s com-petitiveness in information technology, continues to increase budgets available to locally-driven initiatives to improve training, subsidies for capital expenses, cash-in-hand grants, and other incentives for technology companies. Along with the more estab-lished markets including Mexico City, Guadalajara, and Monterrey, second-tier cities have also opened themselves up for business. Cities like Aguascalientes, Queretaro, Hermosillo, Tabasco, and others are recognizing the potential and promise of global services as an engine for economic growth, as well as a pathway towards a higher-value, knowledge-driven economy.


The biggest challenge for these second-tier locations, and for the Mexican market as a whole, is not technical talent, but the limited supply of senior-level, travel-ready English speakers. E�orts are underway to improve on this, but language learning is an incremental process. As Mexico’s IT services market grows at a rate of twelve to twenty percent annually, we predict that supply will have a hard time keeping up with demand; this could drive up the wage premium relative to other Latin American and Asian o�shore destinations.

LABOR MARKET FRAMEWORKMexico has a long tradition of labor unions and has strong laws protecting its workers. These rights include the right to form and join unions, the right to compensation in the event of injury on the job, the right to a safe workplace, and the right to be free from discrimination 14. A National Minimum Wage Commission sets minimum wages in di�erent regions of Mexico based on factors in the local economy and the minimum wage increases each year with in�ation. Also, the minimum wage is set as a daily rate rather than an hourly rate. Wage compensation and medical attention for on-the-job injuries are part of the social security system. Health insurance is provided by the Social Security Institute for all non-work related injuries and illnesses. In Mexico, workers can be legally �red only for certain reasons. Laid o� workers are typically compensated with three months of severance pay in addition to 12 days salary for each year worked. However, �ring employees can be di�cult and can result in legal disputes, even with proper severance compensation.

TELECOMMUNICATIONS INFRASTRUCTURETelecommunications costs in Mexico are among the highest in the OECD. In a recent study commissioned by the Mexican govern-ment, the OECD calculated that mobile and landline carriers overcharged consumers by $13.4 billion a year for phone and internet services from 2005 to 2009. Mexican telecoms magnate Carlos Slim has received criticism by international and federal agencies on his majority control of the country’s telecoms market. The Telmex company controls 80 percent of Mexico's landline market, while Telcel controls 70 percent of the mobile phone business. Mexico’s government, which commissioned the OECD study, is using it to validate e�orts to create more competition in telecommunications. The �ndings support the government’s plans to auction o� �ber-optic lines owned by the state power company and contracts to push high-speed Internet into communities where it’s not available. Despite these challenges, Mexico’s telecommunication infrastructure investments may be receiving a boost in 2012. Mr. Slim recently announced that Telmex and America Movil could invest as much as $13.9 billion dollars to improve Mexico’s and Brazil’s telecoms infrastructure.

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04 Education by Region: Labor Pool and Quality Metrics Data Source: Instituto Nacio nal de Estadística y Geografía (INEGI)


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09 ITC costs in Mexico are among the highest in the OECD

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SECURITYWhile news headlines emphasize violence between rival drug gangs, government statistics and anecdotal evidence show that most incidents involve those involved in the drug trade or law enforcement. In addition, much of the violence occurs in speci�c areas along drug “corridors,” leaving many parts of the country (and even speci�c areas within a�ected cities) safe and pleasant areas to do business.

An examination of homicide statistics for business centers around the world show that many have homicide rates as high, if not higher, than Guadalajara (the “Silicon Valley of Mexico”). Some North American cities that businesspeople or tourists would not hesitate to visit actually have higher homicide rates than Guadalajara.


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10Guadalajara homicide rate lower than many other business centersSources: Guadalajara - Instituto Nacional de Estadistica y Geogra�a (2009), All US cities - FBI Uniform Crime Reports (2010)Rio de Janeiro - Institute of Public Security (ISP) of Rio de Janeiro (2010), Bogota - Instituto de Medicina Legal (2010)Capetown - South African Police Service (2010)

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11Personal Safety Perceptions - Guadalajara, MexicoHow often do you feel your personal safety threatened?

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A survey of foreign professionals living in Guadalajara, a center of IT and outsourcing businesses, shows these statistics are re�ected in day-to-day living.


Finally, respondents to a survey conducted by Global Delivery Report were given the opportunity to comment on what it is like to live in Guadalajara. Sample comments include:

“I have been living here for �ve weeks, have taken the bus and walked around in the city, and have never felt that my safety was threat-ened.”

“The way the U.S. media has reported on the situation in Mexico is very misleading to potential business visitors and tourists...yes, there is a drug war going on but it is important to point out it is in isolated areas near Mexico’s border with U.S. and is mostly in-�ghting between cartel members.”

“Most people take precautions to keep their homes and businesses secure. I am more afraid of falling on the sidewalks than being robbed or mugged.”

“In spite of the media's exaggerated reports of violence in Guadalajara, our lives and those of family, friends, business associates, etc, goes on as usual.”

“You take your normal precautions that you take anywhere you live, and you should be �ne.”

“I was raised in NY City during the Ma�a wars. Enough said. I don't buy or sell drugs. I am not a member of the Mexican military. I drive a simple car and don't go to drug-infested areas after midnight. No problems.”

NEARSHORING SWEET SPOTSWhen it comes to IT services for U.S. clients, Mexico is a more suitable platform for projects requiring a higher-level of collabora-tion between onshore and o�shore teams 15. Two major reasons are geographic proximity and time zone alignment, particularly as agile and other ‘live-time’ software and application methodologies become more prevalent; cultural alignment and the ability to set and deliver on realistic project goals also e�ects overall client satisfaction. On ‘people skills and availability’ Mexico actually scored �fth (A.T. Kearney Index) against those countries that we normally consider as developing. Every year, Mexico graduates 90,000 students in the technical and engineering �elds and the Mexican government has taken aggressive steps to align training and education initiatives toward the information technology sector.

Along with agile development, multimedia and software testing are other Mexican specialties. The country’s development exper-tise is re�ected in its boasting one of the highest numbers of Capability Maturity Model Integration (CMMI) certi�ed centers worldwide 16.


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12 Top 10 Countries with CMMI Certi�cations - 2010 Data Source: Software Engineering Institute – Carnegie Mellon

Country Number of Certifications

China 1,048United States 680India 294Spain 131Brazil 98Japan 87South Korea 71France 70Mexico 70Taiwan 67Rest of the world 519

Gaming, Multimedia & Design

Organic growth and government support have spurred on technology companies increasingly focused on gaming, multimedia and design. The city of Guadalajara in particular is making a name for itself as an innovation hub and creative technology ecosys-tem. Companies like Kaxan Games are building on their experience in gaming applications for mobile devices and are making strides in developing games for major consoles including Nintendo’s Wii. The Mexican government also has high hopes and ambi-tious plans for this sector. While still in the early stages, the Ministry of the Economy has plans to develop an industrial park in Guadalajara focused on creating synergy between the technology and creative industries. The project so aptly named Ciudad Creativa Digital (Creative Digital City) will host local software companies but is also meant to attract international giants such as Viacom, Walt Disney, Sony, and others 17. Guadalajara’s major value proposition for such companies is a relatively high concentra-tion of technical and creative talent, as well as the competitive wages which are one �fth of the equivalent wage in the United States. Digital art and multimedia in Mexico is also being taken seriously by at least one established IT services provider. Brain-Up Systems is a level three CMMI-certi�ed company based out of Mexico City, employing over 300 people working on SAP implemen-tation, in addition to interactive web development, 3D animation, design and illustration, and other creative service o�erings.


Agile Software Development

The widespread adoption of agile development has opened up a unique opportunity for nearshore delivery platforms to further capitalize on time zone alignment. Forrester Research estimates that 38 % of businesses, from small to large, now use agile meth-ods. The agile methodology is used to speed up the software and application development process by relying on cross-functional teams collaborating in real-time. Instead of an incremental approach where tasks are developed sequentially, agile integrates developers, systems engineers, customer support and marketing personnel, and testers into an iterative and collaborative project management approach that has been shown to not only improve quality, but also overall speed of delivery. Chris Snyder CIO of rail engineering �rm Hulcher uses Brazilian based company Stefanini to augment his agile team in the United States. “We tried agile with India, but employee turnover got to the point of ridiculousness.” The growing adoption of video conferencing on personal and mobile devices is also facilitating the project management process.

Creative Web Development, Interactive Marketing, Web Design, Animation

As more and more businesses and people go online there is a growing need for heavily customized and interactive technologies as applied to marketing and branding. There is a growing need for heavily customized and interactive web application develop-ment services, as enterprises �nd new and interactive ways to reach clients and stakeholders. Time zone proximity and cultural a�nity to the U.S. consumer culture gives Mexican designers and web developers a unique advantage over distant o�shore markets, and cost savings over U.S. based personnel. The Mexican government has recognized the potential for Mexico to become an exporter of these services and has sponsored various projects to support new and existing �rms. Costa Rica is another nearshore market that has seen successes in creative development services and could be used as a benchmark for comparison with Mexico. Global media group Possible Worldwide has their main development center in San Jose, Costa Rica employing approximately 100 developers and designers responsible for much of the company’s interactive marketing application work.

Software and Application Testing

Cli� Schertz, CEO of Tiempo, a provider of software development and BPO services to U.S. companies with development centers in Mexico, compares the maturity level of the testing market in Mexico to that of a “teenager.” According to Schertz, a general movement away from “waterfall” software development, where testing is performed separately from core development activities, and toward “agile” development, where testing and development resources are integrated into same team, bodes well for near-shore testing providers. “Proximity o�ers advantages not just in terms of time zone, but in traveling back and forth, since agile development often requires user involvement.” As a result, Schertz said some U.S. companies who outsource software develop-ment according to the waterfall method will send their core development activities to an overseas provider but send the testing to a nearshore provider.


REGIONAL PROFILESThis section takes a closer look at the overall distribution of IT talent and other technological and economic resources available across Mexico.

% Educated6.3 - 10.0

10.1 - 11.5

11.6 - 14.0

14.1 - 16.0

16.1 - 21.1

0 500250 Miles

Baja California Sonora

Chihuahua

Coahuila

Nuevo Leon

Tamaulipas

Baja California Sur

Sinaloa

Durango

Zacatecas

San Luis Potosi

Nayarit

Jalisco

Colima

Mexico

Yucatan

Chiapas

Guerrero

Michoacan

Oaxaca

Campeche

Quintana RooVeracruz

Mexico City

MorelosTabasco

Aguascalientes

GuanajuatoQueretaro

Puebla

Hidalgo

Map

01Talent Distribution: Percentage of the Population with a Bachelor’s DegreeThe graph illustrates percent of educated population and lists number of CMMI designees per state, but says nothing about Bachelor’s Degrees.

StateNumber CMMI

of CertificationsAguascalientes 1Baja California 1Chihuahua 2Coahuila 2Distrito Federal 21Guanajuato 4Jalisco 7Nuevo Leon 13Puebla 2Queretaro 4Sinaloa 11Sonora 1Yucatan 1


LegendMUNICIPIOSDENSITY

0.000000 - 20.000000

20.000001 - 200.000000

200.000001 - 500.000000

500.000001 - 1000.000000

1000.000001 - 2000.000000

2000.000001 - 5000.000000

5000.000001 - 17423.360527

0 490 980245 Kilometers

Tijuana

Ciudad Juarez

Hermosillo

Culiacan

Queretaro

Guadalajara

Mexico City

Monterrey

0 - 20

20 - 200

200 - 500

500 - 1000

1000 - 2000

2000 - 5000

5000 - 17423

The country is divided into 31 states, 2,486 municipalities, and one federal district – also known as Mexico City, Distrito Federal, or simply, DF. Like most of Latin America, Mexico’s 113 million people are heavily concentrated in urban areas – 75 percent com-pared to 28 percent in India. Most states therefore have one dominant city where much of the labor force and economic activity cluster together. The overall population is heavily concentrated in the Occidental region or the southern belt of the country stretching from Jalisco to Veracruz. For the most part, bordering states with the U.S. are arid and sparsely populated, and hold a high concentration of Mexico’s manufacturing activity.

Major Population Centers and Surrounding Labor Basins

Map

02 Labor Pool Distribution: Population Density Across Mexico


Wealth is also heavily concentrated in more industrialized parts of the country. Six of the 31 states make up over 50 percent of Mexico’s GDP (see chart below). In the 1960’s the Mexican government initiated the Border Industrialization Program (BIP) which courted U.S. manufacturers through substantial tax holidays and duty-free imports of capital requirements. This transformed Mexico from a largely domestic agrarian and commodities economy into the world’s sixteenth largest exporter of goods and services.

Much of Mexico’s progression into white collar professional services including business process and IT services outsourcing has been a direct result of the country’s industrial policies in support of manufacturing. It comes as no surprise that many of the regions with traditionally heavy concentrations of manufacturing have also become IT services hubs. Monterrey in Nuevo Leon and Guadalajara in the state of Jalisco were traditionally manufacturing destinations and have subsequently developed stronger than average concentrations of IT services, primarily focused on Mexico’s domestic manufacturing sector. The exception is Mexico City which is the �nancial and government center for Mexico. D.F. is headquarters to most Mexican and international com-panies operating in Mexico. With a metropolitan area population of 22 million, the city has a naturally high concentration of IT professionals. While small, the state and city of Queretaro has also attracted a lot of attention as a global services location.


Figure

13Gross Domestic Product For Top Fifteen Wealthiest Mexican States

* Current prices **2003 pricesData Source: Instituto Nacional de Estadística y Geografía (INEGI)

GDP 2010* (Thousands of Pesos)

Portion of national economy

GDP - Compound annual growth 2003-2010**

México Total 12,504,744,198 100.0% 2.2%Distrito Federal 2,160,048,526 17.3% 1.8%México 1,172,479,719 9.4% 3.3%Nuevo León 938,002,962 7.5% 3.2%Jalisco 787,147,048 6.3% 2.0%Campeche 645,293,199 5.2% -3.7%Veracruz 590,287,903 4.7% 3.4%Guanajuato 491,382,991 3.9% 2.5%Tabasco 462,467,019 3.7% 4.7%Puebla 423,877,988 3.4% 2.9%Coahuila de Zaragoza 388,502,943 3.1% 2.0%Tamaulipas 387,540,126 3.1% 1.6%Chihuahua 371,014,956 3.0% 1.4%Baja California 339,451,756 2.7% 1.6%Sonora 320,899,924 2.6% 3.1%Michoacán 300,829,596 2.4% 2.0%


Mexico City - QUICK STATS

Population Metropolitan Area: 21.2 million , Total Labor Force: 8.9 millionAverage Annual GDP Growth: 1.8 %, 18 years and over with college degree: 4.2 Million

CMMI CERTIFIED COMPANIESCERTIFICATION

LEVELSaitosoft S.A 2ITE Soluciones S.A. de C.V. 2Centro de Inteligencia Competitiva S.A. de C.V. 2Mapdata S.A. de C.V. 2Tecnologia, Asesoria, Sistemas, S.A. de C.V. 2Brainup Systems S.A. de C.V. (Shared with Argentina) 2IDS Comercial S.A. de C.V. 3Informatica Integral Empresarial S.A. de C.V. 3Servicios Telepro 3Accenture Technology Solutions – Mexico 3EDS, an HP Company 3Blitz Software 3QuarkSoft S.C. 3Azertia Tecnologias (INDRA SISTEMAS S.A.) 3T&D Automated Testing & Development Software, S.A. 3Vision Consulting 3AsTecI S.A. de C.V. 3IBM AMS Mexico 3CRS IT Consulting S.A. de C.V. (Shared with Argentina) 3Ultrasist S.A 5Praxis de Mexico S.A 5

Local Economy: Mexico City also known as ‘Distrito Federal’ is the economic and governmental nerve center of Mexico. It is surrounded by the state of Mexico which together account for almost 25 percent of the country’s entire population, and over 25 percent of the country’s GDP. The local economy is centered around �nancial and other professional services as well as the local consumer market. The top twenty-�ve percent of GDP per capita holders in the city had a mean disposable income of US $98,517 in 2007. High personal incomes attract most of the world’s largest retailers, but that also puts a premium on global services.


Labor Pool: Global services draw from the local economy which is focused heavily on business administration and support services. Competition for senior level technical talent is also intense and wages are high compared to other parts of the country. D.F. attracts young professionals from all over the country but the hectic lifestyle has made mid-career professionals reconsider other locations surrounding Mexico City. The state of Mexico engulfs the Distrito Federal which is practically an extension of the capital. Despite higher than average costs, Mexico City has a deep labor pool and international services ecosystem from which much of Mexico’s business professionals emerge. Given its high concentration of trained professionals, Mexico City has become an option for larger BPO operators like Indra, Genpact, and ACS.

Education: In 2011 more than 32,000 students were enrolled in IT related programs, more than 12% of the national total. There are three main universities in Mexico City. The Instituto Politecnico Nacional (IPN) o�ers only technical programs and is a big talent factory for IT services. The Universidad Nacional Autonoma de Mexico (UNAM) o�ers a fully developed computer science program that recruits some of the best IT talent in Mexico. The third one, Monterrey Tech, has three campuses which graduate engineers. Their motto is “entrepreneurial culture,” and these graduates are Mexico City’s entrepreneurial base.

Wages: Wages in Mexico City have been reported to be 30 percent higher than what can be expected in Guadalajara. However, senior-level professionals are more readily available which can lower recruitment costs, particularly compared to second tier cities where at least part of the recruitment for higher-level positions has to be done on a national scale. Indeed, technology companies operating in other cities often talk about recruiting talent from Mexico City by enticing them with comparable salaries as well as a better overall quality of life.

Queretaro - QUICK STATS

Population Metropolitan Area: 1.08 million, Total Labor Force: 750,000Average Annual GDP Growth: 4.0 % , 18 years and over with college degree: 126,000

CMMI CERTIFIED COMPANIES CERTIFICATION LEVELVision Software Factory, S.A. 2OPEN ROAD Solutions 3ALTEC Mexico S.A. 3SigmaTao Factory S.A. 5


Local Economy: Queretaro’s economic base is grounded in manufacturing and prides itself as an aerospace hub with Canada’s aircraft manufacturing �rm Bombardier located there. Queretaro is now home to multinational operations located on the periph-ery of the city in one of four main industrial parks: Zona Industrial Benito Juarez, Parque Industrial Querétaro, Parque Industrial Jurica Parque La Montaña and the Querétaro-San Juan del Río Industrial Corridor. The city is well connected to the rest of Mexico and the world via road, rail, and air. Direct �ights are available from Dallas and Houston to Queretaro International Airport which began operations in 2004.

Labor Pool: Queretaro has recently come onto the global services stage as an ‘overlooked’ IT/BPO option in Mexico. However, with a small yet highly educated labor pool, Queretaro is more aptly suited for operations focused on higher-end IT development services, particularly for the Mexican market. IT services company Praxis operates out of Queretaro, serving mainly clientele and projects for Mexico. Queretaro may also be more suitable for IT consulting services companies with a heavy focus on Latin America and manufacturing. English language speakers are in very high demand and relatively low supply here which has forced a number of larger organizations to disqualify Queretaro for large-scale BPO operations. However, its relative proximity to Mexico City – 2.5 hours driving – and good quality of life has made it easier to recruit talent from outside the region, particularly mid-career level talent for looking proximity to family ties and escape from the often hectic lifestyle of Mexico City.

Education: The city is home to some of the most important universities in Mexico including the National Autonomous University of Mexico and the ITESM (Instituto Tecnológico y de Estudios Superiores de Monterrey), have located campuses in the outskirts of Queretaro where signi�cant research is conducted. UNAM is a public institution and the ITESM-Querétaro Campus is private.

Wages: Living costs and hence labor costs are lower in Queretaro than in Mexico City, Guadalajara, or Monterrey.


Guadalajara - QUICK STATS

Population Metropolitan Area: 4.4 million, Total Labor Force: 1.9 millionAverage Annual GDP Growth: 2.8 % ,18 years and over with college degree: 484,000

Local Economy: Guadalajara is the second most populous metropolitan area in Mexico after Mexico City. The Guadalajara Metro-politan Area is roughly 4.4 million inhabitants and has received considerable attention from the international community. It recently hosted the Pan American Games and is known as "the Mexican Silicon Valley," due to its legacy in electronics manufactur-ing and emergence in global IT services. The city is the main software producer in the country, and also is a leading producer of electronic and digital components. Such high technology companies as General Electric, IBM, Intel, Hitachi, Hewlett Packard, Siemens, Flextronics and Solectron have facilities in the city or its suburbs. Guadalajara has continued to expand as a hub for high-tech manufacturing and engineering/software development, with 12 original equipment manufacturing, 16 electronics manufacturing services and 24 design centers as of 2011.

Labor Pool: Guadalajara’s history in the electronics manufacturing industry doubles as a rich source of labor for IT services. In addition to global electronics brands, Guadalajara houses many of the country’s IT services and consulting �rms. Tata Consulting services, ACS, IBM, Dell, all have major operations in Guadalajara.

Education: Guadalajara is a very important hub for universities and educational centers with national and worldwide prestige, such as Universidad Panamericana, ITESO, Universidad de Guadalajara, Monterrey Tech and the Universidad Autónoma de Guada-lajara (U.A.G.), among others.

Wages: Increased international exposure has some local IT services providers worried that wage in�ation will become a problem. However, cost more often depends on the type of talent required. Local sources have suggested that costs for senior-level, bilin-gual engineers have increased by approximately 10 percent over the past three years. However, costs have not risen dramatically for non-English speaking personnel at all levels. This suggests that Guadalajara has a deep pool of technical talent, but language barriers continue to put a premium on high-end developers.

CMMI CERTIFIED COMPANIES CERTIFICATION LEVELComputacion en Accion, S.A. 2DW IT services S.A. 2Ejecutivos en Computacion y Servicios S.A. de C.V. 2Tecnologia en Informatica y Administracion S.A. de C.V. 2GEUSA, Grupo Embotelladoras Unidas S.A. de C.V. 2INNEVO 4IBM 5


Monterrey- QUICK STATS

Population Metropolitan Area: 4.4 million, Total Labor Force: 1.9 millionAverage Annual GDP Growth: 2.8 % ,18 years and over with college degree: 484,000

CMMI CERTIFIED COMPANIES CERTIFICATION LEVELIlinium S.A. 2Kernel Technologies Group 2Tecnologico de Monterrey – VRHTI 2i-place 2Consiss S.A. 2VENTUS Technology S.A. 3World Software Services Group, SA 3AD INFINITUM S.A. 3SYTECSO, S.A. 3Expert Sistemas Computacionales S.A. 3Softtek 5Sieena Software 3Hildebrando Software Factory 5

Local Economy: Tech services giants in Monterrey including Softtek, Neoris, and Hildebrando are not the only ones hungry for IT talent. Monterrey is a commercial powerhouse hosting international companies like Sony, Toshiba, Carrier, Whirlpool, Samsung, Toyota, Hummer, Daewoo, Ericsson, Nokia, Dell, Boeing, HTC, General Electric, Gamesa and LG. Most if not all of these companies also have in-house IT departments that need to be sta�ed. So coordinating around the needs of both domestic and o�shore com-panies will clearly keep CSOFTMTY and particularly the universities very busy in Monterrey.

Labor Pool: This interplay between the various private and public sector partners is what has allowed the region to grow an impressive IT services sector. And while the nearshore advantage in terms of proximity and labor arbitrage has been a key enabler for this industry, a well-developed university system and a commitment to tech training and education should continue to drive innovation and excellence in �eld.


Education: Monterrey is home to two of the nation's most prestigious universities, the National Autonomous University of Nuevo Leon and Monterrey Tech. Other reputed universities include the University of Monterrey (UDEM) and the Universidad Regiomon-tana. The state has 44 higher education institutions o�ering education to more than 111, 000 undergraduate students, and more than 10,000 students at the graduate level. Graduates entering IT Careers: 3,000 per year

Wages: Monterey’s high standard of living puts a premium on wages. When asked to compare Monterrey to other regions, most industry experts identi�ed Monterrey as less expensive than Mexico City, but more expensive than Guadalajara.

Appendix A: MEXICO’S IT SERVICES MARKET STRUCTUREMexico’s IT services industry has diversi�ed to include new company models and service delivery strategies. Traditionally, there have been four general categories of IT o�shoring companies in Mexico, which were dominated primarily by the large multina-tionals: Developed country multinationals including HP, IBM and Accenture; Indian multinationals including TCS, Infosys, and Wipro; Mexican multinationals including Hildebrando, Neoris, and Softtek; and captive operations for global enterprises such as Dell, Bank of America, and Oracle. These organizations have focused mainly on servicing large enterprises on major IT infrastruc-ture projects, software development, systems integration and maintenance, and IT consulting. While these companies continue to be the biggest employers and revenue generators for the industry, we note the continued expansion, both in terms of employ-ment and capability, of small-and-medium sized providers, as well as multimedia �rms focused on the U.S. market.


Figure

14 Mexico’s IT Services and Innovation Ecosystem

Full-Service Multinationals

Multimedia & Design

Captive Operations

Small-Medium Providers

Full-Service Multinationals

Foreign and domestic �rms with operations across Latin America and Asia continue to dominate Mexico’s IT outsourcing industry. Seven �rms account for approximately 80 percent of industry employment and revenue: Softtek, Neoris, Hildebrando, IBM, HP, Accenture, and Tata Consulting services.


These companies o�er a full range of traditional enterprise-wide solutions including IT consulting, enterprise resource planning (ERP), applications development, testing, management and integration, and IT infrastructure solutions. With a total population reaching 113 million, Mexico has a large domestic market for IT services which is re�ected in these companies’ total revenues. Both the domestic and Indian vendors have reported that the Mexican market represents between 60-75 percent of their core business. For the domestic market, manufacturing, banking and �nance are core industry verticals with an increasing focus on energy, logistics, consumer products, retail, and healthcare. However, and particularly for the domestic providers, ongoing business development initiatives re�ect a signi�cant swing toward revenue growth originating from clientele in the United States. Softtek, Neoris, and Hildebrando all have sales o�ces in the United States with Neoris’ headquarters based in Miami, Florida. IT consulting, legacy systems maintenance and SAP solutions for Fortune 1000 enterprises are at the core of the value proposition, but increased emphasis is being put on mobile application development, and cloud-oriented solutions.

Captive Operations

Captive centers are wholly-owned business units that provide services such as IT and back o�ce operations to a parent company. A 2009 policy brief from the Inter-American Development Bank entitled “The O�shore services Industry: A New Opportunity for Latin America,” put the number of captives in LatAm between 100-150, concentrated heavily in six countries – Argentina, Brazil, Colombia, Costa Rica, Chile and Mexico. But after a rash of divestitures and closings of Indian captives in the wake of the 2008 �nancial crisis, some analysts posited that the captive model had outlived its value for companies, and that the third-party option would dominate the o�shoring space going forward. The bigger markets – Mexico, Brazil, and Argentina – are more attractive when focusing on availability of skilled labor and market potential, but there are hidden risks when considering in�ation and factors such as political uncertainty.

Specialized Providers

Small to mid-sized IT services providers in Mexico are growing, as is the demand for IT services in the global small-to-medium enterprises (SMEs) market segment. Companies like Dextra, Unosquare, and Tiempo Development are capturing a greater market share of web application development and maintenance, testing and imbedded software development services for this market segment. These �rms typically employ between 50-500 people and are either domestic – as in the case of Dextra – or U.S. origi-nated companies with delivery centers in Mexico. On the buy sideSMEs are also increasingly looking to outsourcing as a strategy to lower costs and to increase competitiveness. Gartner predicted that 20 percent of businesses will own no IT assets by 2012, largely due to the need for cost-e�ciencies, �exibility, delivery and mobility 18. The standardization and automation of IT systems means that they can be delivered more easily and cheaply by third parties. Likewise, as telecommunications channels become cheaper and more prevalent with new technologies such as video conferencing, day-to-day collaboration between onshore and nearshore has become easier for application development related tasks. So while Mexico’s specialized providers may not have the bandwidth needed to serve global fortune 1000 companies, growth in the market for IT services in the SME category will likely award these organizations with additional business.


Sheltered services

Another category of �rm that has gained traction in recent years deploys the sheltered services model to back o�ce and outsourced IT services. The sheltered services approach involves a third party that arranges most of the logistical aspects needed to get the customer’s operation up and running. This includes �nding the right facility, getting the ICT connections, and sta�ng and recruitment. From here, the customer takes over and manages the team directly as it would any other department onsite, while focusing on its core business. Ultimately the di�erence between this arrangement and a captive operation is �exibility. As the needs of the buying organization change over time, the sheltered services provider works to adjust certain aspects of the operation, including the size of the o�ce space, the number of sta�ers and their capabilities, and other needs. Vangtel is Mexico’s major sheltered service provider operating in the ITAS space. Having opened its doors in 2006, Vangtel focuses on contact centers, IT and BPO services, and now coordinates close to 1,000 employees out of its facilities in Hermosillo, Puebla, and most recently Guadalajara 19.

Appendix B: COMPANY PROFILESThese pro�les provide examples of the depth and range of IT-related skills available throughout Mexico.

Dextra - Dextra is a CMMI certi�ed IT services company based out of Monterrey with two development centers in Nuevo Leon and Aguascalientes. Dextra's services are focused on two software development business lines: IT and Engineering services. Dextra has a strong track record with Fortune 100 strategic partners helping them to support their IT and Engineering teams. IBM, Qual-comm, Nokia, Handmark and Hewlett Packard are some of the company’s customers. Close to 75 percent of its revenue comes from contracts abroad.

Hildebrando - is a leading nearshore provider of IT services. The company o�ers competitively priced IT solutions, delivered by high-quality, veri�able and scalable IT resources in a true nearshore environment. The bene�ts U.S. clients receive from Hilde-brando's Mexico-based nearshore sourcing services derive from the company's real geographical proximity, shared time-zone, familiar culture, similar values and common management styles. The closeness of the company's delivery centers to the U.S. enables a "follow the sun" work discipline, reduced time travel, and e�ortless setting of face-to-face meetings. The cost of labor, real estate, infrastructure and telecommunications are much lower in Mexico than in any other place in North America. Additional advantages for Hildebrando's clients derive from Mexico being part of NAFTA, the North America Free Trade Agreement, thus o�ering the business bene�ts that come with political stability and a de�ned frame-work that provides legal and IP protection. The company's U.S. HQs are in Houston. Hildebrando's Corporate HQs are located in Mexico City. The �rm has delivery centers in Aguascalientes, Guadalajara, Monterrey and Mexico City. Hildebrando's European delivery center is located in Madrid, Spain.


Infosys Limited - (NASDAQ: INFY) was started in 1981 by seven people with US$ 250. Today, the company is a global leader in the "next generation" of IT and consulting with revenues of US$ 6.35 billion (LTM Q1-FY12). Infosys de�nes, designs and delivers technology-enabled business solutions for Global 2000 companies. Its o�erings span business and technology consulting, appli-cation services, systems integration, product engineering, custom software development, maintenance, re-engineering, inde-pendent testing and validation services, IT infrastructure services and business process outsourcing. Infosys has more than 50 o�ces worldwide, while in Latin America it has physical operations in Brazil and Mexico.

Migesa - was created as a software development house for Medium Businesses, focusing on solutions in areas like: Hardware and Software integration, Consulting services, Software development, Deployment and others. In 1986 Migesa evolved to serve the Corporate market with the same philosophy of providing "turnkey solutions“ and focusing on consulting and outsourcing. Migesa is one of Mexico's largest service and solutions integrators, o�ering complete information technology solutions, ranging from security and Internet to data management, operative environments and business continuity.

Neoris - Neoris is a global business and IT consulting company that specializes in nearshore outsourcing, value-added consulting, and emerging technologies. Neoris is the largest IT consulting and systems integration company in Mexico and the second largest in Latin America. Neoris o�ers systems integration, custom application development, IT consulting, and software deployment and support solutions. The company is a leading provider of nearshore outsourcing services through a global delivery model leverag-ing six worldwide software development centers. In 2007, Neoris was ranked among the Top Five Best Performing IT Service Providers in the Global services 100. Headquartered in Miami (FL), Neoris has operations in the U.S. , Europe, Latin America, Africa, and the Middle East. Neoris is a subsidiary of CEMEX (NYSE: CX).

Praxis - is a Mexican company founded in December, 1996 in Mexico City and is a CMMI level 4 certi�ed services provider. Special-ized in consulting, integration, outsourcing and development services with main focus on Finance, Banking & Telco. Praxis employs approximately 600 engineers and has operations in Monterrey and Queretaro.


Quarksoft - is a CMMI Level 3 certi�ed software development company headquartered in Mexico City with a development center in Zacatecas, and sales personnel in the United States. Services: Customized Software Development: Enterprise, Desktop, HW/SW integration; SAP Consulting and Implementation; Software Process Improvement: Assessment, Training and Implementation; services Oriented Architecture (SOA): Design, Consulting and Implementation; Software Quality Assurance (SQA) and Testing. Industries: Financial Trading, Finance, Insurance, Banking, Retail, Government, Health Care, Manufacturing, Mobile communica-tions.

Softtek - Founded in 1982, Softtek is a global provider of IT and Business Process services with more than 5,000 associates in 24 o�ces in North America, Latin America and Europe. With seven Global Delivery Centers, Softtek provides in-depth, high-quality and cost-e�ective solutions to top-tier corporations in more than 20 countries through on-site, on-shore and its trademarked Near Shore® service delivery models. A pioneer and leader of the Near Shore® Industry, Softtek is the largest private IT service provider in Latin America. The company o�ers Application Related services, IT Infrastructure Support and Business Process Outsourcing (BPO) solutions at seven Service Delivery Centers: four in Mexico to serve the U.S. which are located in Monterrey, Mexico City, Aguascalientes and Ensenada, two in Brazil for Latin America and one in Spain to serve the EU. In 1997 Softtek created the Near Shore® concept as an alternative to “traditional” o�shore outsourcing. The idea behind the concept was to leverage Mexico’s proximity, cost structure and international trade agreements to provide U.S. based companies with a more convenient alternative, including minimal security issues, fewer language and cultural barriers, no time-zone di�erences, and low turnover rates. Today Softtek is recognized as a top vendor for Near Shore® outsourcing by leading analysts such as Gartner and Forrester, and serves several Fortune 500 companies. Softtek’s delivery model is geared to achieve productivity gains to its clients by means of lowering the Total Cost of the Engagements (TCE), lower the risk associated with o�shore engagements, and achieve high productivity as a result of highly specialized lines of service.

Tata Consultancy Services - is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other �rm can match. TCS o�ers a consulting-led, integrated portfolio of IT, BPO, infra-structure, engineering and assurance services. This is delivered through its unique Global Network Delivery Model (GNDM™), recognized as the benchmark of excellence in software development. A part of the Tata group, India’s largest industrial conglom-erate, TCS has over 198,500 of the world’s best-trained consultants in 42 countries. The company generated consolidated revenues of US $8.2 billion for year ended March 31, 2011 and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

Tiempo Development - is a nearshore outsourcer specializing in software development and managed service solutions, helping its clients achieve a higher velocity, lower cost software development and resource management environment. Tiempo possesses Agile software development knowledge that when combined with the nearshore support model, bene�ts clients with meaning-ful operating results. Tiempo Development announced it achieved 41% revenue growth in the �rst half of 2010. The growth resulted from key account acquisitions as well expanding its services in several existing accounts.


Unosquare LLC - is a bi-national �rm with o�ces in Portland, Oregon, and Guadalajara, Mexico and is a provider of nearshore based IT outsourcing and sta�ng solutions. The company only hires bilingual, travel ready, senior software engineers. With that team it provides North American based companies with Mexico and Honduran based software development and QA teams. Customers work with our engineers in the same time zone - Unosquare can scale up fast with a resource pool of over 5,000 senior engineering resources in Guadalajara alone. With the innovative NAFTA (TN) Visa, Unosquare will bring senior bilingual software engineers and project managers to client locations in the U.S. without the restrictions of o�shore Visas. Clients include Fortune 500 companies and well funded startups.

Vangtel - Vangtel, a member of The O�shore Group, is an innovative international service provider that demonstrates its dedica-tion to its clients’ success by providing world-class shelter services for IT and BPO related activities. Based out of Hermosillo, Vang-tel has also recently expanded operations into Nuevo Leon and coordinates approximately 1,000 employees for organizations in the United States.

This White Paper has been sponsored by MexicoITMexicoIT – MexicoIT is a partnership between the government and the private sector in order to raise the awareness of the Mexi-can IT industry as the most important nearshore provider to the U.S. & Canada. No other country is closer than Mexico and can o�er a nearshore concept that includes NAFTA bene�ts, IP protection, human capital capabilities and a strong support from the government. Clients evaluating country options should consider Mexico attractive because of this combination of factors that include competitive total cost of engagement (versus purely lowest labor costs), relatively lower risk and other business drivers, including cultural alignment, short travel distance and same time zone.


SOURCES

1- Forecast was based on average growth rates of revenue estimates from the Mexico’s Ministry of the Economy2- Forecast was based on average growth rates of revenue estimates from the OECD, NASSCOM, and Boston Consulting group from 2005 to 2010. 3- http://nearshoreamericas.com/kpo-latin-americas-global-services/4- http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/0,,contentMDK:23088429~pagePK:64165401~piPK:64165026~theSitePK:469372,00.html5- http://www.imf.org/external/pubs/ft/survey/so/2012/NEW012412A.htm6- http://www.economist.com/node/18895150?story_id=18895150&CFID=173052931&CFTOKEN=76541139 7- http://www.economist.com/blogs/dailychart/2011/06/overheating-emerging-markets-08- http://www.bc.edu/research/agingandwork/archive_pubs/CP21.html9- http://www.doingbusiness.org/rankings 10-http://www.atkearney.com/index.php/Publications/o�shoringopportunities-amid-economic-turbulence-the-at-kearney-global-services-location-index-gsli-2011.html11- http://www.cio.com/article/699015/IT_Outsourcing_Deal_Size_Data_Shows_Decade_Long_Decline12- http://nearshoreamericas.com/nearshore-faces-vast-challenges/ 13- http://nearshoreamericas.com/majority-expertise-scale-criteria-successful-development-venture/14- http://www.naalc.org/15- http://nearshoreamericas.com/o�shore-nearshore-cio/16- http://sas.sei.cmu.edu/pars/pars.aspz17- http://globaldeliveryreport.com/guadalajara-multimedia-startups-industrial-park-software-companies/18- http://www.contactcenterworld.com/view/contact-center-news/smes-move-to-outsourcing.aspx19- http://nearshoreamericas.com/sheltered-services-o�ers-goldilocks-option/

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