The rise of Mexico’s software development industry

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US-based companies are always looking for cost-effective solutions in the rapidly changing field of software development. Regarding nearshore software development, Mexico has emerged as a significant player.

Forecasts claim the value of Mexico’s software development market will surpass $3.8 billion by 2024. So, what exactly makes Mexico a go-to location among American IT businesses?

This post will thoroughly overview the benefits and limitations of nearshoring software development in Mexico and present a viable solution to making your IT expansion risk-free and smooth.

Benefits of nearshore software development in Mexico

Whether you’re a small company, a global conglomerate, or an IT entrepreneur, learning about these benefits will help you understand Mexico’s vast software development possibilities.

The growth of the Mexican IT industry

The information technology industry in Mexico has expanded rapidly in recent years. Its value has already exceeded $28 billion, making it the second-largest IT market in Latin America.

Experts predict it to grow at a CAGR of over 10% during the following five years, mainly driven by AI, cloud solutions, cyber security, and robotics technologies.

The industry’s largest sector is IT outsourcing, showcasing an annual growth rate of 10%-15%.

Diverse talent pool

Mexico impresses with its talent pool of about 700,000 IT professionals, the biggest one in Latin America. That number is rising gradually as more than 110,000 local students get degrees in STEM every year.

Mexican software developers are considered the most educated in the region, being the best at technology skills. This variety of IT experts directly affects the country’s thriving IT sector.

When you work with Mexican development teams, you can tap into their depth of tech knowledge to address any challenges specific to your project.

Cultural alignment

Another benefit of nearshoring software development to Mexico is cultural affinity and shared business ethics with Western companies.

Mexican software developers take no time integrating into the teams and adapting to new work environments.

Possessing strong interpersonal and teamwork abilities, these programmers will always be willing to walk the extra mile when working on your product.

Time zone compatibility

The average time difference between Mexico and the USA is 2 hours, which enables the development teams to maintain constant contact and provide instantaneous responses.

Thanks to this synchronized process, your project will stay on schedule despite unforeseen challenges.

Government support

The Mexican government has been spending much of its budget to improve the country’s tech infrastructure.

The country started using the 5G mobile network in 2021, which is supposed to enhance internet links and speed up digital processes.

IT businesses are also encouraged to make cutting-edge technologies based on AI that can speed up and make software development less error-prone. 

Also, more than 20 tech parks with modern facilities and business buildings were built.

They can be found in Guadalajara, Monterrey, and Mexico City, which are all big IT hubs in Mexico, as well as in Tijuana and Merida, which are growing IT hubs.

Cost efficiency and moderate rates

The annual salary of a senior Mobile App Developer in the United States is close to $140,000, whereas the same expert in Mexico earns just $41K annually.

Consequently, outsourcing software development to Mexico costs around three times less than in the United States.

With significant savings realized, businesses can allocate these funds towards more critical areas, enhancing productivity and growth opportunities. 

Thriving startup ecosystem

In addition to its low business environment risk and good Ease of Doing Business score, Mexico ranks 10th in the 2023 Kearney Global Services Location Index, highlighting its business-friendly climate for entrepreneurship.

With approximately 440 startups and six unicorns, Mexico leads Central America in the Startup Ecosystem Index, further indicating its robust ecosystem for innovation.

These factors make Mexico an attractive destination for US-based IT corporations to develop nearshore software in Mexico.

Risks of IT outsourcing to Mexico

While there are many pros of outsourcing to Mexico, there are also specific hazards and difficulties to be aware of:

Intellectual property protection

Intellectual property protection is becoming more important in Mexico’s IT sector. Commercial-scale infringement is an issue for IP owners in Mexico and the United States.

Issues including inadequate legislation, poor coordination, limited funding, and a flood of fake products play a role.

Recent legal improvements, led by agreements under the United States-Mexico-Canada Agreement, have enhanced IP protection, addressing concerns including technical protection measures and rights management data.

Legal and regulatory compliance

Understanding Mexico’s local laws, taxes, and compliance requirements is essential for successfully navigating the country’s legal and regulatory framework, especially when there’s a ban on outsourcing, or, to be more exact, subcontracting, in place.

Working with a team of seasoned lawyers and accountants is best if you want to stay out of trouble and on the right side of the law.

Final thoughts

Mexico offers myriad opportunities for American IT companies looking to enhance their software development, ranging from a large tech talent pool and affordable salaries to cultural affinity and time zone alignment.

However, outsourcing to this LATAM destination has pitfalls like IP protection and compliance issues.

As a result, many American IT companies opt to build their development teams through local R&D center providers, which offers a safer and more cost-effective approach to achieving their business objectives.

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Disclosure: This is a sponsored post. However, our opinions, reviews, and other editorial content are not influenced by the sponsorship and remain objective.