Mexico’s Burgeoning IT Industry
Mexico’s information technology (IT ) industry is posting promising growth on the back of aggressive pu blic policies that promote government, academic and private-sector supp ort. Cu rrently rated fourth worldwide as a provider of IT services, the country is expected to climb to third position in the medium term.
According to Santiago Gutiérrez Fernández, President of the Mexican Electronics Telecommunications and Information Technologies Industries Chamber (CANIETI, for its acronym in Spanish), to which some 700 companies are affiliated, Mexico is the world’s main exporter of IT services after India, China and the Philippines.
“In the last decade, the sector’s exports have risen from a trifling to over 3.75 billion usd. In other words, they have grown more than 70-fold”, says Gutiérrez Fernández, adding that “global analyst firms project that, if the present climate of support persists and the industry, government and academics continue to pool their efforts, in just three years Mexico could be rated the world’s third-most-important IT service provider.”
The sector’s national market value has also increased substantially, battling its way out of a contraction of -2% in 2000 to post double-digit growth in recent years –except in 2009, when the majority of countries reported negative growth due to the global financial crisis.
The sector is currently valued in excess of 15 billion usd annually and there are 2,500-plus companies engaged in IT-related activities. These companies employ some 600,000 professionals –400,000 of whom specialize in software–, with another 65,000 joining their ranks each year on average, according to figures furnished by the MexicoIT program.
Covering everything from the basic needs of small and medium enterprises to specific solutions within the wide range of services they offer, these companies are also involved in the development and manufacture of software, back office solutions, data centers, distance maintenance, online businesses and e-commerce, in addition to BPO/BPM, ERP/CRM, web migration, B2B, B2C, B2E, multimedia, technical consultancy and call center services.
In Mexico, research centers mainly focus on artificial intelligence, robotics, computer vision, virtual reality, embedded software and the development of applications related to mobile telephony, triple play and RFID, according to information compiled by the Mexican Information Technology Industry Association (AMITI, for its acronym in Spanish), a private organization that seeks to position IT as a key element of Mexico’s competitiveness by promoting the growth of the industry via the creation of a legal and regulatory framework that facilitates the conducting of business.
Concomitantly, the academic and private sectors are cooperating with the government on the development of 24 technological parks throughout the country, which has some 33 clusters in 23 states.
And while some of the industry’s major multinationals have set up shop in Mexico, it is development at a local level that has put Mexican firms like Neoris at the top of the list of leading IT companies in Latin America, according to Global Services magazine.
Likewise, the quality of the customer services rendered by Mexican companies has been acknowledged by the Brown Wilson Annual Outsourcing Survey, while the number of Mexican companies certified under standards like Capability Maturity Model Integration (CMMI), Certification for Meeting Management (CMM) and Software Industry Process Model (MOPROSOFT), is on the rise.
Geographically speaking, Mexico is the natural supplier of the Latin and North American markets. Due to its proximity, the US —which accounts for more than two-thirds of global purchases of IT services— is one of Mexico’s main customers.
“But we are also making a decisive incursion into Latin American and European markets,” says Gutiérrez Fernández.
Mexico enjoys numerous advantages that allow it to meet demand for services on the US market. These include similar time zones, a compatible business culture and very competitive total costs. In fact, the Competitive Alternatives 2010 study conducted by KPMG cites Mexico as the country with the lowest cost index in the areas of software design, back office and call center services.
Then there are the added benefits of a free trade treaty that guarantees the protection of intellectual property, the free passage of people and high-performing bilingual human capital —an area in which Mexico is ranked above all other Spanish-speaking countries on the continent on the A.T. Kearney Global Services Location Index.
But the pluses Mexico offers as an IT service provider go well beyond nearshoring. An extensive network of free trade treaties with 44 countries provides access to almost one billion potential consumers worldwide and Mexico has also entered into mutual agreements for the promotion and protection of investments with 27 nations.
Furthermore, the incentives offered by the Mexican government and the programs organized in conjunction with the industry make Mexico the perfect IT business option.
One such incentive is the Software Industry and Information Technology Services Development Program (PROSOFT). Introduced in 2004 by the Ministry of Economy, this program provides financial assistance for project investment and development, with funding put forth by state governments and industrial associations. In 2008, some 500 companies benefited from the program and 121 universities are presently involved in it.
By 2013, PROSOFT aims to achieve annual software output of 5 billion usd, which would establish Mexico as Latin America’s leading developer of software and digital contents in Spanish. Projects like MexicoIT and Mexico FIRST are also deserving of mention.
Run by CANIETI together with government agencies, the goal of MexicoIT is to position the country brand on the global IT market, particularly in the US. An offshoot of this has been increased awareness among target audiences as to the existence, capacities, benefits and differentiated supply offered by Mexico, which analysts at Gartner estimate will be the second-most-important IT services provider worldwide by 2013.
Mexico FIRST was set up by the Ministry of Economy with the backing of the World Bank to develop world-class, specialized human capital in the sector that will help position Mexico as a preferred nearshoring destination. During 2008 and 2009, over 12,000 people were trained with funding put up by this program, at least 80% of whom are expected to be certified in its various areas of specialization.
The industry’s interests are represented by a series of organizations, such as CANIETI, AMITI, the Mexican Association of Electronic Commerce Standards (AMECE, for its acronym in Spanish), the National Association of Information and Communications Technology Distributors (ANADIC, for its acronym in Spanish) and the Productive Electronic Chain Supply Association (CADELEC, for its acronym in Spanish).
Mexico also has the advantage of being a large country, with 72% of its states possessing productive capacity in the sector. And since it has several cities acting as supply centers, this gives it an edge over countries that depend on the availability of labor in one single city.
Growth estimates for the sector vary between 10% and 14% for 2011, depending on the source consulted.
In any case, Gutiérrez Fernández believes “double-digit growth will almost certainly continue,” but warns that, because this is a global industry subject to variables and world events like a boom or a global crisis that can have a directly proportional impact, it is essential that the government, academics and the IT industry continue to work together as they have been doing so far.
The idea is to build up an export industry with diversified target markets by promoting development and growth on a global level. Government initiatives to this effect should be teamed with academic efforts geared towards producing quality human capital capable of competing on a constantly changing market.
According to Gutiérrez Fernández, “this is what is required to continue positioning the country as a high-caliber global player and progress from the current nearshore concept to differentiators that create value compared to other global competitors, just as we did when we went from being a low-cost solution to one that offered the advantages of the nearshore concept.”